Earned value management (EVM) is a project management technique. It helps you predict whether your initiatives will be finished on time and within budget.
EVM looks at cost and schedule separately. Let’s say you’re 6 months into a year-long initiative and you’ve gotten half of the work done. That means you’re right on schedule regardless of how much money you’ve spent.
Similarly, let’s say you’ve gotten half of the work done while spending half of your budget. That means you’re on budget regardless of how long it’s taken you.
For both cost and schedule, EVM compares something you’ve spent (time or money) against how much progress you’ve been able to make on your initiative. This initiative progress is the “value” that you’re “earning” in earned value management.
Although we track cost and schedule separately, that doesn’t mean they’re completely independent. It’s quite the opposite. The relationships between cost and schedule give EVM its true power, the ability to predict performance.
There are three lines on an EVM chart. They show the work goal, work completed, and money spent.
The work goal line is an S-curve that shows the pace of most initiatives. Not much is accomplished in the early phases of a project as you’re planning everything out, but then things really pick up steam in the middle. At the end you start to wrap things up and everything slows down again.
In official EVM terminology, this work goal line is called either Planned Value (PV) or Budgeted Cost for Work Scheduled (BCWS). In plain English, this line represents the goal for how much of your project you’ll be completing over time.
Next we’ll add the work completed line showing our initiative’s actual progress. You’re ahead of schedule if your percent complete is above the work goal. Higher is better.
The official term for measuring how much of your initiative is finished is either Earned Value (EV) or Budgeted Cost for Work Performed (BCWP). And, instead of tracking this progress by percent complete, EVM academics prefer to track how much money that completed work was worth. It’s a simple conversion.
If your initiative’s total budget is $100,000 and you’re 25% finished, you’ve done $25,000 worth of work. That’s the “earned value” in “earned value management.”
Traditional EVM visualizes how much work you’ve completed in terms of its monetary value. We think it’s more intuitive as percent complete. Either way, the lines look the same and the math is identical. It’s just different labels on the Y axis.
Finally, we’ll add the money spent line that shows how much this initiative has cost so far. Lower is better for this one. EVM purists call this line Actual Cost of Work Performed (ACWP).
Based on the relationships between these three lines, we can predict when the initiative will be finished, and how much money we’ll end up spending. That’s what we’ll explore next.
To predict the final cost of our initiative, we compare money spent to work completed. If you’ve been able to get 50% of the work done while only spending 40% of the money, your project is 10% under budget. Subtract that 10% from your total budget to see how much money you’re going to end up spending in total. The chart below shows this cost prediction in action.
Notice how we’re not comparing anything to the work goal line here. That's because our cost predictions are entirely based on how much progress you've been able to make with the money you've spent. You could be months behind on your initiative, but if you've gotten 50% of the work done while spending 50% of the money, you're right on track as far as cost is concerned.
Ignoring the schedule when predicting how much you’ll end up spending on an initiative is the tricky part about EVM that sometimes throws people for a loop. It does make sense when you think about it, though.
Now let's put it all together. This is our finished EVM chart showing projected cost and schedule. You can adjust the sliders to see how each one affects the overall predictions.
If you’re using performance management software to track your initiatives, there’s a good chance it can already predict cost and schedule using earned value management. You can do it on your own with a calculator, though.
To start, you’ll need 6 pieces of information about your initiative:
days since start
percent (of work) complete
money spent to date
First, let’s calculate the Earned Value. As explained above, this is how much money the work you’ve done so far is worth.
earned value = percent complete × total budget
From there we can predict how much money you’ll spend on your initiative.
Projected Total Cost = money spent to date + total budget ‐ earned value
Next we’ll calculate Earned Time, which is the number of days worth of work you’ve completed so far. This is a little tricky because we have to calculate a point on the work goal curve, yet EVM doesn’t explicitly tell us how to draw that S-curve. Don’t worry, though. We’ve found that a curve like this works well.
wave scale = 7 / ((due date ‐ start date ‐ 1) / 2)
wave value = ‐1 × ( ln(( 1 / percent complete) ‐1))
work goal = start date + ((wave value + 7) / wave scale)
earned time = work goal ‐ start date
With that out of the way, we can finally estimate when you’ll finish your initiative.
projected end date = due date ‐ earned time + days since start
Some US government agencies publish a Gold Card, which is a small EVM cheatsheet. They can be incredible handy to have around for whenever you need a quick refresher on earned value management.
The wikipedia article on EVM is a great summary of the subject, but it’s fairly dense. We recommend getting a firm understanding of the basics before supplementing with wikipedia.
Finally, if you really want to dig deep, there are a few books dedicated entirely to earned value management. If you’re going to buy just one, get The Standard for Earned Value Management. It was published by The Project Management Institute in 2019, and incorporates the latest concepts in EVM. The book doesn’t shy away from math, but there are also practical examples for implementing EVM in different situations. It’s also not long, weighting in at just over 100 pages. Be warned, however. The tone is very academic, and it’s printed in a narrow font that can be hard to read.
Another book worth checking out is Earned Value Project Management. It’s the old standard in EVM, with clear writing that focuses less on math and more on overall concepts. It’s also a quick read at around 100 pages. The book’s main downfall is that it was published in 1996 and doesn’t benefit from the last 25 years of evolving EVM thought.