Most project managers and project management organizations tend to shy away from the use of earned value management. If you study PMI’s Project Management Body of Knowledge you will find that one of the dimensions of earned value is defined in terms of cost. Some of the terms which are used are “estimated costs,” “actual budget” and “actual cost.” When we think of these terms we think of dollars (or pounds, or franks, etc.). Yet the fundamentals of this tool discuss value. Ask people what they value in their lives and they probably will not reference money (bar a few). I would say the same is true if you asked them what they valued on their project. To use earned value management requires us to start thinking in terms of value and not money.
Since I live in the world of IT and software development most of the “cost” for a product is the salaries of the people that work on the project. Project managers typically do not have access to salary information to measure costs. They might be able to put together an average dollar amount per hour, but even that is not necessary. What we really “value” on our projects is not money but people. More specifically we value people’s time.
The key to performing earned value on our projects is using time spent as our measurement of “cost.” It is time that we truly value as our projects are resource limited. This becomes a much easier task for a project manager as they merely need to gather estimates of the time it will take to create project deliverables. Each deliverable on the project has a time estimate “value” attached to it. From the project plan each deliverable will also have a date attached to it. Using this information, project managers can measure the project against the two dimensions of value over time.
The second piece of making this work requires a tool to track the estimates against the actual time spent. In other words, you will need a time tracking system. One mistake that many organizations make here is that they attempt to collect too much information. For this method of earned value management you need only track time against the deliverable. You do not need to know the specifics of what work is being performed such as planning, designing, coding, etc. This will greatly reduce the complexity for people to measure their own time. The reduction of complexity will increase the accuracy of the data that is collected and what I have found is that you do not need to measure your project in excruciating detail. The more time you spend on creating these details the more “value” you are expending by requiring additional time to be spent on your measurements. This is the primary reason that many government project costs so much money. Government contracts require that data be kept at these very detailed levels.
To all you project managers out there, Keep It Simple, Stupid. Remember that when you are using earned value management you must think in terms of value and not cost.