The Earned Value
Management (EVM) technique is a valuable tool for
managing all kinds of projects. EVM lets the
project manager combine schedule performance and
cost performance to answer the question: "What did
we get for the money we spent?"
Without earned value, projects can easily fail!
Many project managers measure their project's cost
performance by simply comparing the amount of money
spent to date to the amount of money they allocated
for the project.
While this might seem like a good idea, it
really tells nothing about the project's
performance. What if half the money has been
spent but only 10% of the work has been done?
The example below compares budget to actual
spending. It looks like things are going well.
After all, less money is being spent than has been
allocated, right?
Earned value
improves on the first process (comparing budget to
actual spending) by quantifying the work that has
been done on the project.
Using earned value, management can easily
compare the amount of work that has been completed
to the amount of work planned. Earned Value forces
the project manager to plan, budget and schedule
the work in a time-phased plan. As work is
accomplished, it accrues "earned" value.
Earned Value gives better project visibility
Here's the same
project schedule with one big difference. This one
reports the project's Earned Value. It uses some
slightly different terminology (AC for Actual Costs
and PV for Planned Value), but the main addition is
the EV, or Earned Value, column.
Now, we can see
that this project is actually not performing as well
as planned. Because several tasks are behind
schedule (as indicated by the yellow progress
markers), the Earned Value of the project is less
than planned:
