Earned Value

(In our last post, we discussed our simplified approach to Project Management, called “4 Core Elements and 3 Wrap Arounds”. In that post we discussed the use of Earned Value and burndown curves.  We find that most people understand burndown curves, but many do not understand Earned Value.  In this post, we describe our use of Earned Value with an example.)

Earned Value

Earned Value provides a standard approach to measuring progress during work, including during projects.  Earned Value monitors the “Four Core Elements” discussed in our last post by quantitively measuring: (1) total budget, (2) budget spent to date, (3) the scope in terms of total number of “things” the work is to develop and (4) the number of “things” completed to date.

The graph provides a sample a project being tracked with Earned Value that demonstrates how Earned Value works.

At the start of the project, performance was not very good. Planned and Actual Costs are higher than Earned Value.  The project is spending more money than planned for work completed

Toward the middle, the project was doing better.  Planned and Actual Costs are lower than Earned Value.  The project is spending less money than planned for work completed.

At the end, the project was not doing well again.  Planned and Actual Costs are higher than Earned Value.  More money is being spent than planned for work completed.

The budget and actual costs should be easy to document. The harder part of Earned Value is the number of “widgets” or “things” that the work or project is responsible to develop.  In a manufacturing type environment, counting “widgets” is easy.  I can count the number of “widgets” I was supposed to make and how many I did make.  In a service or consulting type industry, it may not be as easy.

Our Process

In our consulting business, we help customers solve problems with the cost and performance of their equipment, Work Management and Maintenance processes.  In some projects, we evaluate and recommend changes to the preventive maintenance performed on asset equipment.  Our process includes several steps that include our decision making, customer review and approval and then our implementation of the approved changes.  Our approach to counting “widgets” is to add up the number of preventive maintenance activities to be evaluated and the number of steps for each to determine the total number of steps we need to take to complete the project.

We would be happy to forward a simple workbook we use for Earned Value that you can use to track your Earned Value.

Gerald Knull,
ACA Senior Consultant