If you’re considering Earned Value (EV) as a way to develop better project governance, then you’ll know what an undertaking it is to shift the organizational mindset towards that way of working.
Even when you have buy-in at the top levels, you still need to embed a different way of managing projects in the teams themselves. One of the biggest changes is making sure that before Earned Value reporting starts. The team needs a full understanding of what’s required to get the best quality data out of the approach.
Earned Value Management training can help provide the deep level of knowledge to support your teams in working in this new way. However, for a quick overview, in this article we’ll share the 5 pre-requisites for any project before starting to manage with EV.
1. Detailed Project Scope
First, your project managers will need to prepare a detailed project scope in conjunction with other key stakeholders. The best way to do this is in the form of a work breakdown structure. Each deliverable can be documented and formalized for the individuals involved.
It should go without saying that it’s important to involve the whole team in preparing this as they could well spot additional tasks that the project manager alone wasn’t aware of. The detailed project scope provides the information required to parcel up the project into work packages.
2. Schedule of Tasks
With a detailed work breakdown structure in place, the team will also need a schedule of when the work will happen. EV relies on being able to track progress against time, so that schedule needs to be recorded in a way that enables progress tracking to be done realistically.
The schedule doesn’t need to include every tiny task, but everything in the work breakdown structure should be recorded so that smaller activities are covered by and rolled up into larger tasks.
3. Cost Baseline
Next, you need to be able to work out the cost for the work involved. A cost baseline can only be calculated if you know the costs for the resources for the work package.
If you don’t have them already, you’ll have to agree standard rates for the work done by your project staff members. In an agency or consultancy business this is probably quite easy: you already charge clients for the time your contractors spend working on their projects. However, for executives managing in-house project teams it can be harder. No one wants their salary and on costs published, so you’ll have to agreed indicative figures for the cost of an individual in a particular role.
With these numbers agreed at a corporate level, project teams can then work out the resource cost of a particular work package and add on any additional non-resource costs that the work is going to involve.
Add it all up and you’ve got the cost baseline for each work package, and all of those together give you the cost baseline for the project.
4. Agreed Reporting Milestones
There are some operational decisions that need to be made before EV really starts to add any value to the way project progress is reported.
You should agree what the reporting milestones are going to be. For example, when can you report that a task is 50% complete? You might decide that each project is going to set this for themselves, or you might follow in the footsteps of large government bodies and say that a task can only ever be not started (0%), in progress (50%) or complete (100%).
Setting these guidelines at the level of the PMO will save individual teams time debating what the milestones should be for their project. All they’ll then have to do is take the guidelines and apply them in a sensible way to their work packages.
At project level, project managers should agree reporting milestones with their project sponsors so that everyone knows when they should be expecting to receive information. You have two options here:
- Time-driven reporting, which relies on a fixed period passing e.g. preparing a monthly report
- Deliverable-driven reporting, which relies on the completion of a work package or other deliverable before a report is generated
Both can work, although many companies find it easier to manage EV with deliverable-driven reporting. This could be quite a mindset and culture change for your delivery teams and executives.
5. Agreed Data Collection Methods
Finally, you should agree how data will be collected from the people doing the work. Again, you can set corporate standards about what is expected. Perhaps with some high level guidelines like management by exception. Alternatively, you can allow project managers to define what best practice looks like for their teams.
Some options would be:
- Weekly written reports
- Weekly verbal updates
- Monthly status updates in team meetings
- Management ‘by walking around’
- Management by exception with confirmation of completion at the end of a work package
You probably already have established routes in place for project managers to receive information and updates on status from their teams. In many cases all it will take is a small adjustment to align these to the best frequency for preparing the required EV reports.
Earned Value is a robust and well-established method of tracking time and cost performance. Working with veteran practitioners and experienced staff will vastly improve your organization’s ability to get value out of it. And it doesn’t need to be a huge overhead for your delivery teams. Don’t have this capability in-house, or intending to grow it organically over time? You can get a head start by bringing in experts to help you embed the culture and the tools.
With these pre-requisites in place, you can develop a solid and workable approach to Earned Value. This will help your project teams accurately monitor, track and forecast project performance over the longer term.