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Earned Value concept was developed in the late 1800s in the manufacturing industry when it became desirable to measure performance on the factory floor. In the early 1960s, the United States Government needed a method to ensure that money was being spent effectively and progress was being made, on large defense and space projects. EV methods proved very effective in achieving this goal. It enabled the government to keep the focus on the overall mission of these large projects and better predict the progress of these projects. Since then, Earned Value has been adopted as a standard method of measuring project performance.
The data collected across decades of projects tracked by the U.S. Government, and their analysis using EV reports, established that a disciplined Earned Value Management (EVM) approach could accurately predict the final cost of a project to within 10%, as early as one-fifth of the way through the project. This ability for early and accurate forecasting of costs opened the door to more general use of EVM in support of project tracking.
EVM uses effective practices in the areas of project planning and control, and relates to the measurement and analysis, as well as forecasting and reporting of cost and schedule performance for evaluation and action by project managers and other key stakeholders.
EVM evolved to be seen as either a friend or a foe, and is either embraced or shunned. It is seen by some as a cost saving tool to the overall project, and cite the improved analysis, communication and control derived from the implementation of Earned Value practices. The opponents of EVM see it as an overhead burden, and generally cite the cost and effort to make it work, and the limited benefit derived from its implementation. If used effectively, it is a great tool for project management.
Current performance is normally a very good indicator of future performance. It is possible to forecast cost and schedule performance by analyzing current trends. Earned value is one of the most sophisticated and accurate methods for measuring and controlling project schedules and budgets. Earned value is a project management tool for estimating how a project is doing in terms of its budget and schedule, and to obtain an estimate for the cost that will have been used at completion.
Project Managers and stakeholders would like to know the following information at any point in time, to ensure that work is progressing according to schedule:
Earned Value calculations help to answer the question “what did we get for the money we spent?”
Earned Value is an approach where you monitor the project plan, the planned work, and the actual completed work to see if a project is on track with respect to cost and schedule. Earned Value focuses on the accurate measurement of work performed against the detailed baseline project plan, and provides accurate prediction of the final cost and schedule, based on the current trends with respect to cost and schedule of planned and actual work.
NASA definition: “An integrated management control system for assessing, understanding and quantifying what a contractor or field activity is achieving with program dollars. EVM provides project management with objective, accurate and timely data for effective decision making.”
Earned Value has proven to be one of the most effective performance measurement and feedback tools for project managers. Timely and appropriate feedback enables project managers to identify problems early on and make necessary adjustments for keeping the project on time and budget.
EVM is a useful technique for measuring a project’s performance in terms of its schedule and cost, and involves using formulas to combine objective measurements of project performance into one integrated system. Project costs are essentially the costs incurred in completing scheduled activities. Hence, work that is completed or work that still has to be done can be viewed in terms of its monetary value. Considering costs and schedules are closely related, EVM can be used to control project costs.
The performance of any project is mainly measured against the time it takes and the incurred costs. EVM involves looking at both the schedule performance (how well the project is performing compared to the planned schedule), and cost performance (how efficiently the budget is being put to use to complete the work outlined in the project schedule). There are two EVM variables that are used to measure and specify how the project is doing with respect to time and costs:
1) Schedule Performance Index (SPI): This tells us whether the project is on schedule (SPI = 1), behind schedule (SPI < 1), or ahead of schedule (SPI > 1).
2) Cost Performance Index (CPI): This tells us whether the project is on budget (CPI = 1), over budget (CPI < 1), or under budget (CPI > 1).
There are other EVM variables that can reveal the project’s performance, but SPI and CPI are the ones that are most commonly used.
EVM consists of the following primary data elements, and each of these data point values is based on the time or data an EVM measurement is performed on the project.
A visual representation of the relationship between the various elements defined above would help in better understanding of the EVM measurements.
Using the primary data elements, we can arrive at the derived data elements for EVM. They typically fall under 3 categories:
Schedule Variance (SV) indicates how much the project is ahead or behind schedule.
SV = EV – PV
A negative value for SV (SV < 1) indicates that the project is behind schedule, while a positive value for SV (SV > 1) indicates the project is ahead of the schedule.
Cost Variance (CV) indicates how much the project is under or over the budget.
CV = EV – AC
A negative value for CV (CV < 1) indicates that the project is running over budget, while a positive value for CV (CV > 1) indicates the project is running under budget.
2) Performance Indices
Schedule Performance Index (SPI) is an indicator or measure of the efficiency of the time spent on the project, or the schedule efficiency of the project.
SPI = EV / PV
A positive SPI (SPI > 1) indicates the project is ahead of schedule and a negative SPI (SPI < 1) indicates the project is behind schedule.
Cost Performance Index (CPI) indicates the efficiency of utilization of the resources allocated to the project, or a measure of the actual cost efficiency on the project.
CPI = EV / AC
A positive CPI (CPI > 1) indicates the project is under budget and a negative CPI (CPI < 1) indicates the project is over budget.
3) Cost Forecasting
Estimate at Completion (EAC) is the estimated overall cost of the project at the completion of the project, or the forecasted total project costs based on project performance till date and likely project performance in the future.
EAC = BAC / CPI
= AC + ETC
= AC + ((BAC – EV) / CPI) [typical case]
= AC + (BAC – EV) [atypical case]
Estimate to Complete (ETC) is the estimated cost required to finish all remaining work.
ETC = EAC – AC
= (BAC – EV) / CPI
Earned Value Management helps in providing an objective measurement of how much work has been accomplished on a project. Using EVM, the management team can analyze and compare how much work has been actually completed against the amount of work planned to be completed, at a given point in time.
The primary goal of the EVM system is to provide Project Managers and stakeholders (key decision makers) with valid, timely, accurate, and auditable performance information on which to base management decisions concerning the project. EVM provides many benefits to successfully deliver a project at acceptable and agreed upon quality levels on time and within budget.
The key benefits of EVM are:
As far as the Project manager is concerned, EVM changes the emphasis from performance targets that are way into the future, to targets that are coming up in the near term. Measuring the performance of individual tasks (WBS elements) rather than the project as a whole gives both the project manager and senior management a steady stream of indicators about the health of the project.
EVM provides a concise and timely view of project progress that enables monitoring and early forecasting of cost and schedule issues. EVM is indispensable as a communication tool for managing stakeholder expectations. EVM provides important communication content, and it concisely and objectively indicates the schedule and cost status of the project. The objective facilitation of discussions around root cause analysis and problem resolution to identify and justify actions that each stakeholder must own in order to meet expectations becomes much more effective when EVM is used to measure progress. Everyone involved in the project benefits from the use of EVM.
Project Manager: No one benefits more from the use of EVM than the Project Manager. Earned Value provides essential project management metrics that will allow the project manager to very accurately identify the current status of the project with respect to cost and schedule, and where the project is headed in terms of the final cost and schedule, and do so throughout the project lifecycle. EVM is one of the most effective ways to manage project schedule and cost performance for large complex projects. The process also gives project managers some data to back up that “gut” feeling that comes from years of project experience when things are about to go wrong with respect to schedule or cost. The practice of EVM also forces good planning.
Program Managers: EVM offers program managers a common platform for planning, executing, monitoring, measuring and controlling one or more projects simultaneously.
Stakeholders: The various stakeholders benefit from the use of EVM in different ways. To the key stakeholders, EVM provides accurate reporting of the project status and gives objective indications of the health of the project. EVM gives the stakeholders more reliable information to make better management decisions. The project sponsor gets accurate reports on the current status and future trends of the project, which helps him to make timely decisions about the future of the project.
Company: To the company, EVM provides a smarter resource allocation and thereby an increased return on investment. CIOs can expect to further the organization’s business objectives by ensuring that their project portfolios are properly, consistently, and systematically managed, and that portfolio values are maximized while risks and costs are minimized.
Though people recognize the benefits of EVM, there are many reasons why EVM does not work effectively in many organizations. The main reasons are:
EVM is one of the most effective techniques for providing objective and accurate information on project performance. It can communicate scope, cost, and schedule status information to the stakeholders. When properly used, EVM is a flexible process that provides timely information on the health of the project, and its effective use can provide a competitive edge to the organization in successfully delivering projects.
Popularity of EVM has grown significantly in recent years, especially in the management of complex projects, and has been embraced by project managers around the globe with good success. With good planning, and effective implementation of EVM tools and processes, project managers can be better informed to make management decisions during the entire life cycle of their projects.
PMI EVM Community of Practice (previously known as PMI College of Performance Management) is a knowledge-based component of the Project Management Institute. The Association for the Advancement of Cost Engineering (a professional Engineering group) advocates the use of Earned Value Analysis and offers certification as an Earned Value Professional.
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You have decided to complete your Project Management Professional (PMP®) Certification. You have made a smart decision. The PMP® certification sponsored by the Project Management Institute® (PMI) is the most recognized and respected certification in the field of project management world wide. The salary survey performed by PMI found a 10% higher salary for PMPs vs. non PMPs in the United States. Anecdotally there are reports of significant bonuses and improved hiring rates of individuals having successfully
completed their PMP Certification. Completing your PMP certification is a strong way to demonstrate to employers that you are a step ahead of the rest.
The PMP exam is based on information from the entire project management body of knowledge. The “Guide to the Project Management Body of Knowledge” (PMBOK®), provides an outline of the topics covered. As per the PMI website,
The PMP Credential Examination measures the application of knowledge, skills, tools, and techniques that are utilized in the practice of project management. The PMP examination is comprised of 200 multiple-choice questions. Of the 200 questions, 25 questions are pretest questions. Pretest questions do not affect the candidate’s score and are used in examinations as an effective way to increase the number of examination questions that can be used in future PMP exams. The pretest questions are randomly placed throughout the exam. The allotted time to complete the examination is four hours.
PMP Exam Questions
PMP® Credential examination questions:
• are developed and validated by global work groups of content experts;
• are referenced to current resources from project management textbook sources;
• are monitored through psychometric analysis;
• satisfy the test specifications of a job analysis.
The current passing score for the exam is 61 percent (106 questions correct out of 175 scored questions).
Top 5 Tips
“Best Practice” Testing Techniques
PMP Exam things to remember
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Have you been thinking about taking your PMP® exam? Congratulations on your foresight. You probably already know that the PMP® exam is the most widely recognized Project Management Professional Certification world wide. What you may not be aware of is that every 5-7 years, the PMP® exam changes. The Exam is scheduled to change again on August 31st, 2011.
Why is the test changing? Essentially the Project Management Institute (PMI®) wants to ensure that their test does in fact test what project managers do in the “real world.” As the needs of businesses change year to year, and new areas of enterprise develop, the role of a project manager evolves.
Every 5-7 years PMI® conducts what they call a role delineation study. Over 3000 PMP® credential holders from 97 countries provided guidance to PMI® as to their status and the changes they have experienced in the role of the PM. The Role delineation study is part of what makes the PMP® certification so valuable to employers. If one has passed the PMP® exam it provides an employer with certainty that their roject manager indeed possesses the skills required in the role of project manager.
What are the changes?
30 percent of the PMP® exam will change. The manner in which one is tested will also be altered. As Per PMI® Today December 2010: “ Specifically, the Professional and Social Responsibility content area (Domain 6) will now be tested in every domain rather than as a separate domain on the examination.”
In the wake of recent corporate irresponsibility, it makes sense that there would be an increased emphasis on professional and social responsibility. Consideration for this moral code should be a part of a project manager’s thought process within their decision making. Essentially PMI®’s Code of Ethics and Professional Conduct should be considered a part of the daily role of a project manager. Ethics and Professional Responsibility should be considered to have an important role in each phase of a project.
PMI® has released the new breakdown of test questions to be as follows:
|Domain||Percentage of items on Test|
|Initiating the Project||13%|
|Planning the Project||24%|
|Executing the Project||30%|
|Monitoring and Controlling the Project||25%|
Remember there has been no change to the education and experience eligibility requirements to sit for the PMP® Exam.
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Implementing a project risk management plan entails proactively identifying and managing the factors that could potentially hinder the successful completion of the project in any way. Monitoring project risks helps to ensure that you quickly recognize and respond to any risks that materialize into project issues.
More on the differences between project risks and project issues later.
Once a good baseline set of project risks have been properly identified, the roadmap to risk avoidance becomes much easier for a project manager to navigate. In some projects, there are some risks that are unavoidable due to the nature of the given project. Having a proper project risk management plan in place will allow the project manager to actively monitor the trigger event for such risks and to respond quickly because an action/response plan has already been formulated for those risks.
Proper risk management planning will require you to first have a clearly defined project scope and project task list or work breakdown structure built around your choice of project management methodology. You will want to incorporate a risk assessment component at each phase.
Proper risk management assessment and planning is an ongoing effort. Risk identification and impact assessment does not end until the project has completed administrative closure. A risk can materialize when you least expect it to and can easily catch the unaware project manager or project team off guard without an appropriate risk mitigation plan.
Depending on the size of the project, you may deem it necessary to assign either a dedicated risk officer to monitor the project risks or have risk monitoring as an additional role of one of the project members. Every risk and the mitigation process agreed on should be documented within the project’s risk management plan.
By having everything documented, as a project manager, you ensure that in the event you are pulled away onto anther project, you can quickly transition your risk management plan without missing a beat on the project.
There are several benefits derived from having a robust risk management plan and risk monitoring techniques when managing a project.
Proper risk management planning must be considered an integral part of any project and not just a “nice to do” when there is time. So often, risk management planning takes a back seat to simply trying to get the work done in today’s competitive and schedule constrained project environments.
Even though the cost of incorporating risk monitoring within the project management process may at times appear as an added administrative cost, the benefits in the long run are more than worthwhile.
There is a dichotomy in managing projects in relation to risk management. It is often said; “everything went smoothly, why did we have to spend so much time in risk management planning?” When in fact, the project went well, BECAUSE of the risk management planning.”
Causes Of Software Project Failure by Muhammad Saqib
Most software projects fail completely or partial failures because a small number of projects meet all their requirements. These requirements can be the cost, schedule, quality, or requirements objectives. According to many studies, failure rate of software projects is between 50% – 80%. This essay is a compilation of failure causes of software development projects; this essay summarises several areas that play a vital role in software project failure.
So, what really is the reason for software project failure? The sad fact is that software projects fail because we do not recognize that good engineering principles should be applied to software projects just as they are to building office buildings. We try to defend ourselves by saying that software construction is “different”.
One of the most serious complaints against software failure is the inability
to estimate with acceptable accuracy the cost, resources, and schedule necessary
for a software project. Conventional assessment methods have always produced
positive results which contribute to the too well-known cost infested and
Over the last 20 years many cost and schedule estimation techniques have been
used with mixed sensation due to restrictions of the assessment models. A major
part of the estimations failure can be due to a lack of understanding of the
software development process and the effect of that method used in the project
plan, schedule and cost estimates.
Read Full Article: Causes Of Software Project Failure
A New Look at an Old Question by an Ancient Project Manager: Why Use a Translation Agency? by Tina Cargile
“It seems unbelievable that this huge project was accomplished on time. I was asking a lot of you and you did a great job. Not only did it get done, you managed to make me feel like it really could be done, which made me calm in a sea of mounting pressure from my senior management. I have realized the comfort of using professional services like yours. It really is true that when you turn a big job over to the best, you can let some of your worry go.”
This quote is a marketer’s dream–it is an actual quote from a relieved and satisfied client. Perhaps you have also basked in glowing words of praise and effusive thanks from a translation requester in your organization. In the interest of full disclosure, I must admit that the client who wrote these words is not a translation company professional.
Still, her organization assigned to her the task of verifying labeling and packaging for a new product in a wide range of languages for use in an even wider range of locales. The materials presented to our project management staff were an assortment of master documents and derivative documents, and the client’s charge was to verify and certify the language and content of the text prior to printing.
This client did not possess the familiarity or level of comfort with foreign languages to either organize the project or even identify the languages in question. Her goal was quite simply to accomplish the task and move on to her area of expertise, which clearly did not involve determining that “Dutch” and “Netherlands” were a language and a country, respectively, rather than a language pair.
If You Don’t Want To Spend Your Life In The Salt Mines
This type of client and this type of situation are neither an uncommon nor an unwelcome part of our translation business. As a project manager, and, by extension, as a company, I take pride and satisfaction in our willingness and ability to rescue such clients from what can be a translation nightmare–uninvited, unwelcome, and frequently baffling to the person targeted for the task. The often uninitiated non-volunteer is grateful to find a vendor willing and able to provide a turnkey solution.
Read Full Article: Why Use a Translation Agency?
Resolving Sub-Prime Mortgage Crisis Using Project Management Principles by Jaganadha Karra
Almost everyone residing in US are aware of the current Mortgage Crisis and its impact on their daily life. While some professionals debate on how the problem got created, there were some Senators and US President actively involved in resolving this crisis at the earliest. If we consider solving a problem as a Project, then most of the principles of Project Management as mention in PMBOK are to be considered. Understanding more in detail about the problem and its impact on the Society reveals the important players. Gathering proper information about the problem that these players are facing is nothing but gathering requirements from the End-Users. These requirements now play a vital role in getting this problem resolved.
ABOUT THE PROBLEM:
Mortgage Loans are provided in general to those who have good income levels or make a reasonable down-payment or have a good credit history for repaying their loan amounts in a timely manner or people who have good employment status. These restrictions were enforced in the market to the extent possible. As an exception, few lenders offered special loans to those who do not qualify these stringent requirements. These lenders are the Sub-Prime Lenders. They offered a loan plan that makes the borrower to pay small amount during the incentive period. One of the main ideas is to give the borrower an opportunity to correct their Credit Worthiness so that traditional loans will be available for them before the expiry of the incentive period. Unfortunately this opportunity provided by the Market and Regulators were misused which lead to rise in these loans drastically. To maintain their niche in the Market, lenders over-looked some of the basic principles of lending. Federal government reduced the interest-rates during 2001 and 2003 to boost the economy. Once the Federal Reserve started to raise their interest-rates, hypothetically the mortgage lending rates are to be increased proportionately. In contrast, the mortgage lending rates remained same or further lowered in some cases. Once the housing bubble busted, everyone realized how deep they were in this mess.
Read Full Article: Resolving Sub-Prime Mortgage Crisis Using Project Management Principles
Top Ways to Deal with Conflict — and Harness Its Potential! by Justin Elza
Conflict management is an integral part of successful business administration. Research shows that managers often spend as much as 20 percent of their work day trying to resolve conflict. Although conflict is a common workplace issue, it is important to recognize the sources of conflict and implement strategies to solve problems. This can help businesses overcome the harmful aspects of conflict and benefit from the positive results conflict can produce.
There are four basic elements of conflict. These include:
1. The involvement of two or more parties
2. A perception of incompatible goals
3. Differing values or perceptions
4. A continuation of the conflict until both sides feel satisfied with the results.
Conflict in the workplace can take many forms. However, it always requires at least two parties. Often, one of the parties is unaware of the conflict. They are a part of it nonetheless. From the perspective of management, it is best to identify the two parties and separate them initially. The first step is to accept that there is a problem and to define what it is and who is involved.
Read Full Article: Top Ways to Deal with Conflic
Software Maintenance Implications on Cost and Schedule by Bob Hunt
Abstract The dictionary defines maintenance as, “The work of keeping something in proper order.” However, this definition does not necessarily fit for software. Software maintenance is different from hardware maintenance because software doesn’t physically wear out, but often gets less useful with age. Software is typically delivered with undiscovered flaws. Therefore, software maintenance is: “The process of modifying existing operational software while leaving its primary functions intact.” Maintenance typically exceeds fifty percent of the systems’ life cycle cost . While software maintenance can be treated as a level of effort activity, there are consequences on quality, functionality, reliability, cost and schedule that can be mitigated through the use of parametric estimation techniques.
1. INTRODUCTION One of the greatest challenges facing software engineers is the management of change control. It has been estimated that the cost of change control can be between 40% and 70% of the life cycle costs . Software engineers have hoped that new languages and new process would greatly reduce these numbers; however this has not been the case. Fundamentally this is because software is still delivered with a significant number of defects. Capers Jones estimates that there are about 5 bugs per Function Point created during Development . Watts Humphrey found “… even experienced software engineers normally inject 100 or more defects per KSLOC . Capers Jones says, “A series of studies the defect density of software ranges from 49.5 to 94.5 errors per thousand lines of code .” The purpose of this article is to first review the fundamentals of software maintenance and to present alternative approaches to estimating software maintenance. A key element to note is that development and management decisions made during the development process can significantly affect the developmental cost and the resulting maintenance costs.
Read Full Article: Business Process Vs Project Management Process