Earned Value Management is an internationally-recognized management system that measures project performance through answering the question, “What did we get for the money we spent?” It traces its history to no less than the US Department of Defense before it has been utilized by more government agencies and private sectors. As a standard accepted by the American National Standard Institute/Electronic Industry Association, it is currently a preferred management tool of multiple industries, educational establishments and consulting firms.

Using EVM, a project team can quantify the variances between what they planned to work and what they actually accomplished. It also allows the managers to control, refer and forecast costs and schedule for decision-making. It uses the following primary formula:

1. Determining Planned Value or the work that was planned to be accomplished in (hours or dollars).
2. Determining Actual Cost or how much was actually spent (in dollars or hours).
3. Determining Earned Value, which is the variance between Planned Value and Actual Cost.

EVM’s formula can determine if each project phase progressively produces the expected “earned values”. This simple example will best explain it:

A project has allotted $12,000,000 for construction of a tower building. The construction is expected to last for 12 months while spending a million each month. However, on the 6th month, it was found out that 50% of the building has been completed yet a total of $10 has already been spent. The project therefore is not earning the expected values.

Upon knowing these details, the project manager can start to check the performance of the construction workers and builders, set the expectations of the stakeholders, replace resources (such as suppliers), analyze the project’s profitability, and determine the accountability of the other workers within the team. This top level view of project performance can also evaluate non-cost related plans (e.g. employee hours).

However, despite its being easily understandable and result-oriented, EVM has its own disadvantages. One of these cons is that it does not give enough account to quality, which can never be measured through objective values alone. Quality needs to be assessed with some subjective judgments that EVM does not provide. It is very possible that a project can earn impressive values, yet come up with disappointing outputs and results.

EVM can likewise be an unreliable metric for some long-term projects. These projects entail regular substantial research, which can cause varying numbers and predictions. Their expected earned values therefore are uncertain and are nearly impossible to be accurately measured. And although EVM is a proven method that necessitates low overhead costs, it can still drive wrong behaviors, cannot maximize management reserves, and cannot reveal the root causes of the project’s risks and problems.

Analyzing earned values can be a waste of time if the project’s scope, schedule and costs are too complex. Thus, EVM might not always be a superb tool for every project. Its supporters say that this controversial tool it gives reliable predictions and assessment, while its detractors say that it misrepresents the real project status. Either way, good and resourceful teams can and will know if EVM is appropriate for their projects.

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