What Is Earned Value Management?

Earned Value ManagementWhen project managers take on a new company project that will taka significant amount of time and money, thy focus on earned value management as a measure of their overall success in developing the project and managing its journey toward completion. Earned value management, or EVM, is perhaps the most critical way to measure this success, since it focuses on the time and money required, the time and money spent, and a comparison of those resources to the remaining work yet to be done before a given deadline. The EVM can also show whether the project is ahead of schedule and under budget, lagging behind on the timeline, or draining the company of key resources that should be devoted to more worthwhile, marketable, or market-ready products that would have a greater immediate benefit.

Earned Value Management: What Does it Measure?

Companies rely on project managers to handle any number of key projects, whether it is the overhaul of a marketing strategy, the choice of a new logo, or the development of a key new product that will produce long-term benefits in the marketplace for the organization. When they entrust these duties to a project manager, they also craft a budget and a timeline for completion of the task. The project manager then must assemble an appropriate team and work on the project within these constraints. An earned value management assessment is done periodically as the project winds its way toward completion, with project managers focusing on three key areas of earned value:

  • The time spent on the project so far, in relation to the proportion of budgetary money spent on it.
  • Performance-based assessment of project team members, and outcome-based assessment of project benchmarks.
  • The full cost of the completed project versus the immediate and long-term fiscal benefits to the company.

The EVM process is typically contained within a piece of computer software, and this software does all of the assessment and calculation on its own. Most project managers set the software to perform an earned value management assessment on a set schedule, which might be once daily, once weekly, or once per month. They’ll make changes to the project’s budget and schedule based on the outcome of these assessments, and will work with company management to make any budgetary or staff adjustments as needed.

A Crucial Process to Keep Projects and Budgets in Line

If there’s just one area of a company’s budget that can easily spiral out of control, it’s certainly the segment dedicated to special projects in various departments. Because of uncertain required resources, staff levels, and timelines, projects have a tendency to be finished late, run over the set budget amount, and set the company behind when it does finally unleash its new products or initiatives to the public, according to Project Smart.

Related Resource: Special Events Planning

EVM is one of the best ways to keep tabs on these metrics, with regular reports that look at employee performance, budgetary allocation, time remaining versus time spent, and much more. The system was originally designed for use within government agencies, including NASA and the OMB. Its level of precision is therefore quite high, and it’s a key way to keep company finances from running into the red. Project managers who are trying to work more efficiently, with better staff levels and more disciplined spending, should turn to earned value management as a way to meet these objectives more easily in the future.