What is Earned Value Management?

Earned Value Defined

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: