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What is This EVM Thing, Anyway?
The first in a series that demystifies EVM, this whitepaper by Pat Barker and Larry Ambuhl from MCR's Project Solutions Group shows how Earned Value Management is both appoachable and cost-effective for small businesses.
About twenty years ago a story surfaced about a substance called “dihydrogen monoxide.” This compound was a major component of acid rain, deadly if inhaled and could even cause severe burns, often found in industrial solvents and nuclear power plants. Yet dihydrogen monoxide was an excellent fire retardant and often found use as an additive to many food products in the supermarket! This story was, and is, a simple hoax that reappears occasionally on the web. For most anyone with a basic chemistry background, “dihydrogen monoxide” is quickly recognized as H2O. We call it water.
The story of Earned Value Management (EVM) is not altogether different than the saga of dihydrogen monoxide. EVM is not a hoax, of course, but it often suffers unnecessarily from detractors who give the subject barely a second glance and, come to think of it, likely did not do well in high school chemistry, either. In typical project management preparatory environments such as a training class, EVM tends to be explained and demonstrated in terms of formulas (e.g. CPI equals planned value divided by actual costs) and terminology than with respect to leadership and decision-making. Thus, EVM has at best a “number-crunching” image and at worst is associated with the esoteric and irrelevant. Perhaps some would even believe those who practice EVM prefer the solitude of dark corners in office buildings reciting obscure passages from ANSI/EIA-748B while entering data into large, complex spreadsheets. The aggregate result is an unfortunate myth, which goes something like this: Establishing an EVM system is a challenge to be undertaken by no less than a major corporation as the “price of entry” into the big-ticket Federal Acquisition contracts.
The truth says otherwise. EVM is, and always has been, an interdisciplinary performance measurement tool designed to inform leadership decision-making. Yes there are numbers and artifacts and guidelines and processes, but those are but means to an end. They need not dominate the discussion, for the root enabler of EVM, the very foundation upon which it survives, is leadership, common sense, discipline and a willingness to live with reality on a daily basis.
EVM is a proven asset, a cornerstone of Department of Defense (DoD) acquisition practices for several decades. When newspapers report massive overruns in defense development programs the root cause of program disasters usually has something to do with leadership, common sense, discipline and/or a willingness to live with reality. EVM cannot work in such environments. EVM has worked wonderfully in programs we rarely hear about, like the Navy’s F/A-18 program. EVM is not unique to DoD. The Office of Management and Budget (OMB) requires that all Federal agencies implement EVM for major capital investments.
Think about it: all successful businesses, whether they realize it or not employ fundamental EVM concepts and techniques. All of these can be easily realized by any small business. Here is a sample:
- Disciplined planning for all work, in a manner suitable to the product development environment
- Proven methodologies for decomposing complex problems in such a way that the various “pieces” and their inter-relationships can be ascertained and managed reasonably
- Empowerment at the lowest practical level of management
- Ensuring accountability and consistency in management control of technical, schedule and cost objectives
- Managing schedule, and cost performance objectives against a baseline plan in a manner to enable adaptation to change
- Reasonable, repeatable and defendable forecasts for cost and schedule completion
Sound like some esoteric ritual in “bean-counting?” Are these the unobtainable characteristics of an ungainly system of rules, regulations, processes and expensive software that takes years to implement and quickly eat up your cash reserves and price you right out of competition forever? Hardly.
Earned value management is a tool that allows your project leadership and your customers a dependable, regular and integrated visibility into the technical, cost, and schedule dynamics of projects. What does this really mean? It means you achieve the organizational capability of “telling it like it is” and “being real.” From your customer’s perspective, that means you successfully completed a rapid journey to their circle of trust. What value do you place on “trust” in a competitive environment? To play on words in a credit card commercial:
- EVM training from that consultant you met last week: $2000
- Decent laptop on E-Bay you are willing to live with and use for planning: $873
- Getting “benefit of the doubt” from your customer when you need it and generating repeat business due to solid contract performance: Priceless
For you and your company, the disciplined insight and proactive posture enabled by EVM gives your small business advanced warning in time to avert disaster just as easily as it shows the path for increased profit margin on that firm fixed price contract.
In other words, EVM helps your bottom line so you survive the long haul and come out on top. Don’t be scared of it. A little education goes a long way: Even a basic level of knowledge “magically” turned that deadly dihydrogen monoxide into water, which we all know is pretty essential for life.
