On-Schedule and On-Budget – A Pipedream? Earned Value is a Great Tool for Large and Small Jobs
Often in our efforts to achieve our objectives faster at lower cost, our best intentions take the optimistic viewpoint and we forget to consider the impact that skipped steps or substitutions may have on the project outcome.
The physics maxim, “For every action, there is a reaction,” continues to hold true. Working through a thorough estimating process prior to officially starting a project will minimize unwanted consequences.
During a hectic period juggling two careers, two young children, and a myriad of other commitments, my husband and I grabbed a one hour time slot to purchase a refrigerator. We had done our research; we knew which features we wanted, our price range, and other purchase criteria. We completed our mission within the allotted time and applauded our efficiency. The refrigerator was delivered on the scheduled date and time. All was good – and then we realized the refrigerator was 1” wider than the unit we were replacing. It did not fit the existing space. Fortunately, the single appliance purchase that drove a five figure kitchen remodeling project has become a family joke. And for those who are curious, we now measure twice before any large purchases are made.
Our home project mishap occurred because we assumed a kitchen appliance maintained a standard width. Launching projects based on faulty assumptions is not reserved for homeowners and other do-it-yourselfers. Far too many business decisions and projects are pursued with minimal analysis. How many “lessons learned” sessions focus on business/political pressures and misinformation from anecdotal references? And do “lessons learned” get filed in an accessible place or archived with the rest of the closed project?
A center point to PMI’s documented methodology is a series of Earned Value calculations that help people track estimated cost and schedule variances. Gauging the actual work completed and budget spent against the forecasted timeline help project managers realize that schedules and cost outlays are veering off course while there is an opportunity to make adjustments. The value these equations offer is the ability to focus on the multiple moving parts that affect the outcome and not a single calculation.
Earned Value methodology is not reserved for large, multi-year projects. Smaller project efficiencies can benefit from tracking the work performed against estimated costs and schedules. The Cost Performance Index (CPI) and Schedule Performance Index (SPI) are two Earned Value calculations that enable project managers to identify the probability that the budget outlays and schedule forecasts are tracking to plan. For example, an SPI greater than one means the project is ahead of schedule; conversely, an SPI that is less than one means the project is behind schedule. Using these estimating tools, managers are able to recognize the relationship among the various project elements which will enable them to make decisions based on factual reality.
Assuring a project can be completed on schedule and within budget can be achieved when you are able to answer the question: If this element is adjusted, what reaction will that adjustment cause? Using facts, you will be able to determine if the project will meet goal, or if you will need to adjust expectations.