Welcome to Part 3 of our Earned Value Management (EVM) or Earned Value Analysis (EVA) series!
In Part 1, we discussed what is Earned Value Analysis, and how it helps project-centric businesses keep their projects on track in terms of both Time (schedule) and Cost (budget).
In Part 2, we took a closer look at the concepts and KPIs of Earned Value Management Metrics, explaining how they can offer project managers tighter control over project performance and health, so the project doesn’t go off the rails.
And today, we are here to talk about the Benefits of Earned Value Management.
Earned Value Management: Do You Really Need It?
Every project-centric business is familiar with unexpected situations where even a well-planned project can sometimes sit in the grey area that exists between success and failure. And no matter how well you may have planned for the inevitable, sometimes hard decisions have to be made so your project can adhere to the budget and timeline.
After all, in the world of projects, the absence of the right performance tracking variables that keep tight control over budget and schedule can result in project failure!!! So, if you’re on the quest to find more definitive goals to track project success, EVM or Earned Value Management comes to the rescue.
With EVM, you get a clearer picture of where your project stands currently, and what the journey ahead looks like.
Its accuracy can help you identify discrepancies, correct any mistakes you might be making, change your plans to adhere to the original time and cost baseline figures, and ensure that you are able to make timely delivery without compromising on quality.
EVM brings two diverse yet crucial project factors – cost and time – on a unified scale so you bring your project back on track. It offers precision in project planning and accuracy, which empowers you to make timely decisions so you can meet deliverables without burning out the team, while at the same time, giving stakeholders a clearer picture of project progress at every stage of the project.
Sounds like a win-win, right?
The 8 Top Benefits Of Earned Value Management
Now that you understand why EVM is so handy for the smooth execution of your projects, let us discuss the many advantages of using Earned Value Management for unmatched project performance and delivery.
1. Offers Realistic Project Planning
In order to reap the full benefits of EVA, project managers must start with the right planning. Determining a realistic time frame and setting a reasonable budget while planning is important, adding EVM to the equation right at the planning stage helps prepare for any challenges that may lie ahead. This ensures that you define the project baselines in terms of – schedule, cost, and scope – right at the beginning.
Then, using EVM at every stage of your project, you can get a clear picture of where your project stands versus what you had planned. With EVM, you can also gauge actual work completed vs projected schedule, offering actionable insights for timely corrections.
2. Accurate Measure of Progress
For the success of every project, it’s imperative that decision-makers have a clear idea of how the project is progressing at any given point in time. With the help of earned value management system, creating status reports becomes a lot easier.
For example, when you say that a project is 50% complete, it can mean:
6 months have lapsed in a project that has a 12-month deadline
Half the budget has already been spent, or
50% of planned project activities have been completed, regardless of the lapse in time
Which of the above is true? With EVM reports, you have clarity on exactly what 50% project completion means in terms of scope of work, budget, and time, giving a more accurate measure of progress and simplifying reporting for the team as well as CXOs. Using EVM KPIs, you can establish the percentage of work completed and also gauge cost and schedule variance in a single chart.
3. Real-Time Visibility on Project Performance
For an enterprise that runs on projects, it’s very important to gain real-time visibility on all projects through centralised information. For this, EVM can be instrumental, helping managers track project performance and health metrics through robust management tools.
EVM allows for actionable insights on project reports and analytics, allowing managers to gauge progress at every milestone. By objectively reviewing time and cost variance, managers are better able to divide project activities in smaller chunks and reassign work to pick up pace …. or collate activities for a smaller team to cut back on budget.
Additionally, EVM also helps identify any inaccuracies that could be a result of task dependency priorities.
4. Measure Inaccuracies In Timely Fashion
No one likes surprises; definitely not when millions are at stake. Unforeseen circumstances, changes in bylaws, modified project scope or differing client priorities can all lead to unwelcome challenges throughout the life cycle of a project. As a result, project timeline or budget can deviate from the original plan, putting more pressure on the projects team.
EVM is very useful when it comes to avoiding partial failures. By calculating Schedule Variance (SC) or Cost Variance (CV) at every milestone, managers can still keep their projects on track, despite unexpected circumstances. To mitigate damages, timely changes/corrections can be made to ensure that cost variance comes back to zero – and the company doesn’t lose money on the project.
5. Enables Superior Forecasting
Here is something you might not have known about EVM!
Studies have revealed that using Earned Value Management metrics like CPI (Cost Performance Index) at early stages of a project can accurately depict Estimate at Complete. Hence, calculating CPI can become an accurate predicter of any project’s Cost at Completion, even when a project is only 20% underway.
Doesn’t that sound like a great way to forecast high-risk projects? Using EVM, a project-driven business can utilise past performances to accurately forecast future success. Utilizing accurately collated EV data, managers can carefully plan resources, allocate funds, and ensure project deliveries run smoothly throughout the project lifecycle by making adjustments to project portfolios whenever needed.
6. Anticipate And Adjust For Risks
Good EV data can help project managers and decision-makers anticipate problems and address them before it’s too late. While it might take time to product good Earned Value data, it’s extremely beneficial in identifying risk factors that could mean changes in cost and time.
This means your team wastes less time chasing smaller problems while focusing on the problems that might have maximum impact to improve project outcome. It allows managers to use smart tools to identify what activities/resources are contributing the most to cost or schedule variance and intervene in timely fashion. By making adjustments (like tweaking the budget for a task, or scope of the task, or procuring a different resource for a problematic task) ahead of time, it becomes possible to keep the project on track.
7. Promotes Better Project Management Disciplines
To produce good EV data, four important project factors come into play. These are:
Cost
Schedule
Scope of Work
Risk Factors
For a well-run project-driven business, the above-mentioned disciplines set the stage for good project management. And this is where EVM shines.
Every project-based enterprise wants to ensure these disciplines are well-integrated, and that is exactly what EVM is all about. An Earned Value Management system promotes good project management discipline, as this is an integrated program that cannot neglect any of the aforementioned factors.
Hence, an EVM system ensures a business adopts good project management practices which are performed across all four dimensions, benefiting the organisation as a whole.
8. Improves Team Accountability and Motivation
While the main focus of EVM is to identify problems that could derail a project, a pleasant side-effect is that the data also tells you when you are ahead of schedule, or when project tasks have been completed under budget. This can boost the morale of hard-working project resources, motivating them to keep up the good work.
EVM helps make your project team more agile and stay accountable as well. All resources understand the importance of tracking their time and reporting progress correctly. This keeps everyone on the team accountable for their specific task, and also motivates someone who might be lagging to pick up the pace to match their co-workers’.
The Takeaway
All in all, Earned Value Management system is an excellent choice for enterprises that want to objectively measure their progress at any given point in the project, and take actionable decisions to ensure the project runs smoothly without deviating from course.
It’s especially beneficial if your enterprise is engaged in long-term and/or high-risk projects where on-time and on-budget delivery becomes even more important.
If you enjoyed reading this article, stay tuned for our upcoming Part 4 of Earned Value Management series next week, wherein we will discuss EVM with respect to Oracle Projects.
Liked what you read? Share it!
Follow us on Twitter and LinkedIn to stay abreast about more interesting industry blogs, news and upcoming events or visit our website.
About Projects Expert
To know more about what we can do for you, visit our website at www.projectsexpert.com. Reach out to us on +44 330 330 5154 or drop a note at info@projectsexpert.com