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at PMI.org.
01-Aug-2007: Our web site has been
re-launched with a new look and in 2 languages,
English and Español.
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PMBOK® 3rd Edition, has been
released. Find out more here.
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Permalink posted by Jorge Dominguez, PMP® @ 9/01/2007 11:36:00 AM
The mere fact that you are a PM doesn’t mean that you can manage. The second definition of “manage”, when used as intransitive verb, in the Merriam-Webster English dictionary says: to achieve one’s purpose. How do you know if you are achieving your purpose? How do you know that you are succeeding in managing? You have to measure.
In project management there is an important key performance indicator (KPI) that allows the PM to measure a project’s performance. It is called earned value.
The foundation for measuring project performance is a project baseline and the entry of actuals against the project.
A baseline records a snapshot of a project at a point in which you are ready to measure against it. Generally, baselining occurs when all initial project estimates have been collected and approved. This is the plan. Thereafter, each time there is a significant change to cost, time, or scope that is approved by all project stakeholders the project has to be re-baselined so it can be measured against the revised estimates.
Actuals are entered against the project as the project progresses. The number of actual hours worked on a task, the percentage completion of a task, how much each hour spent costs, any purchase made, etc. are examples of actuals.
When measured, earned value results indicate if the project has deviated from the baseline. Earned value provides the PM with:
· Cost variance – the project is over budget, on budget or under budget
· Cost performance indicator – you are getting $x of work for every $1 spent (you can substitute $ for any currency)
· Schedule variance – the project is behind schedule, on schedule or ahead of schedule
· Schedule performance indicator – the project is progressing at x% of the rate planned
In all of the above, a negative number is bad and a zero or a positive number is good.
Another measure you can take is forecasting. Earned value can forecast the following:
· Estimate at completion – how much is the project expected to cost at completion time
· Estimate to complete – how much more (than what was estimated/baselined) will the project cost at completion time
· Duration – how long is the project going to take
· Percentage completion – percent of completion of the project
· Critical ratio – the overall status of the project; a negative number is bad and a zero or a positive number is good
The formulas to calculate earned value are not part of this article, just know this fact. Most project management tools calculate earned value automatically.
Now, not only the PM can safely communicate the progress of the project but can also determine early on the need for corrective action.
I hope you now agree with me that if you can’t measure you can’t manage. Don’t you think so…? Well, I do.
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