Earned value management (EVM)

Definition

Earned Value Management (EVM) is a project management technique that integrates scope, schedule, and cost to assess project performance and progress. It helps project managers and teams evaluate how much of the planned work has been completed and whether the project is on track regarding budget and timeline. By combining actual performance data with planned performance data, EVM provides valuable insights for forecasting future performance and guiding decision-making.

5 Must Know Facts For Your Next Test

1. EVM uses three key metrics: Planned Value (PV), Actual Cost (AC), and Earned Value (EV) to provide a comprehensive view of project performance.
2. By analyzing variances in these metrics, project managers can identify potential problems early and take corrective actions.
3. EVM enables better forecasting by providing insight into future performance based on current trends.
4. Effective use of EVM can enhance communication within project teams and stakeholders by providing clear, quantifiable data on project status.
5. Integrating EVM with other project management practices can improve overall project governance and accountability.

Review Questions

• How does earned value management support the role of project managers in assessing project performance?
  • Earned value management equips project managers with a structured method to evaluate project performance by comparing planned progress against actual progress. It allows them to measure key metrics like Planned Value, Actual Cost, and Earned Value, giving a clear picture of where the project stands. This information helps project managers identify any deviations from the plan and make informed decisions about resource allocation and potential adjustments needed to keep the project on track.
• Discuss how earned value management can be used for effective forecasting in project control.
  • Earned value management serves as a powerful tool for forecasting by providing data-driven insights into a project's performance trends. By analyzing variances between Planned Value, Actual Cost, and Earned Value, project managers can predict future performance, including potential overruns or delays. This predictive capability allows for proactive measures to be taken, ensuring that any issues are addressed before they escalate into larger problems.
• Evaluate the impact of integrating earned value management into portfolio performance measurement practices.
  • Integrating earned value management into portfolio performance measurement significantly enhances an organization's ability to evaluate the effectiveness of its projects. EVM provides a standardized approach to assess multiple projects simultaneously by offering insights into cost efficiency and schedule adherence across the portfolio. This integration allows decision-makers to prioritize resource allocation effectively, identify high-performing projects, and make informed decisions about future investments based on comprehensive performance data.

Related terms

Planned Value (PV):

The budgeted cost of work that was planned to be completed by a specific time.

Actual Cost (AC):

The actual expenses incurred for the work completed during a specific period.

Cost Performance Index (CPI):

A measure of cost efficiency, calculated as the ratio of earned value to actual cost, used to assess how well the project is staying within budget.