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How often do you get asked these questions?
How do we measure up on budget? Are you confident that we will meet our budget? Are we spending as anticipated? What are our performance in relation to the project schedule. These questions and many more can be answered using earned value management calculations.
The PMI teaches earned value management (EVM) as part of its PMP. This is a very old-fashioned way of thinking for digital project managers. But, I think this piece is extremely valuable!
This article will explain what earned value management is and all its acronyms. It will also show you how to run simple calculations to measure project performance. What you can learn from these calculations will help you answer any questions you might have about your project’s progress.
What is the bottom line for me? EVM can help you get a better understanding of your project’s health by using data and not just gut feelings.
This article explains.
What is Earned Value Management?
Calculating Earned Valu
What are CPI and SPI?
Walk-Thru: How to Calculate Earned Valuation
Six Formulas for Earned Value Management
Useful tools for managing earned value
Why is Earned Value Management important?
What is Earned Value Management?
According to the Project Management Institute, earned value is a method for calculating project percent complete using a uniform unit measure for all project work.
Earned value management, which is simply to say, allows you to report on the schedule and cost of a project using a dollar value base unit. It allows us to compare project reporting apples-to-apples.
The answer to the question is earned value management
Where have we been all our lives?
Where are we now?
Where are we going?
I know what you’re thinking.
My project management tool shows me how far I’m at the project’s end and how far I’m at the budget. Isn’t this enough?
The short answer is: Not always.
Long answer: Not always. Here’s why.
Let’s assume you’re working on Project ABC. It should take six months and a budget of $100,000. We just finished month 2.
The simple logic would dictate that we should have spent 33% and should be 33% done by this point. However, that is not the whole picture.
The percentage of budget used and the progress of the project are not always the best indicators.
You can easily imagine a situation in which a project team could spend 33% of their budget before being 33% complete. Perhaps they were using new technology and spent 33% on R&D, which could have impeded their progress.
It is possible to imagine a situation in which a project shouldn’t have spent 33% of its budget within the first third of a project schedule. An obvious example is if the first 33% was research and requirements elicitation by a group of 3, while the last 66% was a team consisting of 18 people designing and building the solution.
Instead, we need to understand the value we have created within the context of the time we’ve spent and the budget we’ve allocated so that we can determine with greater certainty if our project is on track.
As we get into this, keep your hats on. There are a lot of acronyms. These acronyms are very useful when looking at equations. But be aware.
What do I need to calculate earned value?
The following data sets are required to perform EVM and all of its calculations:
Planned Value (PV).
Actual cost (AC).
Earned Value (EV)
To put together the data sets, you will also need to create a few tables.
Planned Value
Planned Value (PV), is the time-based project spending.