earned value management

EVM (Earned Value Management) vs. Agile Project Management

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This article provides an introduction to the differences between an Earned Value Management System (EVMS) and Agile approaches on projects, and isolates the challenges of implementing an EVMS on a project where the project management has chosen to follow an Agile approach to the development work. The article explores the principles of EVMS and of Agile, and contrasts them to show where there are inherent conflicts. The article then discusses how the conflicts can be mitigated so that the benefits of both the EVMS and Agile can be obtained from a joint implementation.

Controlled Planning with EVMS

Controlled Planning with EVMS

Earned Value Management (EVM) Background

Earned Value Management is a 50 +/- year old methodology based on widely accepted principles that applies documented, systematized practices to support the processes of organizing, planning, directing, and controlling large complex projects, of any nature, which contain a high degree of uncertainty.

An EVMS is structured compliant to 32 guidelines that define what a project management information system should be capable of doing to support the program management team. Within the 32 guidelines there is a subset of generally recognized core principles. The core principles are:

  1. Organize the entire scope of the project using a Work Breakdown Structure (WBS).
  2. Organize the project team using an Organization Breakdown Structure (OBS).
  3. Integrate the project work with the project team to create management control points (Control Accounts).
  4. Schedule the project work in the Control Accounts across the entire project duration at the appropriate level of detail.
  5. Establish time-phased budgets for the scheduled work in the Control Accounts.
  6. Establish the scope/schedule/budget baseline as the Performance Measurement Baseline (PMB).
  7. Authorize the scope/schedule/budget and control the start/stop of work.
  8. Periodically measure the schedule and the value of completed work and determine the Earned Value.
  9. Record direct costs (actual costs) and summarize into the Control Accounts.
  10. Compare planned, accomplished, and spent to analyze the performance and associated variances.
  11. Develop realistic time and cost estimates for the remaining effort in the Control Accounts.
  12. Rigorously control changes to the Performance Measurement Baseline.

The EVM concept presented in these guidelines is a sound management approach, that once incorporated on any type of program, whether research and development, construction, production, etc. provides all levels of management with early visibility into cost and schedule problems.  Earned Value Management now appears as a contractual requirement on programs world-wide.  Primary EVM users include the United States, Europe, England, Canada, Australia, China, and Japan. It is a requirement of many U.S. Government agencies, including the Department of Defense (DoD), the National Aeronautics and Space Administration (NASA), the Department of Energy (DOE), the Intelligence Community, the Department of Homeland Security (DHS), the Federal Aviation Administration (FAA), the Department of Transportation (DOT), Health and Human Services (HHS), and others.

EVMS has been adopted by companies in situations where it is not a contractual requirement so that they can gain the discipline and benefits of the structural management approach discussed in the guidelines.

 

evms 2

Flexible Planning with Agile

Agile Background

Agile is a 20 +/- year old approach to applying a mindset that values the use of small, empowered, self-organizing, multi-functional teams, mainly in software development, to establish a test driven product development effort. This uses a series of short, rapid incremental builds within projects with a high degree of uncertainty to achieve shorter development times, lower costs, and products more closely aligned with customer requirements.

Agile does not usually appear as a contractual requirement. The concept is adopted by companies and organizations with the belief that a better product will be produced faster, and with less expense, using this approach than if traditional approaches were followed.

There are a core set of principles for Agile that were initially established in the copyrighted Agile Manifesto. These delineated core principles are:

  1. Early and continuous product delivery.
  2. Deliver working software (product) frequently.
  3. Expect change and respond positively to change.
  4. Developers and project business organization (PMO) work together.
  5. Product-focused build teams are at the core.
  6. Support self-organizing teams – trust among peers.
  7. Encourage face-to-face discussions (involve the user/customer).
  8. Working software is the measure of progress.
  9. Maintain a constant sustainable pace of development.
  10. Simplify the process and the product.
  11. Put the highest value on technical excellence.
  12. Improve team effectivity.

So How Does Agile Work?

The Agile mindset or approach is implemented through a process of defining the product backlog into smaller and smaller subsets of work that are structured in a top down fashion. At the lowest level of product backlog, the work elements or requirements can be prioritized and assigned to teams. The self-organizing teams pull work from the backlog and work the tasks to completion in a series of short, time-fixed Sprints or iterations. Sprints are often from 2 to 4 weeks long.

Because the teams are self-organizing, there is no team manager or team lead. The teams work as a group and only pull from the backlog at the last possible minute, and do minimal planning for each Sprint. If the product backlog is properly deconstructed and defined into user stories, then the planning meeting for an entire 4 week Sprint can be accomplished in a few hours.

The teams design, code, test, integrate, and deliver functionality in every Sprint. Since tested product is output every few weeks, all on the project can see the product being created and can contribute along the timeline, as needed, to provide a complete finished product.

The product owner embodies the customer’s perspective and either accepts or rejects the team’s work.  At the latter point of each Sprint, the tested product is demonstrated to the product owner.

High Level Side-by-Side

The two approaches are contrasted in the chart shown below. The EVMS is a methodology that is highly documented and highly systematized, while Agile is just the opposite. It is more of a mindset than a methodology with the preference not to have significant process documentation.

The EVMS is applied to entire projects and contracts, while generally Agile is applied to software portions of projects.  However, it could also be used on other development work.

The EVMS is usually a contractual requirement with significant implementation and operation constraints while Agile has none of these. As a contractual requirement, the EVMS carries with it the option for customer reviews and the threat of non-compliance, which entails penalties.

EVM Agile
Methodology Mindset
Documented Self-defined
Systematized Self-defined
Any type of project Software development (mainly)
High degree of uncertainty High degree of uncertainty
Applied to the entire project Applied to portions of the project
Often a contractual requirement Adopted not required

Lower Level Side-by-Side

In addition to the high level side-by-side, there are significant differences within the details of the two approaches. These are shown in the side-by-side table below.

Agile EVMS
Minimal documentation More documentation
Plan at last moment Plan ahead to end of project
Scope is flexible Scope is baselined and controlled
Expect and embrace change Avoid and/or control change
Schedule (Sprint) is fixed.  Timebox ends the Sprint. End the package when the work is done.
Budget is secondary Budget is baselined and controlled
Cost collection is not mentioned. Cost collection at the right level is critical

Accommodate and Capitalize on Differences

It is possible to implement Agile along with an EVMS if the EVMS application is set up to accommodate the differences and capitalize on them.

For example, the main reason that Agile’s embrace of change is a potential problem within an EVMS is because often the EVMS is used to plan too far in advance, and then reacting to change is difficult and expensive. If short term planning in the EVMS can be coordinated with the Agile planning, then the two can coexist.

The Agile free acceptance of scope changes within the backlog runs counter to the EVMS imposition of baseline change control. But if the EVMS baseline can be carefully set at a work level above the busy lowest level ups and downs, the impact to baseline change control is manageable.

A surprising chance to capitalize on Agile, within the EVMS, is found in the Scrum team approach in Agile where the team breaks work down into tasks far below what would normally be done in an EVMS, and then meets daily to update progress and provide corrective action. This low level constant attention means that the EVMS benefits from a better look at real progress as assessed by the real performers.

Not all the compromise needs be on the EVMS side of the equation. The Scrum team operations will often be defined to have the least possible recording of what happens during the Sprint. Since the product is king, then only the product really matters. But that misses the opportunities to capture the actions of the team for analysis, and use in upgrading their skills later. Necessary compromises would include some additional recording of the daily actions of the team and capturing the progress and problems. These would then be used in the EVMS functions of performance measurement, variance analysis, and corrective action planning.

One other compromise in the Agile realm that would be needed is the adoption of some minimum documentation of processes so that team operations can be repeatable and stable. Even a self-organizing team cannot change the way they work every time it wishes. That would raise the risk of a chaotic work environment.

These topics are recapped in the table below.

Agile EVMS Accommodation
Scope is flexible Select a higher level package for the baseline
Change is expected and embraced Have the shortest possible planning horizon
Plan at the last possible minute Have the shortest possible planning horizon
Daily Scrum Stand-up Meeting Collect the data and use it for performance measurement
Sprint Review Meeting Use for periodic measurement and analysis
Sprint Retrospective Meeting Use in Corrective Action Plans
Lack of documentation Add minimum documentation to stabilize team operations

Bottom Line

Implementing an EVMS is a challenge itself. Implementing Agile is a challenge too; perhaps a more difficult challenge. Implementing the two approaches side-by-side can seem impossible. But it is possible and even beneficial if done in a way the makes needed accommodations in both arenas for the project’s benefit.

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Earned Value Management: How Much Is Enough?

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How Much EVMS Is Enough

I took the scenic route to selecting the theme of this blog. First, it was suggested that I write a blog on the benefits and costs of the earned value process as it applies to program management. Next it was suggested that I describe the harm of not using any of the elements of the earned value process.

In the case of the benefits and costs of the earned value management process, it would be difficult to improve upon Dr. Christensen’s 1998 paper on this heading or to attempt to improve other papers and studies done by Wayne Abba, Gary Humphreys, Gary Christle, Coopers & Lybrand and others. So I will not make citations to these past studies. Rather I will leave them undisturbed, as the monuments they have become.

This blog will summarize my observations of how companies have chosen “how much EVM is enough” for them and share my observations of the results of these decisions. Each company has selected an EVM implementation strategy and each company’s strategy falls along a bounded continuum.

I will describe this continuum of company EVM strategies with a left hand and a right hand goal post, and the space between as a cross bar. The “left hand goal post” represents companies that elect to be very poor at EVM or to not use EVM at all. The “right hand goal post” represents companies that have committed to being “best-in-class” practitioners of the EVM process and are the polar opposite of the companies at the left hand goal post. There are few companies at either the left or right hand goal posts. The “cross bar” represents the vast majority of companies that have selected an EVM strategy somewhere between the left and right goal posts.

Two Goal Posts And A Cross Bar; Recalcitrant, Merely Compliant, Efficiently Expert

There are as many strategies to earned value management as there are companies using EVM to manage their programs and projects.

Left Goal Post; The Recalcitrant

I have firsthand experience with a company, that at the time I initially joined them and had decided to ignore earned value management even though it was a requirement in several of its contracts. After many painful years of attempting to maintain this recalcitrant EVM strategy, this company decided that a better strategy would be to become “efficiently expert” at EVM.

Cross Bar; Merely Compliant at EVM

It has been my experience that most companies desire to “become EVM compliant,” which generally means being compliant to the 32 guidelines and not failing those guidelines so as to be de-certified. This is the vast middle ground between the two goal posts. I will now share five observations regarding companies in the “cross bar” majority.

Observation #1: Compliance As A Goal; Golf and EVM

Compliance should be a “given,” or a “pre-condition,” not a “goal.” Remaining merely compliant implies a status quo or static posture.

I will use the game of golf as an analogy. Golf is a game of honor and compliance to well established rules. All PGA professional tour golfers “comply” with the rules that govern golf. Although all PGA tour pro golfers comply with these rules, their performance on tour differs dramatically.

Fifty-three percent of all PGA golf pros, past and present, have no tour wins. That means only 47% of all PGA tour golf pros have won at least a single PGA tour. There are seven players in the history of the PGA that have fifty or more tour wins. If the bar is lowered to forty or more wins, only three players are added to the list. If the bar is lowered yet again to thirty or more tour wins, only eight more players are added to the list. Only 18 golfers have won 30 or more PGA tournaments.

Professional golfers do not confuse compliance with performance, nor do these professionals assume that “being compliant” will improve their performance.

Observation #2: “The Tyranny of The Status Quo”

With apologies to Milton Friedman and his book of the same name, companies that attempt to maintain mere guideline compliance will do no better than the status quo, and more often than not, regress toward non-compliance. Maintaining status quo is a myth – you either improve or regress.

All professionals, companies included, must compete in their markets and selected fields. To succeed in this competition requires constant improvement in areas critical to success. A company, organization, or individual without the means or the desire to improve will eventually fail and perhaps perish.

Observation #3: Blaming The Scoreboard

As a program manager, I considered EVM as my scoreboard. I reacted to the EVM data – the scoreboard – and made decisions based on that data (GL #26).

I recall the 2014 Super Bowl’s final score: Patriots 28, Seahawks 24. Did the scoreboard cause the Seahawks to lose the game or did a poor decision by their coach cause the loss? Imagine a coach that cannot see the scoreboard. That coach does not know the score or how much time remains. That coach cannot react to the realities of the game.

Observation #4: EVM Causes Poor Program Performance

I have witnessed several company leaders assert that the use of EVM on a poorly performing program is the cause of that program’s poor cost and schedule performance. A correlation between two variables, or a sequence of two variables (use of EVM and poor performance), does not imply that one caused the other. This is the logical fallacy known as “X happened, then Y happened, therefore X caused Y.” Night follows day, but day does not cause night. Use of EVM does not cause poor program performance. Not reacting to EVM data and promptly taking corrective action with your program’s cost and schedule performance often leads to poor outcomes.

Observation #5: It Takes More Energy To Be Poor At EVM Than To Be Expert

Returning to the earlier golf analogy, professional golfers make very difficult shots appear easy. I played in one pro/am tournament years ago. The pro I was teamed with took me to the range hours before our tee time. He asked me how many balls I hit before each round. I told him sometimes none and sometimes 50. He hit 1,000 balls before our round. When we finished our round, he was ready for another 18 holes. I was not. Both of us “complied” with the rules of golf. His score was significantly lower than mine. His game was effortless and produced a below par score. My game was labored and produced a poor result.

And so it is with EVM or any other process. The better you are at a skill, the easier it becomes. Experts consume far fewer calories at their craft than ambivalent amateurs.

Right Goal Post; Efficiently Expert At EVM

The polar opposite of a recalcitrant strategy to EVM is a strategy to become “efficiently expert.” As I mentioned earlier, I joined a company that attempted to sustain a recalcitrant EVM strategy. Their recalcitrant EVM strategy led to de-certification, large dollar withholdings, and significant damage to their corporate reputation.

After the most ardent EVM recalcitrants in this company “sought employment elsewhere,” a new strategy was adopted. This company embraced a strategy to become “best-in-class” as expert practitioners of EVM. This company’s goal was EVM perfection. EVM perfection is an impossible ambition, but wiser than “mere compliance.” And as with the PGA tour golf pro, EVM became nearly effortless.

Which EVM strategy will your company choose?

 

Robert “Too Tall” Kenney
H&A Associate

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Rolling Wave Planning for Earned Value Management Systems

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If someone were to ask you: “Can you please give me a detailed explanation of what you will be doing on this date three years from now?” you would probably look at that person as though he or she were crazy.  It would probably be difficult to provide a detailed schedule of events for a date one week from now – although that might be more likely since you know a lot more about what might be taking place next week than what might be happening three years out.

In the early days of earned value management, contractors were expected to detail plan the entire length of a program to establish a “good performance measurement baseline.”  For a year-long development program this expectation might be okay, but for a 10 to 12 year shipbuilding program it might be unreasonable and probably a monumental waste of time.  The program will no doubt change several times before its completion – maybe several times in the first year alone.  With industry’s “help” the government soon realized requiring detail plans on lengthy programs was not always possible – or even meaningful – especially when program requirements are often fluid.

The government and industry agreed that contractors could provide an overall (general, straight-line, “average”, etc.) plan for accomplishing a program very much like what is already done in preparing a proposal, and then provide more details on an incremental basis as more became known about the work to be performed.  The government is not keen on having contractors do detail planning whenever they felt the urge, so they sought to put reasonable rigor into the incremental planning process.  All the work that existed beyond the detail planned work was considered by the government to be general “planning packages”, although contractors were still permitted to detail plan as much of the future work as they wanted.

The government also expected the contractors to identify the planning increments and frequency of planning to ensure there was not a time when the detail planned work was completed and there was no more future work detail planned.  The expectation soon became that contractors were to expand a detail plan from those planning packages into detail planned work packages with enough frequency to ensure there was always a minimum number of months of detail plans in place when the next detail planning event took place.   It also became evident that more months of detail (often called a “planning horizon”) could be provided on production or manufacturing type work vs. for development type effort.

As this “straight-line” plan was converted into detailed work package plans, the straight line became more curved (such as bell curve or skewed bell curves), with more “waves” rolling in as it became time to detail plan.  This type of planning became known as “rolling wave planning”.  Some companies call their process “incremental”, “accordion”, or “inchworm” planning process – the name does not matter, so long as the application of the process results in a minimum amount of detail planned work packages always being in place on a program.

A production program might have, for example, a 9 month planning horizon with a quarterly frequency.  In this scenario, the program starts with 9 months of detail planning in place.  Three months later, the Control Account Manager (CAM) is to look at the next 9 months (6 already detail planned and 3 new months) to make sure the existing detail planning is still good and to plan out in detail those new tasks that should be starting in the new three months of the planning horizon.

A development program however, is likely to use a different planning horizon.  Because of program volatility, it often has a shorter horizon and a higher frequency, such as 4 months of detail planning in place, with a one or two month frequency.

An example for a production program is illustrated below.  The program manager determines production can do detail planning for nine months and then every quarter review the next nine months for:

  • New work scheduled to commence in the next three months of the planning horizon and
  • Five of the six months already detail planned in the prior incremental assessment (depending on the company’s “freeze period”) – WP No. 3 and beyond can be re-plannedRolling Wave Planning

3 Months later: Rolling Wave Planning

Rolling Wave Planning for long term projects is a common area where control account project managers need help.  Humphreys & Associates earned value management experts can provide the guidance you need for your unique production or development project.  Contact us for more information.

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Earned Value Management System Success – 7 Steps

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An Earned Value Management System is a common contractual requirement on US federal government agency projects and on some foreign government agency projects. Earned Value Management is an effective tool to provide more visibility into project performance for government customers and for internal management.

As with any new concept or tool, success is dependent on how the system is implemented. Upfront planning can mean the difference between success and failure. Based on more than three decades of experience helping hundreds of companies implement an Earned Value Management System, Humphreys & Associates is well versed in what it requires to create a compliant, effective Earned Value Management System (EVMS).

The seven steps below can help to expedite and manage the implementation of a compliant EVM System. Successful implementation can greatly enhance productivity and the bottom line.

Earned Value Management System Success – 7 Steps

Step 1 – Management Team Commitment

Commitment and support from the management team is essential to the success of the EVMS implementation. Without it, the process will fail. Establishing an implementation team responsible for developing the strategic plan and schedule is a critical initial step. Read more…

Step 2 – Pre-Implementation Assessment & Gap Analysis

Before implementing an EVMS, it important to have a clear understanding of the state of the current project control system. This is essential for determining the full scope of the implementation effort. Comparing the current processes and procedures to the 32 guidelines in the EIA-748 Standard for Earned Value Management Systems is part of the process.

Internal EVM experts or an independent third party commonly conduct this assessment, sometimes referred to as a requirements analysis or gap analysis.

The intent is to produce fact-based information useful for creating a realistic implementation plan. What are the processes, tools, and training that need to be enhanced or implemented? Based on this knowledge, an implementation plan and schedule can be produced that defines the specific tasks and milestones to accomplish the end objectives.  Read more….

Step 3 – System Structure and Integration

At the beginning of the system enhancement or design stage, it is useful to focus on each of the subsystems that support the nine EVMS process areas and how they integrate with each other. When the customer’s reviewing agency reviews the company’s EVMS, it will look at each of the following process areas:

  • Work Organization
  • Planning and Scheduling
  • Work/Budget Authorization
  • Accounting
  • Indirect Management
  • Management Reporting and Analysis
  • Revision sand Data Maintenance
  • Material Management
  • Subcontract Management

The EIA-748 32 guidelines are the foundation for determining if an EVMS meets the requirements for a compliant system. Developing flow diagrams and storyboards are useful tools at the beginning of the design phase to note what needs to be added or enhanced to create a fully integrated EVMS as well as to satisfy the EIA-748 guidelines. Read more…

Step 4 – The System Description Document

The primary document for describing the system and how it satisfies the EVMS guidelines is the EVM System Description. Internal formal procedures support this document. The system description and related procedures are meant to be the all-inclusive explanation of the EVMS characteristics and how the system is used to manage a project from inception to completion.

The EVMS storyboard and system description are complementary work efforts. An excellent starting point for the system description is to develop an outline that describes the subsystems for each of the nine process areas. Read more…

Step 5 – Training

Training is an important part of the implementation process. This includes upper level management, project managers, functional managers, control account managers (CAMs), and analysts. The training should reflect the EVM System Description, as the government reviewing agency’s team will assess whether or not a project is following the company’s EVM System Description. The development and execution of the training plan as part of the overall implementation plan helps to ensure the various end-users complete the training they need. Read more…

Step 6 – System Implementation

System implementation on a pilot project requires dedicated teamwork and is the most time consuming of the seven steps. An easier approach is to implement the EVMS on a new project so that all project artifacts reflect the system description at the onset.

Projects that run effectively and efficiently often translate into higher profit margins and result in more company business. Read more….

Step 7 – Operation and Use Verification

Once in place, periodic internal reviews, sometimes called self-surveillance, can be done to ensure that the EVMS implementations on the various projects continue to comply with the company’s EVM System Description. This helps to prevent the system from atrophying over time. It also provides an opportunity to address additional training needs, resolve common implementation issues, and enhance the system.

Independent third parties can also assist with the self-surveillance process. This provides an added benefit by using experienced outside consultants who regularly perform mock compliance or certification and other types of reviews. The outside consultant team can also update a company on the latest issues the government agency review teams are focusing on, provide a fresh look at how an EVMS is used on a project, or bring new ideas to the table that can improve the company’s EVM System.

Similar to the implementation and use of the EVMS, it is important to establish a repeatable process for self-surveillance, capture the results, identify the problem areas, identify actions to address the root cause of the problems, and track them to closure. Read more….

For a full-length copy of this article, see our EVMS Educational Center.

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