From a business enterprise and senior management standpoint, everything that moves and breaths bears a cost to the company. Whether the shareholder structure is privately owned, co-cooperatively owned, or publicly traded, the basis of all metrics are monetized in order to be associated to shareholder value. For projects conducted by the company, earned value (EV) is the metric that is used to demonstrate the value that the project bears to date, as well as the projection for costs based upon the performance to date.
Back in the day when all projects were managed employing a Gantt waterfall methodology, the project manager could easily set up a structured EV model using available tools, such as Microsoft Project, adhoc tools based upon customized spreadsheets, or a combination thereof. Assuming all of the labor and other direct and material costs were included in the working schedule, then the time phased plan could be baselined, and the tracked actuals and any such execution changes could be updated thereby providing an accurate model of the project roll out. This approach is still used in some industries, but what I have found is that this linear model system simply cannot accurately plan out a time phased precast detailed activity set over the full scope and duration of the project with any realistic chance of executing within reasonable and acceptable contingency both in cost and time. Several factors such as ambiguity, overzealous risk adversity, and market dynamics are among the instigators.
Many factors in market, enterprise management, and general stakeholder expectation have changed the playing field so profoundly that the waterfall methodology can not accurately model the detailed activities in the same way that it had classically managed with such success in past generations. The two things that have remained constant are project fiscal budgets, and market launch date expectations which tend to be fixed at an early stage and are expected to remain constant.
Agile Project Managers must still provide EV metrics using the classical formulas as are still taught and are the foundation of EV measurement as per the Project Management Institute (PMI). We can still successfully apply linear EV formulas; however, we need to recognize, manage, and account for the dynamic work roll out which is best managed by employing an Agile framework. What this means is that the EV calculation must adapt a Piece Wise Linear (PWL) model to wrap around the Agile framework. The EV claim updates (i.e. the Physical % Complete) must be based on objective tangible work/cost performed; therefore, a defined relationship must be set between the task(s) that collect EV claims and the team execution. Assuming the team is executing under an Agile framework, a translation can be established that will achieve accurate EV claims. The team does not have to change the way they execute provided they are following a developed workflow and are tracking the assignment and progress of tasks. There must also be a developed project road map, and a corporate New Product Introduction (NPI) framework setting clear stages and gate expectations upon which the PWL is modeled. More on these latter two topics will be discussed in future posts.