{"id":15999,"date":"2018-11-21T11:11:24","date_gmt":"2018-11-21T11:11:24","guid":{"rendered":"http:\/\/blog.toggl.com\/?p=15999"},"modified":"2024-06-15T07:41:16","modified_gmt":"2024-06-15T07:41:16","slug":"earned-value-management","status":"publish","type":"post","link":"https:\/\/toggl.com\/blog\/earned-value-management","title":{"rendered":"Earned Value Management: Learn to Measure Project Performance in 3 Easy Steps"},"content":{"rendered":"

As a project manager, you need to know about earned value management \u2014 what it means, the terminology involved, and how to how to implement it into your management system. Lucky for you, that\u2019s exactly what this blog post is about.<\/span><\/p>\n

If you\u2019re ready to learn the same project management methodology<\/a> that NASA (yes, <\/span>that<\/span><\/i> NASA) has been championing for years, keep reading.<\/span><\/p>\n

What is Earned Value Management?<\/span><\/h2>\n

Is \u201cearned value management\u201d a new term to you? <\/span><\/p>\n

If you\u2019re a bit lost on the definition, don\u2019t worry. While the name itself might sound complex, the meaning really isn\u2019t. <\/span>Wikipedia<\/span><\/a> describes it this way:<\/span><\/p>\n

a project management technique for measuring project performance and progress in an objective manner.<\/span><\/i><\/p><\/blockquote>\n

The success of any given project needs to be <\/span>measured<\/span><\/a> on three levels: scope, time spent, and costs incurred. Project managers run into problems when they neglect to calculate one or more of these important elements.<\/span><\/p>\n

For example, the brass at company XYZ has just greenlit a new project. They\u2019ve allocated $1000 a month for this endeavor and expect it to be completed in four months.<\/span><\/p>\n

Without an earned value management system in place, company leaders could, two months into the project, look at the $1500 spent thus far and be thrilled to be under budget. They may conclude that the project is destined for success after viewing just the time and money data points.<\/span><\/p>\n

But what if leadership<\/a> also analyzed the project scope and discovered that only 25% of the work has been completed up until this point? <\/span><\/p>\n

That would mean the team is actually behind schedule and over budget.<\/span><\/p>\n

Earned value management looks at all three factors of a project \u2014 both before, during and after \u2014 to assess its feasibility, progress, and success. This approach also helps companies better forecast potential issues.\u00a0<\/span><\/p>\n

Earning Value \u2014 What\u2019s That All About?<\/span><\/h2>\n

The \u201cearned\u201d in \u201cearned value management\u201d speaks to the way <\/span>progress is tallied<\/span><\/a> when using this project management technique.<\/span><\/p>\n

Basically, each \u201cblock\u201d of work needed to complete an entire project is given a monetary value. This value is calculated by dividing the total project budget by the number of work \u201cblocks\u201d.<\/span><\/p>\n

In our previous example, a \u201cblock\u201d could be defined as one month\u2019s work. Meaning the value of each work \u201cblock\u201d is $1000. Once that work has been completed, its value ($1000) has been earned.<\/span><\/p>\n

Using this system makes for accurate progress tracking. By comparing the planned earned value to the actual earned value, project managers can more accurately forecast the future and adjust both schedules and budgets as needed.<\/span><\/p>\n

Earned Value Management Terminology<\/span><\/h2>\n

Now would be a good time for us to share with you what may or may not be bad news: earned value management requires math. Duh, duh, duh\u2026 (sound of ominous organ playing.)<\/span><\/p>\n

Fortunately, there are only a few <\/span>terms and formulas<\/span><\/a> you need to be aware of. Let\u2019s cover them now:<\/span><\/p>\n

Earned Value Management Terms<\/span><\/h3>\n