Nowadays, many organizations are thinking about implementing an Earned Value Management System (EVMS). With the wide variety of solutions in the market, not to mention different business requirements and budgets, the choice may not be that easy. Generally speaking, the search results should translate into defining the most effective price/functionality ratio for your company. So what is EVM anyway? That’s precisely what we’re going to find out in this article. Let's start with the basics.
How to apply the earned value method
When selecting EVM software, it's vital to understand why and how the concept of EVM exists and operates in the first place. Regardless of the solution you have chosen, you must:
- define in detail the content of the project;
- create and save a basic project schedule;
- draw up and hold a baseline plan for the cost of the project.
These elements are of critical importance for the reason that if, for example, an estimate says that 20% of the work has been completed, and the content of the work is not fully determined, then the accuracy of such an estimate is low, since this estimate is based on an incompletely defined content of the work. An orderly and adequate application of the work breakdown structure (WBS) can help gain a correct understanding of the fully defined project scope.
With a baseline schedule, each task will be accurately described in terms of its start and finish, as well as duration. Together with an approved cost baseline, this information determines the time and costs to complete the job. As the project unfolds, the actual work performed is evaluated, and the project's earned value is determined.
Summarizing the information, we can say that EVA requires a completely defined project scope.
Key quantities that operate in this method:
- The planned cost of planned works (PV aka Planned value);
- The planned cost of work performed (EV or Earned Value);
- The actual cost of the work performed (AC - Actual Cost);
- The planned cost of the entire project.
The benefits of EVM
With all this info, one question stands from the rest. What are the main benefits the adoption of a project management strategy brings?
- Thorough upfront planning;
- Complete understanding of your project's current status versus what's been planned;
- Better project management;
- Increased employees' effectiveness;
- Faster detection of problem areas;
- Increased team's flexibility.
Tips on selecting the right software
When selecting EVM tools, the first thing you need to do is to enumerate the goals and objectives you're pursuing in a project. Secondly, you have to understand the needs of those who will use the potential system within your team. The checklist should contain all the actual and future project management processes.
The third step is to consider a detailed set of IT guidelines, standards, and integration needs. With such preparation, it gets easier to evaluate an EVM system that suits your needs. A fully operational EVM solution generally includes the following features:
- The scheduling engine;
- A project cost management tool;
- The variety of BI (Business Intelligence) tools;
- Integration with business systems (such as accounting, ERP, etc.).
As said earlier, there are several systems in the market to consider when selecting an EVMS solution. The question boils down to choosing the right components, and especially scheduling and cost engines. So how can you decide which system works best for your company?
With your particular needs in mind, we advise you to conduct a decision matrix analysis and find out some of the most common standards for EVMS. This method allows evaluating different options against the critical criteria for your business. You can read more about a sample decision matrix using this link.
Tips on comparing the components of an EVMS
Earned Value Management solutions are integral in regards to budgeting, analyzing performance, and actual costs of a project. One-size-fits-all solutions are non-existent, so it’s essential to evaluate your specific needs before picking up a system. This way, one should consider all the objectives for the system.
When selecting an EVMS, it's vital to know what exact components your team needs. Below you'll find some essential considerations to be aware of.
- The system should provide the tracking of multiple projects simultaneously;
- One should be able to record planned and actual expenses;
- The scheduling engine (both built-in and extension) must record risks associated with project activities;
- The system should be web and mobile-friendly;
- Be sure to know whether EVMS components can be integrated and connected with other solutions you're using;
- Make sure the potential system provides convenient EVM analysis, reports, alerts, and status indicators;
- Find out how easy it is to familiarize yourself with the system. Does your vendor provide training courses? Find out;
- The system should allow creating steps or sub-activities that count towards the percent complete of the leading activity;
- Make sure the components comply with EIA-748 standard requirements.
The free earned value management template by Akveo
Here at Akveo, we developed the project management template that correctly measures a project's PI (performance index) and progress. The template allows project managers to compare costs to a budget based on the project development schedule.
Using the Earned Value Management Template, it’s possible to detect issues early, and estimate costs considering actual progress. This method is especially vital when you’re short on budget.
By filling out the template following each development stage, it gets easier to evaluate budget variance per each feature, the cost performance index and enhance the projected timeline. The earned value spreadsheet template ensures that your projects will be delivered both on schedule and budget.
To Sum Up
Nowadays, several EVM solutions in the market come in real handy at all levels of EVM. The basic functionality runs from measuring project performance and ensuring regulatory compliance to precise calculations and keeping all the data organized. With a proper earned value management solution at hand, one may answer the following vital questions:
- What was the project's square one?
- What is the ongoing status of the project?
- Where is the project heading to?
EVM systems help project managers check the current status of the ongoing project in comparison with the initial plan. In all, project management software always boosts productivity and ensures better results, so you don't have to worry about delays or errors. Indeed, EVM systems are industry-wide. For instance, Mark Stringer, the director of PMO at Aston Martin, claims that EVMS "helps to realize if a process or an employee is heading in the wrong direction, so it's easier to identify and fix mistakes early."
If you’d like the summary of all the info you've just read, EVM is all about staying on budget and time. And if you do, it gets a lot easier to make timely adjustments and be in control. This way, you have more chances to assume that your project will be successful.
P.S. Apart from the Earned Value Management Template, you might be interested in some of our related solutions:
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