Earned value analysis calculates whether the work for a given period is accomplished as planned. This type of analysis uses three key values: earned value, actual cost, and planned value.
- earned value (EV) - EV is the budgeted value of work actually completed in a given period of time. It answers the question: "How much work is done and what was the original budget to complete that work?"
- actual cost (AC) - AC is the total of costs incurred in accomplishing work on an activity during a given period of time. It answers the question: "How much has it cost to complete the work that has been done so far?"
- planned value (PV) - PV is the portion of the approved cost estimate budgeted for an activity during a given time. It answers the questions: "What should the work planned for this period cost?" and "How much work should be done by now?"
EV = PV x % Work Complete
EV is the PV of your project multiplied by the percent of work complete. The PV is in the project budget and you can determine the PC by dividing the amount of work completed by the total amount of work that is expected to be completed during this time period.
With a good basic understanding of these key values, you can move on to performing the calculations used in earned value analysis. A careful interpretation of the results will help you determine if additional risk identification and analysis is required.
To determine whether your project requires additional risk identification and analysis, you must calculate four performance measurements.
- cost variance (CV)
- schedule variance (SV)
- cost performance index (CPI)
- schedule performance index (SPI).
CV = [(EV - AC) / EV] x 100
SV is the difference between the budgeted value of work actually completed and the amount the company planned to spend to complete the work during a given period of time. The formula is:
SV = [(EV - PV) / PV] x 100
The last two performance measurements are ratio expressions of CV and SV. CV and SV tell you the percent that your project varies from the baseline, while the CPI and SPI tell you how efficiently the work has been performed.
CPI is the cost efficiency ratio of earned value to actual costs. The formula is:
CPI = EV / AC
SPI is the schedule efficiency ratio of earned value accomplished against planned value. The formula is:
SPI = EV / PV
Once you have calculated the results for CV, SV, CPI, and SPI, they must be interpreted. This is the information the company needs to decide whether additional risk identification and analysis is necessary.
When analyzing the CV and SV for a project, you must look at how close to zero the results are. A result that is equal to zero indicates that the project or activity is performing as estimated. A result that is greater than zero indicates the project or activity is ahead of the estimates. A result of less than zero indicates that the project or activity is behind the estimates. When the result varies significantly above or below zero, additional risk identification and analysis may be necessary.
When analyzing CPI and SPI for a project, you must look at how close to one the result is. A result that is equal to one indicates that the project or activity is performing as estimated. A result that is greater than one indicates that the project is performing ahead of the estimates. A result of less than one indicates that the project is performing behind the estimates. When the result varies above or below one and exceeds the company's predetermined acceptable range, additional risk identification and analysis is necessary.
Earned value analysis can help you determine when additional risk identification and analysis is necessary. Being able to perform the calculations and interpret the results will help you handle and control project risks properly.
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Tag: PM206A53. Let me share all of you about #5 Tips for Project Management Success,, I hope you enjoy it
1. Plan your day using time management techniques
As a project manager, time management skills are essential because you are dealing with a wide range of tasks that demand a quick turnaround time. Planning your day will go a long way in keeping you organized and increasing your productivity. Assist your task planning by using project management software which helps you track the work of you and your team.
If you are not very tech savvy, a simple to-do list can also be a great organizational tool. Prioritize your most important tasks by putting them at the top of the list and less important ones at the bottom. Having a visual plan of your daily tasks helps to keep you on track and aware of time.
Related post: Free ebook 104 secrets to become a great project manager
2. Include stakeholders in important project conversations
While you will have plenty of responsibilities regarding the project, don’t neglect your clients.
Good communication is essential is keeping both parties informed of project progression, curtailing scope creep, and apprised of changing requirements. Some clients may have different expectations when it comes to communication, so make sure to establish the frequency and type of communication (like emails, phone calls, and face-to-face conversations) at the beginning of your project.
Establishing communication expectations early helps alleviate stakeholder uncertainty about communication frequency and delivery.
3. Regularly communicate with your team
Daily team communication helps keep misunderstandings and unclear requirements under control. Keeping your team informed in every step of the project is essential to project management success.
For example, a study published by Procedia Technology found that good communication skills were the cornerstone of project management. The study examined over 300 “construction project managers, architects, construction managers, engineers and quantity surveyors” and their successes and failures on various construction projects.
4. Anticipate project setbacks
Even the best-laid plans often go awry.
Remember that even with a high amount of planning and attention to detail, your project may still encounter some challenges. Pay attention to complaints from stakeholders or colleagues, and other warning signs, like a missed deadline or cost overrun, that there may be a problem.
Preventing a crisis will keep your project running smoothly, save you a lot of time, and keep you, your team, and your stakeholders confident in progressing with the project.
Unfortunately not every complication can be avoided. Crisis management skills are essential for dealing with the unexpected. Project managers need to be flexible and pragmatic. Improvise and make sharp decisions when needed.
Related post: 92 free project management templates
5. Stay focused on the details
A common problem project managers encounter is having the project aims not aligned with the organization’s objectives. A great project manager will strategize a plan for the project to lead back to the overall success of the business.
Know your project’s scope by heart and avoid wandering outside of the project’s requirements. It’s too easy to get lost in minor details and forget what your focus is, so a well-planned project scope is essential for success.
And final, you should use KPI to measure effectiveness of the project, here are full list: 76 project management KPIs
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