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Advantages and Disadvantages of EVM

If you are currently working on a project, you might want to know about the Earned Value Management method to measure its performance level. It will allow you to compare the total of work made until a certain date with the total of work planned for that same date. Ultimately, this will enable you to evaluate your project’s state and determine if it's necessary to take any chances, which makes it an incredibly useful and important tool for its success.  

What Is Earned Value Management? 
 

Among project managers,  Earned  Value is one of the most demanding requirements for management tools.  When they talk about it,  they refer to Earned Value Management  (EVM), a  series of parameters that advise on the operation of the project based on planning. The Earned Value will inform us of the cost and time deviations of the project. So, thanks to its functionality we can make faster and more effective decisions, supported by concrete data about the reality of the work executed.  

In the graph shown above, you can visualize what would be the Earned Value,  in relation to the estimated budget in the planning and the costs actually allocated during the development of the project, as well as the risks that are taken when taking part in it. 

Advantages and Disadvantages of the Earned Value Management

Of course, this method might have some positive characteristics and some problems. Next, we will take a closer look into these. 

Advantages of the Earned Value Management 

First, let's start with the many advantages and the importance of Earned Value Management, and why it can be a useful method for revising your project: 

  1. Deviation evaluation: The EVM will allow you to evaluate the magnitude of the deviation in regards to the baseline of the schedule.
  2. Real performance comparisons: It also compares this baseline for the measurement of the performance level in regards to the real performance of the schedule and costs plan.
  3. Measurement of the project’s global performance: EVM is an extremely useful tool to monitor the global performance of the project
  4. Requires little data: It only requires a few additional data other than the ones used to the normal management of the project

Disadvantages of the Earned Value Management 

Even though it has some major advantages, Earned Value Management also has some disadvantages: 

  • Difficulty estimating the deadline in the final phases of the project: As the project progresses towards its final phases, almost all its activities will have been completed, so that the work done will increasingly resemble the planned work, and, therefore, the value gained will tend to the planned value. In fact, when the project is completed, both values must coincide, since all the activities will have ended, and the budgeted cost of the work carried out will coincide with the initial budget (EV=PV=BAC). Consequently, in the last phases of the project, naturally, the schedule variance (SV) will tend to zero, while the efficiency index in terms, will tend to 1, regardless of delays or over-costs.
  • Network morphology: We call network morphology the graph that represents the precedence relationships of the project tasks, using any of the traditional methods of "Activity-On- Node (AON)" or “Activity-On-Arrow (OAO)".
  • Decision-making capacity of the management team, management flexibility: Programming and resource optimization methodologies are based on the estimated duration of activities, their precedence relationships, and resource constraints. Some of the methodologies are deterministic, and others are stochastic, in the sense that they allow the initial data to be stated in terms of probability.
  • Learning and tracking cost slopes: Both the value gained and the programming gained do not take into account the learning effect that takes place throughout the project life cycle. Although by its very nature every project has a unique character, there are always a series of tasks that keep similarity and that improve as a result of learning.
  • Consideration of project risk: Risk management is critical to the success of the project. However, neither the methodology of the Earned Value Management nor the programmed earnings, integrate this aspect. 
What is the Earned Value Analysis (EVA)? 

The Earned Value  Analysis  (EVA) is also one of the most popular tools in project management, which allows you to control the execution of a project through its budget and schedule. In addition, it allows us to analyze the state of a project in a given moment of control and compares the amount of work that was planned with the amount of work done, in a way that allows us to determine the performance of the work and whether the performance was as intended.

Importance of the Earned Value Analysis

The EVA is one of the most useful techniques because it helps us to see how the project is being carried out and why it is being carried out in that way. In addition,  some research indicates that the statistics of the Earned Value are stable and begin to be significant when between 15% and 20% of the project has elapsed. The best thing about this technique is that it allows us to manage the risks of the costs associated with the projects and the faster we realize there is a  problem,  the more we have the possibility of mitigating it.

According to The Standish Group, 70% of projects are delayed, 52% of them end up with extra costs of 189%, and other projects, after much investment and effort, fail. It is for this reason that the control and analysis of the project progress are of great importance since it allows us to continuously monitor all phases of the project so that we can prepare for future phases and make projections of what could happen.

Earned Value Analysis Advantages and Disadvantages  

Once again, there might be some advantages and disadvantages of applying the Earned Value Analysis to your projects. Let's take a deeper dive into these: 

Why Use EVA

There are many positive reasons why you should consider the EVA. Initially, it allows an economic and temporal control of the project and it will also allow you to consider the economic repercussions of a delay in the deadline. Another advantage is that it will give you the ability to control the variations, both in cost and time, with respect to the planned project planning. These variations must be corrected as soon as possible so that the project meets the intended objectives. Overall, it is an exceptional tool of power and control over your project and if you start trying it out it will surely become an essential tool for all of your future projects.

Why Not Use EVA

Regardless of all the positive reasons why to use EVA, many people might argue on some of the reasons why not to use it, including implementing expenses, that it requires special software for it or a lot of people from different departments, discloses more information you want, and that overall it is just too complicated. On the other hand, if your project doesn't really have a perfectly established scope, schedule, or budget, as well as its objectives and results,  the WBS is faulty, the AC collection system doesn’t announce on timely costs, or there is not enough time to correctly configure data,  EVA might not be the best option for you.

Conclusions

One of the main objectives of the earned value method is to detect problems in execution in time in order to make decisions at the right and necessary time. As with any method the value gained has its advantages and disadvantages, in order to obtain the correct results in its application, it is necessary to know the application system. Applied in the right way, the value earned is a very useful tool for any project manager, which will help you complete any project meeting the initial requirements of time, cost, and scope.

References
  1. https://www.pmi.org/learning/library/earned-value-management-systems-analysis-8026
  2. https://apmg-international.com/article/what-earned-value-management-and-why-it-important
  3. https://www.pmis-consulting.com/articles/earned-value-management/

 


Author

Paula

Is a passionate learner and blogger on Agile, Scrum and Scaling areas. She has been following and practicing these areas for several years and now converting those experiences into useful articles for your continuous learning.