According to the Project Management Institute, earned value management is a management methodology for integrating scope, schedule, and resources; for objectively measuring project performance and progress; and for forecasting project outcome. Earned value management (EVM) is a powerful way to gain insight into how a project is performing and what problems the project may face in the future.
Earned value management provides an organization with an early warning system, so they can resolve issues before they become detrimental to the project’s success. Significant cost and schedule variances are detectable when the planned work has reached as little as 10% completion on any portion of the project. It is far easier to make a small adjustment when you spot a potential problem early on, but it becomes chaos to deal with if you hit the problem head on without warning. Put simply; good news should travel fast, bad news should travel faster.
Earned value management also makes it easier to see which areas of a project are under-performing, allowing for management by exception (focusing on the most troublesome areas of the project). By focusing energy on resolving the most concerning issues, the project will be overall more likely to succeed. According to an article published in The Measurable News, “Project Management by exception is nothing more than utilizing earned value Cost, Accounting and Schedule Integration (CASI) as a means to efficiently manage and control strategic projects. Earned Value utilizes these three CASI cash flows to calculate key performance indicators (KPIs), which permit “managing a project by exception”.
Earned value management also supports greater communication between project stakeholders. Communication is stifled when problems are hidden. Using EVM helps everyone associated with a project understand the answers to important questions like:
1) What is the work scope?
2) When is the work planned to be accomplished?
3) What resources are planned to be used to accomplish work?
4) What is the estimated cost of the planned work?
5) What is the progress of the work?
An enterprise project lifecycle management software, like ARES PRISM, makes it far easier to execute earned value management properly. Using ARES PRISM, you can set up baselines, time-phase your data, perform earned value calculations and more. Using this tool, you can gain total insight into project performance and produce powerful reports that show management what direction the project is heading in.
This case study shares how LLW Repository Ltd used PRISM to improve reporting, reduce reliance on spreadsheets, and increase control over their processes. They are now able to produce reports quickly while having total confidence in their data.