Earned Value Management – Use It or Lose It!

Intro:

Assessing project performance is both an art and a science.  A successful methodology in evaluating project health and performance is Earned Value Management (EVM).  This methodology utilizes several factors to determine how well the project is being run: Planned Value (PV), Actual Cost (AC), and Earned Value (EV). But let’s face it, these metrics can be as insightful as a magic 8-ball when it comes to actual customer satisfaction. Earned Value to the Customer (EVc), the superhero we didn’t know we needed, focuses on what truly matters: delivering real value to the customer. Unlike its less charismatic cousin, EVc measures tangible, usable outputs, ensuring that what gets charged is of value to the customer.  When these principles are applied throughout the project, key stakeholders will have invaluable insights into project performance.

Earned Value Management (EVM) is a fancy project management technique that brings together scope, schedule, and cost to create a performance trifecta. It revolves around three key metrics:

• Planned Value (PV): The dream—what we hoped to achieve by a certain date, based on our initial cost and schedule daydreams.
• Actual Cost (AC): The reality check—what we’ve spent by a certain date.
• Earned Value (EV): The tangible achievements up to a certain date, representing what we’ve accomplished.

While these metrics give us a good peek under the project’s hood, they often miss the glaring neon sign: the value delivered to the customer.

Earned Value to the Customer (EVc)

EVc is the metric that measures the value of work delivered to the customer at any given point during project execution. It’s the project management equivalent of a hug from a warm, fluffy puppy. Unlike traditional Earned Value (EV), which is all about internal progress, EVc emphasizes deliverables that customers can use and appreciate.

Key Points of EVc:

1. Customer-Centric Focus: EVc shifts the spotlight from internal project nerd metrics to the actual value delivered to the customer, ensuring the outcomes are as fabulous as the customer’s expectations.
2. Milestone-Based Measurement: EVc is assessed based on specific milestones that make customers do a happy dance, representing key deliverables that scream “real value.”
3. Tangible Deliverables: EVc only considers aspects of the project that are complete and ready for the customer to use because half-baked cookies just don’t cut it.
4. Alignment with Customer Requirements: Tracking EVc ensures projects aren’t just progressing on schedule and budget but are also ticking all the right boxes for the customer.

Example Scenario

Imagine you’re hired to write 10 test scripts for testing equipment purchased by a customer. Each script is worth $10, and you have 20 hours to finish (2 hours per script).

Project Details:

• Each script is valued at: $10.
• Total project value: $100 (10 scripts x $10 each).
• Timeline for completion: 20 hours (2 hours per script).

After 10 Hours of Work:

• Completed: 50% of each script.

Traditional Metrics:

• Planned Value (PV): $50 (based on the scheduled progress).
• Actual Cost (AC): $50 (cost incurred).
• Earned Value (EV): $50 (work completed).

But wait! EVc would be a whopping $0 because none of the scripts are fully complete and ready for the customer to use. The customer only wants to be charged for the scripts that are fully functional and ready for use.

That’s why Earned Value to the Customer (EVc) is so important to understand and utilize. EVc tells the whole story and the right thing to do is not charge the customer yet due to EVc = $0.00.

Importance of EVc:

1. Enhanced Customer Satisfaction: By focusing on the value delivered to the customer, project managers can ensure that the project outcomes meet or exceed customer expectations.
2. Better Project Alignment: EVc keeps project activities aligned with customer priorities, making sure the work being charges directly contributes to customer value.
3. Improved Decision Making: Tracking EVc provides a clearer picture of project success from the customer’s perspective, aiding in more informed decision-making and adjustments.

CAI Data Center Services Application Case Study

A hyperscale data center customer wanted a Schedule of Values (SoV) that prioritized their needs and was based on actual EVc. They wanted billing based on value received each month. In response, the CAI team developed a SoV based on fair and transparent billing and EVc, reflecting the actual value delivered. This approach aligned billing with the benefits they received, fostering trust and satisfaction—and maybe even a few high-fives.

Summary:

Earned Value Management (EVM) integrates scope, schedule, and cost to assess project performance through three key metrics: Planned Value (PV), Actual Cost (AC), and Earned Value (EV). However, these metrics often overlook the real value delivered to the customer.

Earned Value to the Customer (EVc), focuses on tangible, usable outputs that the customer can benefit from. CAI Data Center Services collaborates closely with our customers to deliver exactly what they need and provide transparent billing based on the value delivered. When Earned Value is used right, you will gain trust across the project team and key stakeholders – Otherwise, you risk losing it: Trust, time, and money!