By James Bell
Earned value (EV) is simple formula that measures the progress of the project as a dollar value. It shows us the value of the project to date and is part of the Earned Value Management Methodology. EVM is an objective and systematic way for measuring performance and progress of projects.
As a business manager articles like How to Explain Van Leasing to a Five-Year-Old can really get you focused on implementing your strategy to get more customers.
EV helps us determine other metrics such as Cost Variance, Schedule Variance, Schedule Performance Index, Cost Performance Index, and more. The math on many of these metrics is pretty straight forward. When utilizing multiple metrics in a dashboard or report, we obtain better high level visibility of a project without having to get into too much level of details.
Budget at Completion
We typically divide completion percentage by time, tasks, story points, or some other measurement that makes sense. All the parts add up to 100%. Let’s say you have 4 tasks that all take equal time and effort. Each task is considered 25% of the entire of the entire project. If you’ve completed 2 of these tasks, your Percent Complete is 50%.
This is the total amount budgeted to the project.
Project Management is complex. The scope and budget can change in the middle of a project. It’s built into some methods like Agile. This scope creep changes the Budget at Completion value and can cause confusion. Scope creep is one reason why analysts and managers like burn up charts rather than burn down charts. Because of this it’s very important to understand the nature of your business and projects when setting out to build kpi’s, viz’s and dashboards.
At an even higher level, projects and funding are negotiated, traded, and sometimes even cut. There is always going to be a healthy tension of conflicting interests within an organization. This means you may need to fight for your budget and hold on to as much as possible so you can shift it between projects and move the funding around. Once you release it back into the business, getting it back can be a challenge. The flip side to that is if you hold on to funding and don’t use it, you are tying up resources which is an inefficient use of cash.
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