a time-phased budget for this obviously valuable piece
of information. EVM can be effective on a simple implementation—it doesn’t need to be difficult.
Mistake #3: Assuming the Accountants
Are Your Allies
Accountants have been told all of their academic and
professional lives that all relevant management information that has to do with budgets and costs originates in their department, and anyone who disagrees
with that premise is an idiot. But, of course, EVM
systems require actual costs, collected at the reporting level of the work breakdown structure, in order to
function. Once your organization’s accountants realize
this, and recognize EVM as a rival information stream,
they will often pretend to be unable to provide your
EVM system with this component, and find creative
excuses why they can’t. It’s very frustrating, but you’ll
have better luck getting your earned value system set
up if you go in assuming you do not have the support
of your accountants.
Michael Hatfield, PMP, is an author ( Things Your
PMO Is Doing Wrong, Game Theory in Management),
speaker and blogger (for ProjectManagement.com),
and can be reached at varthold@aol.com.
function of putting usable management information
into the hands of decision-makers, earned value begins
to lose its efficacy, followed closely by its attractiveness.
Mistake #2: Making It More Difficult Than It
Needs to Be
Many earned value practitioners insist that all cost baselines must be estimated with the most precise, current
data available, right down to being within one-tenth of
a percentage point of the forecast escalation rate. This is
silliness. EVM systems have an inherent self-correcting capacity that allows for highly relevant information to remain
accurate even as some parameters become questionable.
For example, one of the most (if not the most)
valuable pieces of information produced by EVM is
the calculated estimate at completion (EAC) (those of
you who like to re-estimate remaining work, add that
to cumulative actuals, and call EAC victory are, well,
wrong). Studies have shown that calculating the EAC by
dividing the total budget by the cost performance index
(CPI) yields an EAC that is accurate to within 10 percent
of realized total costs, once the project has passed the
15 percent complete point. Here’s proof of my assertion:
The formula EAC = budget at completion/CPI can be
algebraically reduced to EAC = cumulative actual costs/
percent complete. In other words, you don’t even need
ANOTHER TOOL IN THE CHES T
Ultimately, Mr. Berkeley notes, “EVM is predicated on the fact that you have
good project management in place.” Its outputs, and the bene;ts it delivers, are
only as valuable as the project professionals around it.
“EVM is by no means a silver bullet,” says Mr. Ahmed. “Not using it is like
taking a seven iron out of a golfer’s bag. ;at club on its own doesn’t make you
win the championship, just as EVM on its own won’t be enough to run an e;-cient project. But without it, it will be much tougher.” PM
EVM is predicated on the fact that you
have good project management in place.”
—Russell Berkeley, Darbus Ltd., Blackpool, England
EVM systems
have an inherent
self-correcting
capacity that
allows for
highly relevant
information to
remain accurate
even as some
parameters
become
questionable.
