30 June Earned Value Management - turning on the headlights June 30, 2009 By Administrator Account Methodology, Project Management Ideas, Tools ac, baseline, earned value, ev, project management, pv, schedule, wbs 0 when I rely only on a project schedule of tasks, finish dates, and % complete, I will not know where the project is or where it is going. Earned Value - Why do I need it? To paraphrase the words of the Project Management Institute’s standard, when I rely only on a project schedule of tasks, finish dates, and % complete, I will not know where the project is or where it is going. I will simply know where the project was supposed to be and where it is supposed to be going. What is Earned Value? Earned Value Management (EVM) is a technique that looks at the relationship between a) actual cost expended, and b) actual work completed, and compares this to c) original budget and work timeline. More formally, the three data points you must understand and memorize are: a) Actual Cost (AC) – What amount of resources have been expended to complete the work at a given point in time. b) Earned Value (EV) – Snapshot of work completed at a given point in time. c) Planned Value (PV) – The Baseline – How far along the project work is supposed to be at any given point in the project schedule. How do I implement Earned Value? (My cheat sheet below) Step 1 (Planning) Create a Work Breakdown Structure. Ensure all tasks on the schedule are assigned. Estimate time to complete each task. Determine how you will determine that tasks are complete as the project progresses. Step 2 Periodic monitoring Obtain cost and / or hours expended. Obtain status on task completion. Forecast Cost and Schedule performance. My usual workflow is to enter the planned and actual data into MS Project and then export the time-scaled data to an excel chart. An excel chart (example below) isn’t required, but I highly recommend it as a support to your table of data – a picture is worth a thousand words. Combine the data into actionable forecasts By using Earned Value techniques, you use Project Management discipline to provide key feedback and forecasting to the project team and executives. See four sample questions and formulae below. Limitation Earned Value is not sensitive to the quality of the deliverables. You can be near the end of the project and forecast on budget and on schedule even if the deliverables are poor and the customer will not accept the final product. The expectation is that the PM is using other tools and techniques to manage and control quality. Stephen Wise http://www.IntegrationProfessionals.com/ http://www.IntegrationProfessionals.com/Twitter Related Articles Unlock the Power of Project Management: for Business Leaders 1. Stewardship Acting as a diligent and responsible guardian of the project's resources and interests, prioritizing ethical considerations and the welfare of all stakeholders. Good Practices to Implement Regularly review and optimize resource allocation. Uphold ethical standards and transparency in all project activities. Foster an environment of mutual respect and integrity. How to Measure Conduct stakeholder satisfaction surveys. Monitor resource utilization rates against benchmarks. Track ethical compliance through internal audits. Real World Example A project manager at a construction firm ensures that all materials are sourced ethically, labour is fairly compensated, and the environmental impact is minimized, reflecting stewardship in action. 2. Team Building a culture that promotes accountability and respect among team members, enhancing collaboration and project success. Good Practices to Implement Encourage open communication and feedback. Define clear roles, responsibilities, and expectations. Recognize and celebrate team achievements. How to Measure Evaluate team performance through regular reviews. Measure team morale and engagement through surveys. Assess the clarity of roles and responsibilities via feedback. Real World Example A software development team implements agile methodologies, fostering a collaborative environment where each member's contributions are valued, leading to innovative solutions and high team satisfaction. 3. Stakeholders Actively engaging and collaborating with all parties impacted by the project to understand their needs and align expectations. Good Practices to Implement Identify and map all stakeholders early in the project. Establish regular communication channels and updates. Involve stakeholders in decision-making processes. How to Measure Track stakeholder engagement levels and feedback. Monitor the alignment of project outcomes with stakeholder expectations. Evaluate the effectiveness of communication strategies. Real World Example In launching a new product, a company conducts focus groups with potential customers (stakeholders) to gather insights, ensuring the final product meets the market’s needs and expectations. 4. Value Ensuring that the project delivers outcomes that are beneficial and offer tangible value to the organization and its stakeholders. Good Practices to Implement Align project objectives with organizational strategy. Implement value management practices to prioritize features based on their return on investment. Regularly review project deliverables to ensure they meet user needs and business objectives. How to Measure Use performance metrics to assess the project's impact on business goals. Conduct post-implementation reviews to evaluate the realization of benefits. Gather feedback from end-users and stakeholders on the value received. Real World Example A healthcare provider implements a new patient management system to improve service delivery. The system reduces wait times, improves patient satisfaction, and streamlines operations, demonstrating clear value to both the organization and its patients. 5. Holistic Thinking Recognizing and managing the interdependencies within the project and its environment to make informed, comprehensive decisions. Good Practices to Implement Employ systems thinking to understand the project's context and interrelated components. Facilitate cross-functional collaboration to leverage diverse perspectives. Conduct regular risk and impact assessments to anticipate and mitigate systemic issues. How to Measure Evaluate the effectiveness of decision-making processes through outcome analysis. Track the frequency and impact of unintended consequences or systemic issues. Assess the level of cross-functional collaboration and integration. Real World Example A multinational corporation launching a global marketing campaign uses holistic thinking to consider cultural sensitivities, legal requirements, and market conditions in different regions, ensuring a cohesive and effective strategy across borders. 6. Leadership Inspiring, guiding, and fostering an environment where the project team can achieve their best work through effective leadership. Good Practices to Implement Develop leadership skills such as empathy, communication, and problem-solving. Set clear visions and goals for the project team. Provide support and resources for professional development and problem resolution. How to Measure Assess leadership effectiveness through team feedback and performance metrics. Monitor the achievement of project milestones and team objectives. Evaluate the growth and development of team members over the project lifecycle. Real World Example The project manager of a software development project leads by example, actively resolving impediments, facilitating knowledge sharing sessions, and encouraging innovation, leading to the timely delivery of a high-quality software product. 7. Tailoring Customizing the project management approach to best suit the project's unique context, ensuring methods and practices are appropriate and effective. Good Practices to Implement Assess the project environment to determine the most suitable methodologies (e.g., Agile, Waterfall). Adapt processes and tools to meet the project's specific needs and challenges. Involve the team in the tailoring process to leverage their insights and buy-in. How to Measure Review project outcomes to assess the fit and effectiveness of the chosen approach. Conduct retrospectives to gather team feedback on processes and methodologies. Measure project performance against initial expectations and adjustments. Real World Example A project manager leading a complex software integration project combines Agile practices for development with traditional Waterfall methods for client approvals, tailoring the approach to balance flexibility with necessary controls. 8. Quality Integrating quality into both the project processes and outcomes, ensuring that deliverables meet the required standards and expectations. Good Practices to Implement Define quality standards and criteria at the project's outset. Implement continuous quality assurance and control measures throughout the project lifecycle. Engage in regular reviews and testing to ensure deliverables meet established standards. How to Measure Track and analyze defects or non-conformance issues. Conduct stakeholder surveys to gauge satisfaction with the project’s outcomes. Measure the effectiveness of quality improvement initiatives over time. Real World Example An automotive manufacturer implements a zero-defect program for a new vehicle launch, incorporating rigorous testing and quality checks at every production stage, resulting in a product that exceeds industry safety standards. 9. Complexity Navigating and managing the various complexities within the project, using knowledge, experience, and agile responses to ensure success. Good Practices to Implement Apply complexity assessment tools to understand the project's complexity dimensions. Use adaptive and flexible project management approaches to respond to changing conditions. Cultivate an environment of learning and improvement within the project team. How to Measure Evaluate project performance in relation to its complexity factors. Monitor the team’s ability to adapt to and manage unforeseen challenges. Assess the effectiveness of problem-solving and decision-making processes. Real World Example A technology firm managing a large-scale IT infrastructure overhaul uses an adaptive project management approach to navigate technical, organizational, and operational complexities, achieving milestones through flexible planning and problem-solving. 10. Risk Identifying, analyzing, and managing potential project risks proactively to minimize their impact and capitalize on opportunities. Good Practices to Implement Develop a comprehensive risk management plan. Regularly identify and assess new risks as the project progresses. Implement risk response strategies and monitor their effectiveness. How to Measure Track the number and severity of risks that materialize. Measure the success of risk response actions in mitigating impact. Evaluate the return on investment for opportunities pursued. Real World Example During the construction of a new office building, the project manager implements early weather-related risk assessments and contingency planning, avoiding delays and cost overruns through proactive measures. 11. Adaptability and Resilience Maintaining flexibility and a capacity to respond effectively to change and challenges, ensuring the project's ongoing viability and success. Good Practices to Implement Encourage a mindset of flexibility and openness to change among the project team. Implement agile project management techniques to allow for rapid adaptation. Build contingency planning into the project's strategic planning processes. How to Measure Assess the project's ability to adapt to significant changes without derailing. Monitor recovery times from setbacks or challenges. Evaluate the effectiveness of contingency plans when activated. Real World Example A global event planning company swiftly adapts to the COVID-19 pandemic by transitioning to virtual events, leveraging technology to maintain engagement and deliver value to clients amidst unprecedented challenges. 12. Change Management Effectively managing and facilitating change within the project and organization to achieve the desired outcomes and future state. Good Practices to Implement Establish clear communication plans for all change initiatives. Involve key stakeholders in the change process to gain support and mitigate resistance. Regularly review and adjust strategies in response to feedback and outcomes. How to Measure Monitor the speed and effectiveness of change implementation. Track stakeholder engagement and support levels throughout the change process. Assess the achievement of change objectives and overall impact on the project. Real World Example A software company implements a new project management tool across its development teams, using structured change management processes to ensure smooth adoption, with training sessions, feedback mechanisms, and ongoing support facilitating the transition. References Project Management Institute. (2021). A guide to the project management body of knowledge (PMBOK® guide) (7th ed.). Project Management Institute Six things I must do to bring value. Part 2 of 2. 4. Use Earned value to track schedule and budget progress against plan. Consider that the “Must finish on time” 6 month project you are leading has burned up 80% (5 months) of the calendar. You request an update to senior executives where you report that the team has determined that they need an extra month added to the schedule to finish the project. Some time later, the project finishes after a total of 10 months. Did something unexpected cause extra delay? Could you have provided a more accurate forecast during your executive update? Consider that: Team members, usually under subtle and not-so subtle pressure, consistently underestimate how long it takes to get things done. As an aside, in my experience, the most common source of the underestimate is changing requirements, unexpected complications, and lack of available folks to do the additional work. Given the chance to re-plan the project, the team looks only at the amount of work remaining, ignores the leanings from the start of the project, and bakes in the exact same underestimates in the re-plan. Earned Value is the single most powerful Project Management principle in the entire PMBOK; it provides unbiased status of current state and forecast of future impact to schedule and cost. It is also the most underused key concept by Project Managers. In a nutshell, Earned Value provides an independent Project Management perspective to the following questions: Are we ahead or behind schedule? When is the Project likely to be completed? What is the remaining work likely to cost? It isn’t unusual, that it is not appropriate to report and discuss Earned Value metrics to management. That’s not a showstopper, because the information is still highly valuable and actionable by the person most accountable to take the required day-day actions to ensure project success – the Project Manager. 5. Hold regular status meetings. Hold Weekly Status Meetings: Less frequent, for example, every two weeks, is too long because if key people miss one it is a month until you are together again. More frequent and not enough will have changed resulting in meeting churn. Standard Agenda and Meeting materials: That is, status late and upcoming activities, review new Issues, Risk Log updates, and potential Change Requests. Ensure that all “Work breakdown Structure” stakeholders are represented at the meetings. Issue Agenda/Pre-Mail / Minutes: – That is, issue the agenda and meeting materials at least 24hr prior to the meeting. 6. Escalate unresolved Issues and significant Change Requests to the management team. “Unresolved” – Don’t escalate until the Project Team has reviewed the issue without success. “Issue” - Ensure the item being discussed is within scope of the project and is impacting success, if not, note it for later discussion. “Significant Change” – a) Establish risk and impact thresholds, below which, the project team will “adjudicate” change requests internally without escalating, and above which, will always use the agreed change management process. “Escalate” – Advise the appropriate stakeholders quickly as a courtesy and to ask for help. There you have it. I support and subscribe to PMBOK, ITIL, Agile et cetera, and the more I learn about each one, the more similar and complementary they seem to me. However, as a Project Manager working with diverse clients and changing needs, the above six are my must-haves in order to provide value-add as a Project Manager. Thanks for reading. Feel free to leave comments if you feel strongly about anything. Stephen D Wise http://www.IntegrationProfessionals.com/ Look for a future drill-down on Earned Value. Six things I must do to bring value Part 1 of 2. Six things I must do to bring value. Part 1 of 2. Even in tight times, when the number of resumes floating around has risen dramatically, many Project Management Office (PMO) leads are still saying there is a shortage of talent. “Get me a good Project Manager”, they say to the headhunters. I take it for granted that good managers are great leaders and excellent communicators. What are the differentiators that make a good manager a good Project Manager (PM)? I believe there are six things a PM must do during the planning and execution of a project in order to bring value as a Project Manager: Create a Work Break Down Structure. Determine which tools, methodology, and documentation will be used on the project. Facilitate the creation of an appropriate schedule and save the baseline. Use Earned Value to track schedule and budget progress against plan. Hold regular status meetings. Escalate unresolved issues and significant change requests to a management team. 1. Create a Work Break Down Structure. The 100% rule is the key. The rule is, ‘At any level of the Work Breakdown Structure (WBS), the entire scope of the project and all deliverables is captured 100%.’ To create the WBS, I engage potential participants using pre-mails and then hold a group session with a large white board, all stakeholders represented, and lots of post-it notes. I like to stop at only three or four levels deep into the WBS – but this is really the call of the team members who are doing the work. After the meeting, MS Visio Organization-Chart helps to quickly show the WBS graphically on one page. This page gets tweaked as necessary and is dragged to every meeting I attend. I use this tool to manage scope creep, engage stakeholders, accept deliverables, and avoid gaps in accountability. It’s the one Project Management tool I can’t live without – it becomes the entire project on one page. 2. Determine which tools, methodology, and documentation will be used on the project. Every new project is mashup of culture and organizational objectives. A good PM uses diplomacy and leadership to follow the norms that have been set and break the rules when the situation calls for it. Usually it’s not up to the PM to determine, between PRINCE2, PMBOK, Agile, SDLC, and CMMI. Whatever the methodologies employed it is the PM’s responsibility to ensure the approach is communicated to the team and guidance on how to implement it appropriately is available. My goal is that issues related to the tools, methodology, and documentation float to the background as the team presses ahead with work at hand. 3. Facilitate the creation of an appropriate schedule and save the baseline. A good PM will facilitate team creation of a schedule that documents a) activities that must be completed, and; b) name of the one person responsible for providing status updates. My rule of thumb is that an identified task that takes longer than 2 weeks should be broken down into smaller pieces and a task that takes less than 2 days is too detailed – but this is the team member’s call as they own the schedule, not the PM. When the team agrees that the schedule drawn up is doable, save a copy, this is the (first) baseline. What value are you creating with your IoT? | Stephen Wise | Integration Professionals The increasing capability to digitize the physical world presents enormous dollar opportunities. IoT and its technology provides the ability to sense the world or take an action or both. For example, manufacturing applications include operations optimization, predictive maintenance, inventory optimization, and health and safety. McKinsey has suggested that the economic impact of IoT in factories will be valued at 1.2 to 7.7 trillion US dollars in 2025. Most companies can explore the following over arching models: Transform business process; Enable new business models; or Combine with other advanced technologies like AI and blockchain. Developing a business model to reduce your costs or enhance the customer experience is the first transformation step. Here are my top 5 tips for developing your IoT business strategy. Ensure the business case has clarity for how the company will capture value from the IoT solution internally or from customers. Executive sponsorship of the IoT portfolio of activities requires business led cross-functional support from all areas of the enterprise; IT enables IoT for the enterprise, not the other way around. Involve manufacturing and the frontline in up-front planning as monetizing IoT benefits depends on business process change and change to customer experience. For example, most implementations will require/suggest for things to be done differently as part of the future state – buy-in from those impacted is critical. Engage partners and internal resources to augment the new skill sets that will be required to maintain and use functionality. Networking and connectivity, Data science, and security will all be learning curves. Manage all your IoT initiatives as a portfolio to initiate/cancel, prioritize, and balance projects according to revenue, cost, resource availability, and risks. The pervasive embedding of IoT hardware is a given. IoT is reshaping the way enterprises manage processes. Albeit, the usefulness and timing for when it is helpful that your fridge knows it will soon be out of milk is not clear. Nevertheless, the great value to be gleaned in Health, Transportation, Retail, Manufacturing, and so on is logical. Monetizing the power of sensor-enabled data and knowing how to deploy is a disruptive change that should be on everyone’s business radar. Stephen Wise www.IntegrationProfessionals.com Dramatically Improve Traction How confident are you with the project forecast? As every project progresses through it's lifecycle, the team’s forecast will evolve. The forecast value may move up or down, however, the accuracy of the forecast should always increase. The basis for increasing accuracy is that all estimates are forecasts with some level of uncertainty and as the project progresses the unknowns/uncertainty will decrease. This holds for forecasting any of duration, work effort, or cost. There are two important concepts in the below figure: 1) We see the team’s forecast (solid middle line) moves up and down as time progresses; and, 2) the range in value between the High and Low Estimate decreases in steps at each phase. A key action for the Project Manager is to communicate to all stakeholders that early estimates have higher uncertainty. As part of communication with management and finance stakeholders, I usually ask for a reserve to be added onto my estimates based on the higher uncertainty of estimates and potential negative impact of risks. This amount can be progressively reduced and “given back” as the project progresses over time. Some types of projects inherently have high uncertainty during initiation and planning. For example, integration of custom software. When faced with projects involving high level of unknown, the Project Manger should use “Three-Point Estimating”. This technique will include the full range of possible values of the estimate and reduces bias that can lead to a highly optimistic or pessimistic estimate. I usually create custom fields within Microsoft Project 2010 to capture and calculate the three point estimates. The approach is also called PERT. The formula is PERT Estimate = (Optimistic Estimate + 4 X Most Likely Estimate + Pessimistic Estimate) / 6. Other project teams that work on a high number of similar projects will develop good enterprise knowledge for making estimates. An example would be an energy and gas company that knows 2 resources can lay pipe at 20 metres per hour and the material cost is $150 dollars per foot. Estimates in these situations can be very accurate, from an early stage. A Project Manager may have little control of the level of uncertainty or risk when handed a new assignment. However, appropriate application of the concepts above will lead to successfully managing and quantifying estimates of duration, effort, and cost. Stephen Wise www.IntegrationProfessionals.com How to Improve Sales Revenue in Your Company | Stephen Wise A typical business goal is to execute the sales strategy and increase revenue by X% over the period. The sales process is an ongoing operational activity and is usually not suited to being treated like a formal project. However, the sales process needs to be managed and there are similarities between managing a sales process and managing a project. A sales process needs: Management of key milestones and timing Identification and assignment of people to assist Encouragement of teamwork at client site and internally Risk identification and mitigation planning Tracking and reporting of selected metrics Feedback/improvement loop Management of key milestones and timing in the sales process I recommend every sales team to work with an expert project manager to develop a template of tasks and estimated timing which gets stored in a central library. At the earliest reasonable time, the template should be fired-up and customised to suit the opportunity. That is, tailor it to needs by modifying the tasks that need to be accomplished, the estimated durations, and dependencies. This plan, will guide all stakeholders to manage expectations and keep everyone on track for what needs to happen next. Identification and assignment of resources within the organization to assist with the presentation Once an opportunity has been identified, team members need to be called on for assistance in various parts of the proposal. It is important that the sales person ensure that everyone has time to take on the work, understands how to do the work, and understands when and how to report that the work is completed or that some sort of issue has caused work to slow down or stop. The sales person may not have the authority to prioritise everyone’s time and therefore it is important to keep the lines of communication open. Risk identification and mitigation planning Sales people are able to identify unique risks because they are the closest to understanding the client’s expressed needs. These insights are extremely relevant. Combined with their own experience dealing with other customers, sales people can see risks that no one else can. Positive risks, those that have upside potential lead to new items in the sales funnel. Negative risks, those that can push a deal off the rails should not be pushed under the carpet. The (negative) risks, should be identified and reviewed. Each risk has a likelihood/ probability of occurring and severity/impact on the sale should it occur. The sales person’s team and management should periodically develop and review tactics to reduce the probability and lesson the severity of impact, should it occur. Tracking and reporting of selected metrics back to the team and management Peter Drucker, has been paraphrased, “you can’t manage what you can’t measure”. The selection of appropriate measures and metrics is a cornerstone of sales management. Most sales people are keenly aware at all times of the status of their metrics and how much they are exceeded or failing short of their objectives. In addition to short-term results, frequently communicating a sales dashboard may be more beneficial then you thought. The benefit is to improve organizational alignment with the sales strategy. Having visibility to the sales dashboard could be the trigger to makes those changes Feedback/improvement loop Deals get won. Deals get lost. The salesperson will obtain lots of knowledge about the client or at least they should. Knowledge represents a significant asset for most businesses. Left unmanaged knowledge tends to quickly fade. When deals are lost, it is important to learn from the process. Are there changes that can be made to the sales process? A lessons learned process and central repository for the post-mortem will help the next sales rep and also help when it comes time to review the process for a complete over hall or investment in technology to automate parts of the process. Stephen D Wise Stephen Wise Integration Professionals Dramatically Improve Traction Comments are closed.