Earned Value

Earned value is a concept developed to distinguish between work and the results which that work brings.  The basic idea is that work is not progress even though it might initially seem like it.

When planning a project we try to predict the work that is to be done and schedule and organize that work as efficiently as possible.   This focus, however, can lead us into the delusion that if we complete the work then we will inevitably complete the project.

If this were true no project would ever be late.  Project lateness does not occur because insufficient work is done.  Quite the contrary; projects which are late typically record hundreds of percent more work than was originally contemplated.  Does this mean the original plan was optimistic.  Maybe, but more usually it means that work had to be done over.

By reporting earned value we hope to track the value actually delivered rather the mere completion of the work which was originally intended to deliver that value.

The Mechanics

Associate a value with each of the deliverables or tasks in the project - depending on how you are planning it. (More on how to do this below.)

After the project has been scheduled plot a graph of how much value will be delivered at the end of each week or month of the project.  This graph should be 0% at the start of the project and 100% at the end.

Notice that non even distribution of slack in the project - time when resources are not utilized 100% - will cause the earned value graph to be non linear (bent).  Experience has shown that you should distribute slack more heavily at the start and end of projects because there are always teething problems at the start of the project and final testing all ways throws up unforeseen issues.  This should give the earned value curve an S shape.  More slack means a lower rate of value delivery.

As the project progresses record and plot the actual value delivered. The relationship between the two graphs, a quarter of the way thru the project, will tell you a lot about what is likely to happen in the last three quarters.

Assigning Value

Separating value from work can be problematic.  There are many ways to go about it.  Here are a few.

Method 1

Assign each task a percentage of the projects overall value according to its percentage of the total forecast work. As each task is completed record that the value associated with the task has been earned.

Method 2

Brake the project down into deliverables.  Assign each deliverable a percentage of the projects overall value according to intuition and judgement. As each deliverable is delivered record that the value associated with the deliverable has been earned.

Method 3

Brake the project down into deliverables and predict how much work it will take to deliver those deliverables.  Assign each deliverable a percentage of the project's overall value according to the percentage of the overall work that the deliverable's forecast work represents: If a deliverable is forecast to require half the total work done on the project then it is assigned half the project's value.  As each deliverable is delivered record that the value associated with the deliverable has been earned.

Method 4

Brake the project down into deliverables.  Assign each deliverable a percentage of the projects overall value equal to 100 times 1 over the number of deliverables in the project.   As each deliverable is delivered record that the value associated with the deliverable has been earned.