Enterprises are looking for various project management methodologies to enhance their business operations and productivity. Earned value management (EVM) is one of the most effective project management techniques that you can implement in your business. It allows you to balance a project’s scope, budget, and schedule. Experts believe that earned value management enables companies to monitor their projects and shape the project cycle. In his article for Fool.com, Maricel Rivera shares the benefits and applications of earned value management.
Acknowledging Effective Project Management Methodologies
Budget-based project management methodologies like earned value management go beyond project timeline and schedule compliance. EVM puts your project growth in a real-time perspective and gives you an idea of whether you are on the right track. Furthermore, it provides immediate project characteristics and a clear vision of established costs and timelines.
Advantages of EVM
Here is a list of benefits of earned value management:
- It provides an expansive infrastructure to measure the project’s growth.
- It gives you a clear understanding of schedule and budget discrepancies.
- It allows you to define project success per your requirements.
Ways to Calculate Earned Value
Rivera shares the following steps to calculate earned value of a project:
Planned Value (PV) – You can derive the planned value of your project by multiplying the percentage of completed work that you plan by the project’s overall budget (BAC).
PV = % of completed work (planned) x BAC
- Actual Cost (AC) – There is no specific formula to derive the actual cost of the project. Calculate the overall expense made, and it will give you the actual cost.
- Earned Value – Earned value is calculated by multiplying the percentage of your actual completed work by the project’s budget (BAC).
EV = % complete (actual) x BAC
- Schedule Variance (SV) – Schedule variance is the difference between earned value and the planned value.
SV = EV – PV
- Cost Variance (CV) – Cost variance can be measured by subtracting the actual cost from the earned value.
CV = EV – AC
- Schedule Performance Index (SPI) – You can calculate SPI by dividing the earned value by the planned value.
SPI = EV / PV
- Cost Performance Index (CPI) – Measure CPI by dividing the earned value by the actual project cost.
CPI = EV / AC
How to Use Project Management Methodologies
Project management methods, such as EVM, can be best used when you integrate their results with project management software. It helps you centralize your documents, enhance team communication, and update the data.
Click on the link to read the original article: https://www.fool.com/the-ascent/small-business/project-management/articles/earned-value-management/