Performance measurement is imbedded in every aspect of working life. Sales generated, cost variance, drawings completed, and the number of troubleshooting calls are just a few metrics used to measure performance. Measuring performance has been around since there were projects to manage ¾ before the pyramids?but it was not until the nineteenth century that methods for managing performance in a wide variety of applications were developed. As early as the 1880s, Frederick Winslow Taylor began to formulate the connection between the selection of tools and methods and the resulting work performance. Today, innovators are still developing performance management ideas based on the idea of the right tool for the right job. One of the most enduring concepts using this simple axiom is earned value, a performance management concept that has been put in practice continually since the mid-1960s.
Earned value management (EVM) is now becoming one of the hottest commodities in use for project management. There are several reasons for this, but among them the Office of Management and Budget (OMB) requirement that EVM be used to manage the capital investments of the executive branch of the federal government. But EVM is not just an OMB requirement; it is used by industries and governments around the world. Why? Because it works! The Space Shuttle, Pentagon renovation, and International Space Station represent programs that use or have used EVM. Japan, Sweden, Australia, and Great Britain are just a few of many countries that have embraced EVM.
When used with quality tools and proven techniques, EVM provides insight to integrated information from many sources within the enterprise?information that would not be integrated otherwise. For example, a scheduled Activity has assigned to it a specific scope, or the reverse; a specific scope statement requires a specific activity to be accomplished. The relationship between scope and schedule is thus established and maintained for the entire project. Simultaneously, resources (budget) are assigned to the activity, providing a budget value and scope statement for every activity on the project. The relationship between each activity in the schedule and its scope and budget and other activities is then maintained throughout the project?s life cycle. During project execution, actual cost gathered from the accounting system is related to the activities. This means that schedule information can be related to accounting information to quickly assess the impacts of scope changes in a project as they relate to otherelements of the project itself, other projects, and the overall enterprise.
EVM takes advantage of the information explosion of recent decades. By connecting formal planning processes reminiscent of Frederick Taylor?s idea of scientific management, such as defining what needs to be done and how it will be done before actually starting the work, to the ability to collect information about that planning and the execution of the work, managers are able to objectively compare the work that was planned with the work that was actually accomplished for any given period of time. In addition, the standard for EVM (ANSI/EIA 748) includes provisions for corrective actions when the plan and the execution become separated by some significant measure. In other words, EVM encompasses the ideas of scientific management within the context of 21 st century capability.
EVM uses a disciplined approach to planning and data integration unmatched in any other management form. By following very detailed planning processes to determine the appropriate project structure and scope definition, the project management team defines the data structures, usually developed around a work breakdown structure (WBS) that will be used to bridge the various systems of the enterprise. The following are just some of the systems that supply information to the project manager through the EVM system:
Scheduling
Accounting
Work authorization
Work flow controls
Human resource management
Material management
Various other tools used for planning purposes.
Implementing an EVM system may seem daunting at first, and indeed it is not a simple undertaking. However, its scalability allows for a very flexible approach to implementation. A successful implementation starts with understanding overall requirements, capabilities, and enterprise objectives. It culminates in a set of systems and procedures that enable the enterprise to maximize its capabilities to meet customer requirements and enterprise objectives.
Copyright © 2005, Robbins-Gioia, LLC. All rights reserved.
Dennis White is a principal consulting manager with Robbins-Gioia, LLC. He is the product manager and primary instructor for all EVM training development and delivery and primary SME for EVM solution development. Currently he provides educational support to the Department of Agriculture. A frequent speaker at seminars and conferences for PMI and other organizations, Mr. White has always been active in policy formulation and development?first from the government perspective and then through the National Defense Industrial Association. Mr. White holds a B.S . in management science and mathematics from San Diego State University and an M.B.A. in information systems management from California State University-San Bernardino.
Dennis W. White, MBA, PMP