Keith Custer, in his article “The Seven Deadly Myths of Earned Value Methods in Project Management” (Custer, 2009), describes how Earned Value Management (EVM) is misunderstood as a tool for managing costs in a project. He points out that there is a fear of implementing EVM with detractors saying it is difficult and time consuming. They also claim that EVM is better suited for large ($1M+) or government projects but not for smaller projects (Custer, 2009).
But Custer claims that the process laid out over forty years ago is as appropriate for small as well as large projects and actually makes it easier to effectively manage them (Custer, 2009). In his article Custer lays out 7 myths about EVM stating his case as to why each of these is invalid.
EVM Myths in Managing Project Costs
Myth 1: That only contractors and government projects need use EVM (Custer, 2009). Custer points out that the reason why government and contractors use EVM is precisely because it is so effective at controlling project costs (Custer, 2009). In fact, it is effective as an estimating tool. Properly documented estimation can be more effectively tracked than hastily thrown together estimations. Custer also points out that the government borrowed EVM from industrial manufacturers who had developed the process early in the 20th century (Custer, 2009). He refers to the fact that like many projects in private industry, government projects are notorious for being under estimated and for costly budget overruns (Custer, 2009). The Office of Management and Budget (OMB) has consistently discovered in study after study that those projects run using EVM they rarely under estimate and rarely has significant budget cost overruns (Custer, 2009). In fact, data gathered since mid-1970 has shown a significant improvement in the ability to scientifically forecast the outcome of a project at the 20% completion mark (Fleming & Koppelman, 2010). Both Custer and Fleming point out that EVM’s WBS, schedule constructs, organizational breakdown structures, reporting, variance reporting provide a significant boost to estimating, project performance tracking and forecasting at any given point in the project (Custer, 2009) (Fleming & Koppelman, 2010).
Myth 2: EVM is only useful for large or long term projects: Any project of any size can benefit from EVM, according to Custer (Custer, 2009). And he is right. I have used EVM on projects ranging from $50,000.00 up to $8 million with great success. With smaller projects you have to increase the frequency of the reporting cycle so that you get timely results from monthly to weekly to daily depending on the duration of the project (Custer, 2009). The key point here is that EVM can alert the Project Manager to problems with the budget and schedule at any given point, but there is work involved. The work, though, is what I would consider to be minimal amount required for any size project: Scope, WBS, schedule, regular reporting.
Myth 3: EVM is too rigid: As I stated above, any good Project Manager knows that the minimum requirement for managing a project is scope, WBS, schedule, and regular reporting (Custer, 2009). Custer emphasizes that EVM requires strict detailed up front planning and quantifying of expected results (Custer, 2009). But to say that EVM is too rigid is completely wrong. In fact, it’s very flexible where many of the tools can be constructed to suit your needs on the fly without any negative effect on the data (Custer, 2009) (Fleming & Koppelman, 2010). One thing that Custer points to is the successful use of EVM in defense projects where there are huge risks involved (Custer, 2009). In many of those projects only the near term scope was known with many details not known for many years. The key, as noted by both authors, was a well-developed WBS that gave the Project Manager the flexibility needed to use EVM effectively (Custer, 2009) (Fleming & Koppelman, 2010). A project I’m currently running has a WBS that is not well-developed and my aim is to apply the rules of EVM to bring it into alignment so that I can use it as the tool it is meant to be.
Myth 4: There is such a thing as EVM lite: As noted earlier, yes, there is a sort of EVM lite (Custer, 2009). But you still have to do the work of developing a scope, WBS, schedule, and regular reporting. Custer refers to the many software companies that proclaim an EVM Lite version are really trying to just sell their software (Custer, 2009). The problem is that these companies leave out important aspects of the process, such as implementing management recommendations resulting from the EVM data gathered. Custer asks what the sense is in gathering the information if you’re not going to use it (Custer, 2009). Good point, I have seen many a Project Manager gather together the information, only not use it because it was not good news in their eyes. Never mind that the point of the information was to give management a truthful view of the status of the project so that they could make good decisions.
Myth 5: Implementing EVM is a lot of extra work: Yes, it is hard work, but not extra work since it’s work the Project Manager should be doing already. EVM is a process that allows the Project manager to use the information gathered and organized more effectively. It helps to draw out a clearer picture of the true status of the project. The EVM standards only reinforce the good project standards that should already be in place. EVM actually helps to integrate them (Custer, 2009).
Myth 6: Companies need to change their structure to implement EVM: While EVM requires that the WBS define who is responsible, the department and individual, it does not require a change in the organizations structure (Custer, 2009). Even in a functional matrix organized company, EVM only requires that each department be listed as to what they have agreed to do (Custer, 2009). In fact, EVM works very well in cross-functional organizations in tracking the costs of the project and rolling those costs up to the project level (Fleming & Koppelman, 2010). At Walgreens we use an EVM lite that was internally created in which accounting developed a system for tracking each project costs by department.
Myth 7: Implementing EVM requires expensive software: No specific software is required (Fleming & Koppelman, 2010). Many basic software’s such as Excel, MS Word, MS Project work quite well with EVM.
Conclusion
Controlling the costs of the project is one of the most important responsibilities assigned to the Project Manager. As has been pointed out, controlling project costs can be done quite effectively from estimation to project completion using EVM. Custer and Fleming point out, regularly, that the EVM processes and tools help the Project Manager to effectively estimate the cost of the project; to determine at any given point the true status of the project; and to accurately forecast its outcome even when only 15-20% of the project is completed (Custer, 2009) (Fleming & Koppelman, 2010). Like with any undertaking, you have to create the tools needed effectively and then use them effectively so they work for you. As I stated earlier, many of the projects I have managed were in poor shape when I inherited them. I had to literally rework the scope, the WBS, the project schedule so that I could use the EVM tools and processes to keep control of the costs of my projects. The tools and processes work. All you have to do is use them.
References:
Custer, K. (2009, January 21). The Seven Deadly Myths of Earned Value Methods in Project Management [Web log post].
Retrieved from http://www.projectsmart.co.uk
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