Home  ›   Blog   ›  What is Earned Value Management & How its Theories Affect PM Software

What is Earned Value Management & How its Theories Affect PM Software

what is evm in project management

When the first-ever project management department was developed in the US Navy in the 1950s, it was just the beginning of a glorious journey. At the turn of the millennium and (almost) two decades later, we are still marveling at the wonders project management can do for us.

From NASA to your local advertising agency, every firm has project management departments that function for the sole purpose of planning, preparing, analyzing, and scheduling costs and outcomes of a project.

Earned value management (EVM) did not come into the scene until 1989, and project management already had its dynamic streams of thoughts, thanks to Dupont and Taylor, among others. Measuring the performance of a project against the project baseline has plenty of benefits. Read on to know what is earned value in project management and how EVM is an effective factor when using project management software.

What is EVM in Project Management?

Earned value management in project management can be defined as:

A systematic project management process that helps managers to measure project performance. The process finds various variances in projects by comparing the work planned vs work completed.

Now that we know what is EVM in project management, let’s dig into the concept a little further…

Understanding How the Theory of Earned Value of Management Works

From planned costs to managing schedule, you can do it all using EVM calculations. Let’s take a quick tour of the key concepts of EVM to understand its role in project management.

But before that, you must know about the three key concepts that hold the fabric of earned value project management together.

  1. PV or Planned Value – the budget of a project
  2. AC or Actual Cost – the cost incurred in doing the project
  3. EV or Earned Value – the accomplishments (or outcome) from the project

Let us assume that you have a task that you plan to finish in 10 hours at $100 an hour. That takes your PV to $1000. Let’s also assume that you have assigned Mr. X and given him two days to finish the task.

Here are various scenarios that can unfold from this point on, and how you can keep track of them with smart EVM calculations.

⇒ Scenario 1:

Mr. X reports to you at the end of the day, stating that he has finished the day’s work and clocked in five hours. The task is halfway done, and he expects to wrap it up within the same amount of time the next day. This is an ideal scenario. It usually does not happen that way in real life. Here are the EVM calculations according to the information you have on the progress of the project.

Budget Planned Value Actual Costs Earned Value Schedule Variance Cost Variance
$1000 $1000 $1000 $1000 $0 $0

Table 1

⇒ Scenario 2:

In this case, Mr. X reports that he has worked for three hours on the task and needs seven more to complete it the next day. Here are the EVM calculations that give you real insights on the progress.

Budget Planned Value Actual Costs Earned Value Schedule Variance Cost Variance
$1000 $1000 $300 $1000 Behind $700 $0

Table 2

⇒ Scenario 3:

Mr. X reports that he has put in eight hours of work and needs just one more the next day to finish the task. Here is an EVM-eye view of the entire situation.

Budget Planned Value Actual Costs Earned Value Schedule Variance Cost Variance
$1000 $1000 $1000 $1100 $0 Under $100

Table 3

⇒ Scenario 4:

Finally, Mr. X says that despite putting in ten hours of work, he has not been able to complete the task. He also mentions that he would need another eight hours of work the next day to wrap up the task. Here is how EVM can help you figure in your chips at the table.

Budget Planned Value Actual Costs Earned Value Schedule Variance Cost Variance
$1000 $1000 $2000 $2200 Behind $200 Over $800

Table 4

Here’s How EVMS Helps to Manage Your Projects Better

A technique to measure the performance of the project as per a baseline, Earned Value Management System or EVMS helps you get a better grip on the projects. Even the most seasoned project management and assignment expert overlook certain factors when considering the planning and execution along traditional binary lines.

Let’s face it. There is much more to determining the success of a project than calculating whether it is going ahead of schedule or whether it will be wrapped under the sanctioned budget. That is where EVMS figures in. It helps you look beyond the binaries of project management, and gain a better understanding of where you stand as far as the project is concerned.

If your EVM project management system has answers to the following questions, you have a winner.

  • How can I finish the project ahead of schedule keeping the cost factors intact?
  • How will quickening up the schedule affect cost matters for the project?
  • How can I save on costs by cutting corners on the project?
  • Will I be able to finish the project on time?
  • How to determine the success of a project when I am lagging in schedule but have limited the cost?
  • Can I accurately calculate the total cost of the project factoring in the time it will take until completion?
  • Can I measure the performance of a current project with that of previous ones I have completed?

EVM provides insights on all of the questions mentioned above (and many more). If you need a breakthrough in wrapping up projects, relying on EVM-based project management software is the way to go. Read on to know more about using EVM-based project management software such as ProProfs Project.

EVM project management factors that influence project management software

Project management has been around since the ancient Egyptians. Its main components had important contributions throughout its history. It is no surprise that EVM or earned value management has become one of the primary factors for developing reliable project management software. Here are a few areas that project management software interlays with EVM, bringing out the importance of earned value management calculations in the success of a project.

✓ Planning, Budgeting, and Scheduling

Once the intersection of Work Breakdown Structure (WBS) and Organization Breakdown Structure (OBS) is firmly established, it is the time to draw up planning, scheduling, and budgeting aspects through project management software. EVM calculates the best possible outcomes of each of the processes that help you draw up the road map to meet project objectives. When project management software gets an updated data analysis regarding monthly budget and performance measurement baseline (PMB) from EVM systems, you can proceed to the next level with ease.

✓ Accounting and Cost Analysis

EVM takes time to calculate and analyze all data correctly. Since EVM project management software uses the data collected from EVM systems to integrate actual costs into the project, EVM is just the way to get it done in a jiffy. Project managers can use EVM calculations as an essential resource for the project. In most cases, the earned value management systems help project management software to keep a tab on misleading cost variance or booking lag as well.

✓ Creating Management Reports and Analysis

From documenting causes, impacts, and corrective measures to cost and schedule alterations and more, EVM does it all for a project management software. Drawing up reports and representing data in a manner that everyone can understand, modern-day project management software has EVM to thank for its reserve of ample data on the project. Variance calculations through EVM at the control account level give the project management software the ability to sum up data through an established WBS and OBS.

✓ Revision and Data Maintenance

Finally, EVM helps in the pre-planning, rescheduling, and project analysis fronts as well. EVM can also save the day in cases where projects failed due to improper baselines. Adjusting the performance baseline to empirically established planning factors, EVM gets its job done to salvage a project alright. Along with that, EVM also helps in frequent revisions and accompanying calculations for ongoing projects, making it a storehouse of resources for project management software.

However, you must also watch out for the obvious mistakes that most project managers are prone to make when working with EVM.

Understand How Earned Value Management in Project Management Effects PM Tools

In a world where every other project manager is complaining about schedule or cost overruns, EVM saves the day. This system not only helps in calculating the essential factors needed for the success of a project, but also impacts planning and execution stages of a project. From coming up with an accurate forecast for your projects to identify key areas that require your attention, earned value in project management is the BFF that project management always needed.

Take a cue from this post to gain an understanding of how EVM can have a positive influence on the planning and design of project management software. Look out for the common pitfalls that project managers are prone to while synergizing earned value in project management into their projects, and you will be good to go.

Recommended Read:

FREE. All Features. FOREVER!

Try our Forever FREE account with all premium features!

About the author

David is a Project Management expert. He has been published in elearningindustry.com, simpleprogrammer.com. As a project planning and execution expert at ProProfs, he has offered a unique outlook on improving workflows and team efficiency. Connect with David for more engaging conversations on Twitter, LinkedIn, and Facebook.