There are two phrases I use at every opportunity when discussing the purpose of Earned Value.
How long are you willing to wait before you find out you're late?
Earned value provides actionable information to the decision makers (in ways no other performance measurement can)
In a post from Lynda Bourne, she says
15% of firms surveyed had no processes for dealing with troubled projects and 47% wait until the project has officially missed time and budget targets before taking any action despite 61% of the executives surveyed believing early action on troubled projects enables organizations to better use limited resources.
Ignoring for the moment WHY management fails to have predictive measures of performance, the notion of project status is the starting point for this type of failure. I say because I have experienced this status report syndrome in the past. The status report starts with a narrative explanation of why there are problems on the project during period. Then usually has some colors, maybe with some arrows showing which way the colors are moving, some budget numbers, usually a list of issues and possibly some plans for resolving those issues. Then comes some decisions that were made, the activities performed during the reporting period, the upcoming milestones, and an assessment of schedule, budget, resources, and scope.
While the reporting of status is part of a successful project, the critical success factor for both the project and the project status is wholly missing.
What was the progress to plan planned for this reporting period?
When you have that defined in tangible evidence of physical percent complete, you have a baseline (yes the Performance Measurement Baseline) by which you can compare three critical measures:
- Am I on schedule - look at the Integrated Master Schedule to see what was planned to be delivered during this reporting period. Measure physical percent complete, using tangible evidence - at a period at least half the time you need to make corrective actions so you are NOT late.
- Am I on cost - capture the cost to produce this tangible evidence at the same rate you measure physical percent complete. One of the beauties of agile is the time is essentially level of effort, so cost is simply the number of people on the project x the number of hours they work. But even agile teams need to keep score on hours.
- Am I delivery a product that meets the technical measures - what are those measures. There are a few: Measures of Effectiveness (MoE), Measures of Performance (MoP), Key Performance Parameters (KPP), and Technical Performance Measures (TPM).
Here's how these measures are connected.
With these measures - plus - the measure of Physical Percent Complete - the project team can then see not only where they are but where they are going.
The critical success factor here is simple:
Define where you SHOULD be on the day of the progress assessment, where you actually are on that day, and calculate how far behind schedule you are, how much you spent to get there, and if the resulting product is inside the techncial performance bands planned at that time in the project.
The planned technical performance measures are shown in a graph like the one below.
With this information the status report is self-creating.
- Budget variance is shown as the difference between the planned spend at this point in time and the actual spend.
- Schedule variance is shown as the planned "value earned" compared to the actual "value earned." The "value earned," is simple - what budget did we plan to spend at this time? What is our physical percent complete? Earned Value = Planned Budget x Physical Percent Complete. There are other calculation possible, but start with this simple one.
- Our technical performance variance is the measures performance (effectiveness, performance or some tangible evidence that the products works as planned) compared to the actual performance.
Then the status reports can simply say
We over spent by $X and produce a result that was Y% less than needed for this point in time, and now we're late, over budget, and need to rework the outcome.
Along the way we had issues come up that we had not planned on and we had unplanned staffing change.
Notice we don't talk about scope change, because there is no unplanned scope change. All scope change is met with budget and schedule change or Management Reserve allocation (both cost and schedule).
There are no "up coming" milestones, because those are defined in the Integrated Master Schedule and Integrated Master Plan and are obvious to the reader of the status report. OK, you can move them to the status report, but they should not be milestones in the Roman Road Marker since, but measures of maturity with the Significant Accomplishments and the Accomplishment Criteria, which is the grammar of "Done."
With this information a forecast of future performance can be made with the simple assumption
Past is prologue