Project Controls and Earned Value

what is Earned Value? Earned Value measures project performance by comparing actual work completed and the actual cost against budgeted work planned (at a given date in the project schedule). To calculate Earned Value, you need to be able to compare how much work has been completed against how much was expected to be completed at a given point. To get that, you need to have an agreed project scope, agreed planned value of each agreed work package, assigned and budgeted work packages, and agreed progress measures. To complicate things just a bit, there are multiple ways of calculating earned value, so you also need to agree on a standard way of calculating earned value, and what that standard means.

With all of that agreed, you can start your Earned Value graph by looking at the Planned Value – which is the amount of work you expect to be completed at points across time. Graph it. Then as the project progresses, you need to calculate the Earned Value by looking at the amount that was actually earned in each period. Graph that. When you are done this, you get a picture of where the project has been. Add another curve, the Actual Costs and the Expected at Completion, and you get a really good picture of what has happened on the project. You can also start to focus where the project will end up. Hold onto your stomach, here’s what an Earned Value graph can look like

So, what does this really tell you? Surprise, you are behind. Surprise, you’re over budget. It could help you figure out where you’re going and how much it will cost you. 

Overall, here are some problems with the Earned Value graph:

1. Complicated. It is very complicated to get to the ultimate outcome of the Earned Value graph, and it is often a fleeting thing. It takes a lot of effort to build and maintain the rear-view mirror of the Earned Value picture. The amount of effort required to build and maintain the Earned Value graph takes time from controlling the project.  It is also complicated to interpret the graph. There are so many lines on an Earned Value Report, it is hard for someone like a Project Stakeholder to really understand it without an informed project manager who can walk them through it.
2. Calculations on top of calculations – derived numbers. To get to the Earned Value, you have to pull numbers together, summarize them, run calculations against them, and represent them on a graph. In doing so, you lose the granularity of what is driving your project. You can’t reflect back on a change request that caused you to run over, a key item that didn’t arrive on time, a contractor that caused an accident, cold and snowy weather that hit in June, and so on. 
3. Tells you that you are over-budget and late … but you already knew that. Yup, if you are over-budget and late, and you know enough about what's-what to actually make an EV graph, well you also know that you are over-budget and late. On the other hand, in the rare case that you're are on-budget and on-time, you know know that too. The EV graph just makes it highly visible and keeps you from being in denial.
4. Maturity. If you’ve ever read up on the Capability Maturity Model or other similar models, you’ll know that tracking metrics like Earned Value are only valuable when you are at the top-end of a CMM. At the lower levels, when you are in an “Initial”, “Managed”, or even a “Defined” maturity, applying metrics like an Earned Value shows only that you can create a graph. It doesn’t help you understand repeatable performance across projects or portfolios.
5. It isn’t prescriptive as to what needs to be fixed. Because this picture is derived by rolling data up to a higher level, then summarizing numbers and running calculations on them, you can’t see the individual problems that are causing you to be late and over-budget. The only way you get to that information is if you can look at individual project “facts”, timing, trends, and forecast. The Facts are the raw numbers and business processes on your project like a Change Request or an Incident Report. The Timing reflects any “aging” or delays on the business processes that ultimately can cause the project to run late. The Trends are a view of the impacts of several related items (like Change Requests) which shows the overall impact of the group of items. Looking to the details of the facts, timing, and trends will help a Project Controller actually control the project and increase the likelihood of a successful project.

Don’t get me wrong. The Earned Value Report & Graph has its place. It just isn’t the only thing, or even the most important thing, that a Project Controller should be doing. 

• The Earned Value Report should be the outcome from an integrated, automated, and collaborative project controls system. Project Controllers should spend their days responding to alerts, dashboards, and reports that help them quickly understand exceptions that need to be actioned. When a Project Controller takes action to resolve exceptions in the facts, timing, and trends, the Controller will be causing better results on the Earned Value Graph. 
• The EV Report itself should flow automatically from the integrated, automated, and collaborative project controls system. The Project Controller should only have to “press a button” to generate the report.  This gives the Project Controller time to identify and action exceptions, in order to drive the project forward to a successful completion.

Final thought ... The EV report is helpful to a Project Controller as a mechanism to explain what is happening on the project and where it is going. However, it's value improves greatly if you can actually dig in and understand the details of what is happening on the project and take actions to make the project better