Archive for the ‘Earned Value Management’ Category

Earned Value and Critical Chain

Sunday, May 23rd, 2010

Two questions were recently asked on the LinkedIn “Earned Value Management” forum: “Q1. What are the WEAKNESSES and LIMITATIONS of EVM? Q2. Can EVM schedule forecasting methods provide us RELIABLE EARLY WARNING SIGNAL?” Wayne Abba, a noted Earned Value expert, wrote in response:

“EVM is not a scheduling technique and therefore has no inherent ‘schedule forecasting methods’ – it measures the volume of work that has been performed relative to planned volume, with no regard to critical path or even when the work was scheduled to be performed. Nevertheless it provides one of the best possible early warning signals – a straightforward indication that work is not being performed. The larger and earlier the unfavorable schedule warning, the redder the flag… bear in mind that EVM was invented to deal not with schedule, but with cost variance. So-called ’schedule variance’ (a better term would be accomplishment variance) is a useful bonus but limited by the mathematics. At completion, no matter how late, the variance is zero by definition. The true value of schedule variance thus is early in performance.

“Those advocating using EV to forecast schedule have built a pseudo-science on EV data that are derived from the schedule (and thus must correlate with it) but most assuredly is not the schedule. ANY schedule analysis using EVM must be compared with the ‘real’ schedule. Expect the GAO to delve into this further as the Cost Estimating and Assessment Guide evolves.”

One implication of what Wayne has written is that there need be no conflict between Earned Value Management and schedule techniques like Critical Chain. While we have known this for years, the increasing popularity of “schedule margin” (a buffer-like concept) in government contracting circles has raised the urgency for answering questions about how to make the combination work. With the help of Charlene and Chuck Budd, EV experts in their own right, I recently wrote a paper on the use of schedule margin (or buffers!) with Earned Value. See our new Resource Center to download a copy.

Change: Here to Stay

Sunday, April 18th, 2010

Change is in the air. In much the same way that constraint-related concepts have become standard in manufacturing, critical chain-related concepts continue to gain popularity in the project world. Even if “Critical Chain” doesn’t become standard practice, its important elements will.

For example, consider project buffers: protection time added after project endpoints to protect project deliveries against uncertainty. This concept is known in non-Critical Chain circles as schedule margin or schedule reserve. A few years ago this was not a popular concept, but that has changed. For example, we typically regard government “best practices” as lagging indicators, but NASA (see, for example, p.44) talks a great deal about schedule margin, and the U.S. Government Accountability Office (p. 223) calls schedule reserve a “best practice.” More and more, buffering is being recognized as essential to good management.

Where are these kinds of changes leading? First, I think people will have to pay more attention to the individual concepts like buffers, resource leveling, or task gating than to the overall categories they’re put into, such as Critical Chain or Earned Value Management (EVM). Whether (for example) buffers become part of EVM, or analysis of work completed becomes part of Critical Chain, the concepts that make sense will eventually rise to the top with or without the labels. This is good news.

Second, groups of concepts that together can be applied in the real world to get practical results – methodologies – will continue to be put together into new buckets and given both old and new names. That’s inevitable: we label things, and we like to use popular labels. But it will also serve to create more confusion. Practitioners must understand what practices people refer to when they use a particular label; whether the label is CPM, Critical Chain, EVM, or Monte Carlo. A holistic view of how the methodology fits together to get results will be more and more essential.

Third, project management will continue to improve. Why do I say “continue,” when organizations like the Standish Group “continue” to tell us how poor project results are? Because, on the whole, our ability to manage projects is clearly improving. Project complexity is increasing dramatically year after year: drug development and approval, chip design, and software are far more complex than they were 20 years ago. Meanwhile, new products must hit the market more and more quickly. While project successes across industries may not be at a level we’d like or know to be possible, in a world of increasing complexity and speed, holding steady implies that improvements are going on.

Last, companies and their methodologies will have to become more and more adaptable. That’s because new ideas are going to be tried and integrated, the best will eventually float to the top, and competition will require their adoption. The best new ideas will be more and more essential, both for companies that need to complete their projects more reliably and quickly, and for vendors like ProChain that need to provide that competitive advantage. Your organization should have in place a process for ongoing project management evaluation and improvement.