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The Measurable News 2011, Issue 1

Lawrence of Arabia and Non-Compliant Earned Value (EV) IN THIS ISSUE

Lawrence of Arabia and Non-Compliant Earned Value (EV) 1

How to Make the Perfect EVM-tini 6

Our EVM Professional Organization — An Evolving Process 7

Schedule Adherence and Rework 9

The Challenge for Earned Value in Commercial Industry 18

Is Something Missing from Project Management? 23

Steve Wake In constructing my presentation, I used Some people would argue that if you This article won’t tell you much about stories and pictures to illustrate the are not fully compliant then you are not earned value, but it will show you how thought process needed to achieve compliant at all, the 0 – 100 method. to make ideas stick. These thoughts this condition, including Lawrence of In the UK, people would come up to emanate from a query by Chris Bell Arabia, peanut butter, and dogs of as- me and say they used EV. Sometimes asking, “Can you speak about non- sorted shapes and sizes. that, too, would mean fully compliant. compliant earned value?” Each story or picture was wrapped More often than not, it meant a very I concluded my presentation on around the idea I wanted the audience subjective percent complete and a con- this subject at the 2009 EVM World to understand and remember, and, stantly revised baseline. There were Conference in Naples, FL, with the fol- if you were present for the presenta- also the people in between, with a wide lowing words: tion, I’m sure you do remember. That’s range of more or less compliant. how memory works best. my use of We took the view that any progress to- “The way forward is a combination Lawrence of Arabia and peanut but- of MINDSET and TOOLSET. ward measured performance was a ter, however, were arrived at through a good thing and that it should not be Currently the benefits to be more circuitous route. discouraged; however, we didn’t have achieved by effort expended on The words “non-compliant earned anything to capture and measure how technical improvement of what is value” don’t make me want to hit the much or how little EV was being done. already a great toolset are far out- “buy” button very quickly, but what do If we did, then we would have a start- weighed by the benefits returned by they mean? There are varied answers ing point coordinate. We could then efforts that focus on the mindset. to that question. ask if that was enough. If it wasn’t, We need to build a better project If you do all the 32 EV criteria, then then we now had a map that could manager, not a better project man- you might be said to be fully compliant. show us where we needed to go. We agement method. We must have more thinkers and doers.” Continued on p. 4. Comprehensive Project Controls for Complex Projects

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The PMI - Earned Value Community of Practice Newsletter is an official publication of PMI. . Editorial Staff

Publisher: PMI - Earned Value Community of Practice Managing Director: Gaile Argiro Story Editor: Peter Schwarz Designer: Amanda Mitchell Vice President of Communications: Robert Horrigan Editorial Copy Editorial contributions, photos, and miscella- neous inquiries should be addressed and sent to the editor at the Earned Value Management Community of Practice headquarters. Please follow the author guidelines posted on the PMI-Earned Value Management Community of 2008–2011 Community Council Practice web site. Letters submitted to the editor will be considered for publication unless the Leaders & Staff writer requests otherwise. Letters are subject to editing for style, accuracy, space, and propri- ety. All letters must be signed, and initials will be Community Manager used on request only if you include your name. Susan Wood The Earned Value Management Community of 850-892-3747 • [email protected] Practice reserves the right to refuse publication of any letter for any reason. We welcome articles relevant to project management. The Measur- Deputy Community Manager able News does not pay for submissions. Articles Ray Stratton published in The Measurable News remain the 714-318-2231• [email protected] property of the authors. Finance Lead Advertising Catherine Ahye Advertising inquiries, submissions, and pay- ments (check or money order made payable 571-250-2382 •[email protected] to the College of Performance Management) Administrative Lead should be sent to Earned Value Manage- ment Community of Practice headquarters. Marilyn McCauley Advertising rates are $1000 (taken) for inside 937-878-7923• [email protected] front or back cover (full-page ad only), $800 for other full-page ads, $500 for half-page ads, Service Delivery Lead and $300 for quarter-page ads. Issue sponsor- Barry Schuler ships are available at $2500 per issue. Business 703-456-0707 • [email protected] card ads are available for $100 per issues (or free with full-page ad). Rates are good from Knowledge Management Lead January 1, 2011 – December 31, 2011. Earned Value Management Community of Practice Joe Houser reserves the right to refuse publication of any 301-529-6697• [email protected] ad for any reason. Research and Standards Lead Subscriptions Kym Henderson All Earned Value Management Community of 61 414 428 537 • [email protected] Practice publications are produced as a benefit for Earned Value Management Community of Communication Lead Practice members. All change of address or Robert Horrigan membership inquiries should be directed to: PMI Headquarters, Customer Care Department, Four 703-923-6094 • [email protected] Campus Boulevard, Newtown Square, PA 19073- Immediate Past Community Lead 3299 • Phone 610.356.4600 • Fax 610.356.4647 • [email protected]. Neil Albert All articles and letters represent the view of the 703-506-4600 • [email protected] authors and not necessarily those of Earned Value Management Community of Practice. Advertising Executive Administrator content does not signify endorsement by Earned Gaile Argiro Value Management Community of Practice. 703-370-7885 • [email protected] Please notify Earned Value Management Com- munity of Practice for single copy or reproduction Executive Assistant requests. Appropriate charges will apply. Stephanie Bautista © 2011 by the PMI - Earned Value Management Community of Practice. All rights reserved. 703-370-4301 • [email protected]

3 The Measurable News

ty leader. Rory had been in Afghanistan fectly. It is their war, and you are to help recently and came up with the amaz- them, not to win it for them. Actually, ing fact (to me) that American officers also, under the very odd conditions of were being taught something written Arabia, your practical work will not be nearly 100 years ago by T.E. Lawrence. as good as, perhaps, you think it is.” In 1917, Lawrence wrote 27 articles Article 3. “Your place is advisory, and or commandments to help understand your advice is due to the commander how to deal with counter-insurgency. alone. Let him see that it is your con- What was counter insurgency? ception of your duty and that his is In brief, Lawrence provided guid- to be the sole executive of your joint ance for a change programme that plans.” challenged the ruling status quo of Article 4. “Win and keep the confi- Turkish occupation by getting the lo- dence of your leader. Strengthen his cal inhabitants on his side and train- prestige at your expense before oth- ing them. History has shown us that ers if you can. Never refuse or quash this story did not have a happy end schemes he may put forward, but en- for Lawrence, but what he wrote was sure that they are put forward in the amazing in its content and directly rel- first instance privately to you.” evant to me in the context of EV. Article 12. “Cling tight to your sense Continued from p. 1. of humour. You will need it every day.” My major problem is that I know that EV would have two bearings and a coor- “The open reason that is a great process. I can convince others Article 23. dinate for a planned journey that we Bedu give you for action or inaction that it is a great process, but if that is all could monitor and measure. We had may be true, but always there will be I do, it will not actually happen. invented the Compass! better reasons left for you to devine. When you introduce EV, you have to Instead of saying, “It’s the 32 guide- You must find these inner reasons make people change the way they lines or nothing,” and then shrugging (they will be denied, but are none the work everywhere. EV is not a plug-in and rolling our eyes, we could say, less in operation) before shaping your gadget. It is a way of life. “Yes. You use earned value like this. arguments for one course or another.” That knowledge will help us make in- So bear with me. The 27 articles that As a preface to his articles, he wrote formed management choices about Lawrence wrote are useful wisdom for the following admonishment concerning our working with you.” me to read and think about when I am the context in which they were written: implementing EV. They assist me in “The following notes have been ex- Peanut Butter formulating my own specific way of pressed in commandment form for The Compass and how to use it was making the changes I need to do to in- greater clarity and to save words. going to be my presentation about troduce EV and get it to stick and stay They are, however, only my per- how to manage non-compliant EV. there. sonal conclusions, arrived at grad- When I was thinking of how to explain Some pertinent excerpts from the ually while I worked in the Hejaz it, I thought of peanut butter. It’s some- 27 Articles are: and now put on paper as stalk- thing that every American is aware of ing horses for beginners in the Article 8. “Your ideal position is when and is available in every shape, size, Arab armies. They are meant to you are present and not noticed. Do and quality to suit all tastes, pock- apply only to Bedu; townspeople not be too intimate, too prominent, or ets, and ideologies. Looking at it on or Syrians require totally different too earnest. Avoid being identified too the shelf, it is laid out just like the EV treatment. Compass model. Budget versions at long or too often with any tribal sheikh, They are of course not suitable to any the bottom, then the popular versions, even if C.O. of the expedition. To do other person’s need, or applicable then family size, and then esoteric. It your work you must be above jealou- unchanged in any particular situation.” is a great metaphor for something that sies, and you lose prestige if you are is essentially just peanuts. associated with a tribe or clan, and In other words, you have to think about its inevitable feuds. Sherifs are above them and tailor them to suit your own Lawrence of Arabia all blood-feuds and local rivalries and situation. It’s a lot better than having a Then, I watched a documentary about form the only principle of unity among blank sheet of paper for inspiration. Lawrence of Arabia by Rory Stewart, the Arabs.” who is an expert on Arabia, has Article 15. “Do not try to do too much Pictures Are Worth 1000 Words been a diplomat, is now a Member of with your own hands. Better the Arabs In conclusion, if you want to make Parliament, and is possibly a future par- do it tolerably than that you do it per- an idea stick put a story or a picture 4 The Measurable News

around it. People will remember. Look and Director, Steve Wake for those stories and pictures in history Projects, Ltd. Additionally, and in the everyday world. It’s all there he chairs, speaks, writes, already and it’s the best way to get and is an accomplished people on your side. And do not forget events organizer. He is some humour! seen as a U.K. expert and “And what should they know of champion of the EV sub- England who only England know?” ject. He established reci- (Rudyard Kipling) procity between the U.S. ANSI EVMS Guidelines “What do they know of cricket, who and the U.K. He is also only cricket know?” (CLR James) Chairman of the Planning About the Author SIG and is currently over- Steve Wake is a man- seeing development of the agement consultant APM Guide to Planning. specialising in Earned Additionally, he is a mem- Value Project Control. ber of the core author group for the re- Geneva, with the third scheduled for He provides advice, vision of the PMI second edition of the Lisbon in 2011. He is currently put- guidance and train- Practice Standard for Earned Value ting together the Synergy programme ing. He is Chairman of Management. In 2009, Steve helped with PMI. U.K. at Indigo2 London for the APM Earned Value found the EVA-Europe initiative and November 3, 2011. You may contact Management Specific Interest Group chaired the first conference at CERN, Steve at [email protected].

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5 The Measurable News

How to Make the Perfect EVM-tini

Catherine Ahye Ingredients: Uses: The term “mixology” refers to receiving 1 each equal part of Earned value management (EVM) an increased effect when you drink (amount subject to is used to manage programs that any elixir that you are able to make. availability) are more than 6-months in duration • Scope and > $1M for development and About the Author $5M for sustainment. When cor- • Schedule Catherine Ahye has rectly implemented, program per- 20+ years experi- • Budget sonnel can easily identify what has to be done, when it should be done, ence in project and A twist of risk earned value man- and the budget assigned to getting agement. Besides it done. being the EVM CoP Finance Lead, she Active Ingredients: is Raytheon’s Mid- Program managers, task/technical leads, schedul- Atlantic EVMS Focal Point for the ers, control account managers (CAMs) and EVM Intelligence, Information Systems (IIS). analyst. If these key ingredients are not used or She holds a Masters and BS in busi- have not been properly trained/understand earned ness administration and is a certified value, then improper implementation could result Project Management Professional and the full benefits would not be realized. (PMP).

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6 The Measurable News

Our EVM Professional Organization — An Evolving Process

Marilyn McCauley, Community Administrative Lead Performance Management Association (PMA) In the beginning there was PMA, Performance Management Association. The need for a professional organization grew out of a concern that “even though several contractors proclaimed that their systems supported C/SCSC (Cost/Schedule Control Systems CONTROL was a quarterly published College of Performance Criteria); they all used different termi- journal of professional papers. Management (CPM) nology, and implemented features of The PMA board included not only the By the mid to late 1990’s, it was be- their systems in different ways.” regular officers but three regional vice- coming obvious that EVM was no lon- An initial meeting was held in July presidents (eastern, central, and west- ger a standalone focus but was the 1985 at the Marriott LaGuardia Hotel ern regions). They were responsible integrating factor for project manage- in New York City to discuss this con- for organizing quarterly regional con- ment. The U.S. government’s focus on cern further. There were presentations ferences to enhance information inter- better project management lifted EVM and professional discussions which change activities. As a result of these into the senior leader’s decision mak- led to this meeting being considered regional meetings the idea for chap- ing process. From 1995 though 1998, the first formal EVM professional con- ters evolved. The first local chapters the ownership of EVM criteria was ference. Interested individuals held were formed in Minneapolis/St. Paul transferred to industry by adoption of several discussions, meetings, and (being the first), Boston, Washington, the ANSI EIA 748-A EVM Standard. attended PMI meetings looking for a DC, Mid-Ohio, and Los Angeles. Increased emphasis was being put on management within the U.S. gov- professional home. At that time, PMI’s With the proliferation of local chapters, focus was more on power and con- ernment, and more importantly per- continuation of regional meetings and formance management with EVM struction industries while early EVM the national conference, the organiza- practitioners were involved in the aero- recognized as the tool that could pro- tion continued to grow. In 1988 PMA vide that. Along with its role in project space industry. Following a meeting membership was 550. By 1997, mem- with other professional organizations management and its increasing role in bership had increased to approximate- the world, the need for PMA to stretch the group decided to establish an in- ly 1200. The organization not only dependent professional organization its wings and participate in a grander grew in numbers but grew in relevance scale globally was becoming obvious. focused on practitioners of C/SCSC. around the world. Australia, Canada, The possibility of affiliating with anoth- United Kingdom, and Sweden had be- PMI had become a huge player in the er professional group was deferred for come users of EVM, and consequently global environment of project manage- at least two years. the PMA global membership grew as ment and that playing field had grown A second PMA Conference was held well. Other countries soon joined their well beyond power and construction. within a year of initial inception of the global EVM practitioners. The main fo- When PMI invited PMA to join the PMI organization. By that time there were cus for PMA was still the US DoD and family as the first college, the PMA about 200 members in PMA and an the aerospace industry although EVM membership chose to make the leap attendance of 100 was realized at was slowly becoming more important to the bigger environment. The move the second conference. By 1987 the as a project management tool through- was seen as a chance for EVM to be- first constitution and by-laws were out the U.S. government and other come the key focus in the PMI’s Body in place. Late in 1987 the first issue countries. of Knowledge and other PM opportuni- of IN CONTROL was published. IN ties that existed in the PMI world. On

7 The Measurable News

March 15, 1999, the PMI College of group components. This resulted in membership. Our current membership Performance Management was estab- the advent of the virtual communi- is slightly over 1500, but we hope oth- lished as a component within the PMI ties. As of January 1, 2011, we are ers will see benefits in membership organization. The idea of a college now known as the PMI Earned Value in the EVM CoP. We intend to fill the was that we would provide the EVM Management Community of Practice role of EVM SMEs for PMI’s project expertise, knowledge and academic (EVM CoP). management focus. Both PMI and the background for the project manage- EVM CoP will need to integrate each ment profession around the world. PMI EVM Community of other into their respective daily busi- Practice (CoP) Great strides have been made with the ness and strategic operations to en- The idea behind a community of prac- EVM focus in the global environment. sure we all succeed. As a former ad tice is that each community will be the Today, governments in Japan, India, once stated — “reach ouand touch subject matter experts (SMEs) for the Canada, Australia, Portugal, United someone.” We will expand the EVM various areas of the PMBOK. As the Kingdom, Sweden, Central America, community to include not only the ex- EVM CoP we will be the go to SMEs Italy, France, Germany, Korea and perienced but the novices. We have for EVM. An observation of the old or- China have identified EVM as a best to find our replacements to guarantee ganization (PMI-CPM) is that neither practice for project managers. The that EVM expertise exists years and side (PMI and CPM) capitalized on number keeps growing. In the past years from now. each other’s expertise and capabili- other countries might attend the PMI- ties. This is recognized by PMI as well About the Author CPM conferences but our professional and is one of the reasons for identi- Marilyn McCauley is organization did not necessarily reach fying this new structure. Discussions owner and Principle out to those same countries by pro- throughout the transition process have of McManagement viding local support for conferences helped in a greater appreciation for Group, an EVM con- and/or training and education. Today what each can bring to the table. sulting and train- that has all changed as PMI-CPM has ing organization. supported EVM events in many of the Nothing is automatic though. The EVM Marilyn’s areas of ex- above mentioned countries. CoP will need to continue to reach out pertise include EVM beyond our comfort zone to include When PMA joined PMI, we had ap- system assessments, EVM systems and support others outside the U.S. proximately 573 members. Many gap analysis, data analysis, IBR im- mindset. We will find a way to reach members had chosen not to contin- plementation and training, proposal out to the other communities of prac- ue membership with the increased preparation for performance manage- tice in the PMI family. We will look well focus for the organization. It is inter- ment using EVM, and utilization of beyond our current global reach for esting to note how many people don’t EVM data. She has over 32 years opportunities. like change, but I believe we all know with the federal government in pro- without change we will probably die in While we have opportunities for volun- gram control and EVM activities in- today’s world of evolving needs and teers, we need to expand the opportu- cluding team chief for EVM system focus. At our peak, PMI-CPM member- nities to more members. Our awards reviews, EVM policy development and ship reached 2500 members but has program needs to be enhanced be- implementation, and data analysis. started dropping in the last few years. yond its current state. The current Her customers have included govern- That was probably partially driven by training program is excellent, but we ment agencies such as the FAA, VA, the fear of changes being rolled out by will focus on more and different oppor- FEMA, DHS, Air Force, Army, NGA, PMI and partially due to the fact that tunities for training EVM practitioners. DTRA, GSA, and DOE. Many ma- PMI-CPM was still very focused on the Certifications will likely become part jor government contractors have used DoD/U.S. government environment. of our tool box in the near future. The her services as well. Marilyn has a Our conferences have been heavily current EVM Practice Standard is be- BS in management from Wright State U.S. centric. The organization is working updated and that will continue to University and a MS in management ing to expand that focus. The PMI be an ongoing process over the years. from Central Michigan University. changes being advocated for compo- Research projects will continue. She currently serves on the board as nents should help with that need. As we transition into our new orga- Vice President of Administration for PMI has identified the need for change nization, we will continue to look for the PMI-Earned Value Community of for its colleges and special interest opportunities to bring value to our Practice.

8 The Measurable News

Schedule Adherence and Rework Abstract When project performance is such that the product is delivered with expected functionality at the time and price agreed between the customer and supplier, it is deemed “successful.” The rework, encumbering any project, has a measurable impact on whether a project can achieve success. The project manager, who exercises control of the contributors to rework, can greatly enhance the prospect of delivering the product within its constraints. A significant portion of rework is caused by deviating from the project plan and its associated schedule. The measure of schedule adherence is derived from applying Earned Schedule to Earned Value Management data. This paper first reviews the concept of schedule adherence and then develops an approach to understanding the cost impact from not adhering to the schedule. Finally, an index is proposed which provides information to assist project control and to forecast the cost associated with imperfect schedule adherence.

Walt Lipke, PMI Oklahoma ecution of the project. When the dif- we are concerned is solely caused by City Chapter ference, EV – PV, is negative, there is project execution not in the activity se- a possibility of a constraint or impedi- quence prescribed by the schedule. Background ment preventing task progress. This Although out of sequence perfor- An extension to Earned Value information is extremely useful. Having mance is only one of the six contrib- Management (EVM), Earned Schedule these tasks identified, allows the proj- utors to rework mentioned, it has a (ES), was introduced in the March ect manager to focus on investigating major impact. Out of sequence per- 2003 issue of The Measurable News and relieving problems that are caus- formance is pervasive in that it is not [Lipke, 2003]. The purpose of ES was ing workarounds. Minimizing the im- aligned with a single aspect or project to overcome the anomalous behav- pact of constraints and impediments, event. Rather, it occurs dynamically ior of the EVM schedule performance in turn, minimizes the extent of work- and can involve any, and possibly all indicators by providing reliable time- arounds, thus maximizing execution of the project team throughout the en- based indicators.1 After ES was ini- in agreement with the schedule. The tire period of performance. tially verified (Henderson, 2003) and, more execution agreement there is be- For readers who have some back- subsequently, extended to forecasting tween actual accomplishment and the ground in quality and process im- project duration (Henderson, 2004), it schedule, the greater the performance provement activity, the discussion thus was shown to have further application. efficiency becomes for both cost and far may bring to mind the idea of pro- One unique quality of the ES mea- schedule. cess discipline. The lack of process sure is that it facilitates identifying the Along with the negative differences discipline leads to the creation of de- specific planned value (PV) which previously discussed, there are posi- fects and inefficient performance. As should have been accomplished for tive differences identified for specific has been described thus far, ES pro- the reported earned value (EV). This tasks. The positive differences expose vides a way to identify and measure characteristic was first explained and areas where rework may occur. There process performance discipline. examined in the article, “Connecting are many causes of rework: Earned Value to the Schedule,” pub- Schedule Adherence • poor planning stemming from re- lished in the Winter 2004 issue of Figure 1 provides a visual for discuss- quirements misinterpretation, in- The Measurable News (Lipke, 2004). ing further the ideas from the previ- correct task sequencing, and poor Subsequently, this extended capabil- ous section. The darkened tasks to estimation ity of ES was more fully elaborated the right of the vertical ES line indicate in the April, 2008 CrossTalk article, • defective work performance resulting from impedi- “Schedule Adherence: a useful mea- • poor requirements management ments and constraints or poor process sure for project management” (Lipke. discipline. Frequently, they are execut- 2008). • schedule compression during ed without complete information. The execution Because the task specific PV is iden- performers of these tasks must nec- tifiable, comparisons can be made to • over zealous quality assurance essarily anticipate the inputs expected the task EV reported. The differences However, the rework identified when from the incomplete preceding tasks; in PV and EV for each task are utilized EV – PV is positive is none of the ones this consumes time and effort and has to isolate problems occurring in the ex- previously cited. The rework for which no associated earned value. Because

1The schedule performance indicators derived from Earned Schedule are Schedule Variance-time (SV(t) = ES – AT) and Schedule Performance Index- time (SPI(t) = ES / AT), where AT is the time duration at which an EV measurement is reported. 9 The Measurable News

the anticipated inputs are very likely “k” denotes the identity of the tasks herence, the project manager has a misrepresentations of the future reality, from the schedule which comprise the strong indication the project will have the work accomplished (EV accrued) planned accomplishment. The sum of rework at some point in the future. for these tasks usually contains signifi- all PVk is equal to the EV accrued at Conversely, when the value of P is cant amounts of rework. Complicating AT. EVk is the earned value for the “k” very close to 1.0, the PM can feel con- the problem, the rework created for a tasks, limited by the value attributed to fident the schedule is being followed specific task will not be recognized for the planned tasks, PVk. Consequently, and that milestones and interim prod- a period of time. The eventual rework the value of P, or P-Factor, repre- ucts are being accomplished in the will not be apparent until all of the in- sents the proportion of the EV accrued proper sequence. The PM thus has an puts to the task are known or its out- which exactly matches the planned indicator derived from ES which fur- put is recognized to be incompatible schedule. ther enhances the description of proj- with the requirements of a subsequent ect performance portrayed by EVM. A characteristic of the P-Factor is task. that its value must be between zero Derivation of Rework This conceptual discussion leads to and one; by definition, it cannot ex- The diagram shown in Figure 2 is pro- the measurement of schedule adher- ceed one. A second characteristic is vided to aid the derivation for comput- ence. By determining the earned val- that P will exactly equal 1.0 at proj- ing rework. To understand how P can ue (EV) for the actual tasks performed ect completion. P equal to zero indi- be used beyond its qualitative applica- congruent with the project schedule, a cates that the project accomplishment tion, let’s refresh the fundamental rela- measure can be created. The adher- thus far is not, at all, in accordance tionships to this point: ence to schedule characteristic, P, is with the planned schedule. In opposi- described mathematically as a ratio: tion, P equal to one indicates perfect 1. EV accrued = SEVi @ AT = SPVk conformance. @ ES S S P = EVk / PVk subscript i identifies tasks which When the value for P is much less PVk represents the planned value for a have earned value task associated with ES. The subscript than 1.0, indicating poor schedule ad- 2. EV earned in accordance with the schedule: 2 EV(p)= SEVk @ AT = P • EV 3. EV earned not according to the schedule: EV(r) = EV – EV(p) = (1 – P) • EV These relationships provide a basis for examining the impact of rework and are extremely important to the remainder of this section of the paper. To begin, we know from the earlier discussion of the P-Factor that a portion of EV(r) is unusable and requires rework. If the unusable portion can be determined, then the quantity of rework is calculable. Progressing on, the Figure 1. Actual vs. planned performance. rework and usable fractions of EV(r) are defined as follows: Rework fraction: f(r) = EV(–r) / EV(r) Usable fraction: f(p) = EV(+r) / EV(r) where EV(r) = EV(–r) + EV(+r) and f(r) + f(p) = 1

Figure 2. Rework diagram.

2 Recall that EVk is limited by the value of PVk.

10 The Measurable News

Using the definitions, rework (R) can Inserting m = 0.5 and n = 1 into the definition for the schedule adherence be computed from EV, P, and f(r): general equation for f(r), the equation index (SAI): R = EV(–r) = f(r) • EV(r) = f(r) • for rework can be stated: SAI = R / (BAC – EV) [–0.5 • (1 – C)] (1 – P) • EV R = (1 – C • e ) • (1 – P) • EV The indicator is useful for detecting The quantities, EV and P, are obtain- Thus, in its final form, rework is a func- trends and is, therefore, an indica- able from the reported status data. A tion of the EV accrued, the degree of tor by which a manager can gauge his method for determining f(r) is all that schedule adherence (P), and the frac- or her actions taken. The interpreta- remains to have a calculation method tion complete (C or EV/BAC). tion of the indicator is straight forward. for rework. When SAI values increase with each Computation Methods Logically, the project team’s ability to successive status evaluation, sched- The equation for R computes the correctly interpret the requirements ule adherence (SA) is worsening. amount of rework forecast to occur for the work remaining increases as Conversely, when SAI decreases with from the present status point to proj- the project progresses toward com- time, SA is improving. ect completion due to the current mea- pletion. The end point conditions for Having SAI provides the ability for cal- sure of schedule adherence. It is an this relationship are: f(r) = 1 when C culating the rework created within a intriguing computation, but it is not a = EV / BAC = 0 and f(r) = 0 when C= performance period along with the cu- useful indicator for project managers 1. Carrying this idea forward, the frac- mulative effects from imperfect SA. (PM). Recall that P increases as the tion of EV(r) forecast to require rework Additionally, it provides computational project progresses and concludes at must then decrease as EV/BAC in- capability for forecasting the total re- the value of 1.0 at completion, regard- creases. It is further hypothesized that work from the lack of schedule adher- less of efforts by managers or workers the rate of rework decrease for f(r) be- ence. Rework within a performance to cause improvement. Thus, the com- comes larger and larger as the project period is computed through a trapezoi- puted value of R from one status point nears completion. dal approximation technique, illustrat- to the next cannot provide trend infor- ed in Figure 3. The formula proposed which meets mation concerning improvement and the conditions outlined is: neither can it lead to a forecast of the For the graphical depiction, the area f(r) = 1 – Cn • e[–m • (1 – C)] total amount of rework caused by lack computed for each period is in terms of schedule adherence. of cost of rework per unit of budget. where C = fraction complete of project Thus, to obtain the rework cost for any (EV/BAC) At this point R appears to be a useless e = natural number (base “e”) calculation. However, by recognizing that the rework value computed is dis- The exponents, m and n, are used tributed over the to adjust the shape of the f(r) curve. remainder of the Presently, calculations of f(r) are rec- project, it can be ommended to be made using n = 1 transformed eas- and m = 0.5. These values for the ex- ily to a useful in- ponents yield a nearly linear decreas- dicator. It makes ing value for f(r) as fraction complete sense to normal- increases. It has been speculated that ize R to the work the behavior of f(r) should be more ex- remaining; i.e., the aggerated; for example, a graph of f(r) project budget, versus EV/BAC having the general ap- less reserve, mi- pearance of the perimeter of a circle nus the planned in the first quadrant. The mathemati- value of work cal equation for f(r) is capable of gen- accomplished.3 erating this behavior as well as others. Further research is needed regarding The value of R di- the behavior of f(r) to substantiate use vided by work re- of the equation above and the recom- maining is the mended values for m and n. Figure 3. Area calculation method.

3 In the terminology of EVM, the work remaining = BAC – EV, where BAC is Budget at Completion [PMI, 2005] 4 Final cost (IEAC) = AC + (BAC – EV) / CPI, where IEAC = Independent Estimate at Completion, AC = Actual Cost, and CPI = Cost Performance Index.

11 The Measurable News

period, the computed area is multiplied lable; the denominator in the equation plete. Normally, P-Factor values are by BAC: is equal to zero because there is no expected to be greater than 0.8 before remaining work at project completion. 20% complete. Because the adher- Rp(n) = BAC • [½ • (SAIn + SAIn – 1) • (C – C )] To overcome the indeterminate condi- ence to schedule is poor, we should n n – 1 tion for the rework computations, it is expect rework to be large with respect where n = the performance period of assumed that SAI remains constant to BAC. interest from the next to last status point un- The computed values for SAI and fore- With the methodology established for til completion. Similarly, the rework for cast rework are tabulated in Table 2. computing the cost of rework for any the first performance period is calcu- As observed, the value of SAI increas- lated assuming SAI is constant over period, it becomes a trivial matter to 1 es until the project is approximate- calculate the cumulative cost. The the initial duration. ly 60% complete and then improves cumulative accrual of rework (Rcum) To clarify what Rtot represents, it is the as the project moves toward comple- generated from imperfect SA is the forecast of actual cost for rework from tion. In the table, the value of SAI for summation of the periodic values: imperfect execution of the schedule. the final status period (11) is shown as Rcum = S Rp(n). From experience, rework cost is close- #N/A. As discussed previously, the SAI The method for forecasting the total ly aligned with planned cost. It, gener- for the final period is not calculable. rework caused by performance devia- ally, does not experience the execution The values for the rework forecast are tions from the schedule is very simi- inefficiencies incurred in the initial per- observed to rapidly increase until the lar to the formula used for forecasting formance of the tasks. project achieves 30% complete. From final cost from EVM.4 The formula for Notional Data Example that point, the values increase at a the total rework forecast (Rtot) is slower rate until the peak value of $60 The data provided in Table 1 is utilized R = R + SAI • (BAC – EV) is reached at 61% complete. Afterward tot cum to demonstrate the theory and calcula- the SAI values improve and the rework This formula makes possible, for each tion methods described in the previous forecast decreases and concludes project status point, the computation sections of this paper. For our exam- at $47. To a large degree the rework of total rework forecast from imperfect ple, the schedule adherence shown by forecast is reasonably stable from schedule execution. the values of P are very poor. P does 30% complete until completion. It should be noted that the value of SAI not exceed 0.8 until status point 9, Possibly a clearer understanding of for the final status period is not calcu- where the project is nearly 85% com- the computed results can be obtained from viewing Figure 4. SAI is ob- Table 1. Notional data. served to be rapidly increasing from the beginning, indicating schedule adherence is worsening. Then, once the project has progressed past 60% complete, SAI dramatically improves. The forecast cost of rework, due to imperfect schedule adherence, likewise rapidly increases from a value of $13 at the first status point to the maximum value of $60. Although SAI greatly improves after its peak value, it is seen Table 2. Computed values (notional data). that the rework forecast improves only marginally. As the project moves to-

ward completion, there is less and less of the project remaining upon which the SA improvements can have impact. Thus, the rework forecast is af- fected, but not to the extent of the change in SAI.

The Measurable News

Real Data Example The data in Table 3 is actual performance data from an in-work project, beginning at 22% through 84% complete. The BAC for the project is $2,488,202. As shown, the P-Factor is a high value initially, 0.930, and increases to 0.995 by 75% complete, and remains fairly constant for the status points that follow. The schedule adherence for this project is incredibly good. Not only is SA good, CPI and SPI(t) are very good as well, 1.05 and 0.98, respectively. Although only a single set of correlat- ed data, the fact that all of the indexes have relatively high values demon- strates the conjecture that when SA is good, cost and schedule performance Figure 4. Rework forecast (notional data). are maximized. If the conjecture is true, then the SA index is an important Table 3. Real data. management indicator. The implication is the appropriate use of SAI as an additional management tool will increase the probability of having a successful project. Table 4 contains the computed results for SAI and forecast of rework cost from imperfect schedule adherence. As expected for such high values of P, SAI is extremely low. The highest value is 0.028, while the lowest is 0.005. To have a sense of the distinction between poor SAI values and good ones, compare the values provided in Tables 2 and 4. The poor values of Table 2 are as much as 89 times greater than Table 4. Computed results (real data). those shown in Table 4. The average of the forecast rework cost for the real data example is slightly less than $47 thousand, only 1.9% of BAC, and a remarkably low number. The estimate of the standard deviation from the forecast values is $8300. Utilizing the standard deviation, we can say it is extremely unlikely that the actual final rework cost will be greater $72 thousand; i.e., $47,000 plus 3 standard deviations (3 • $8300 = $24,900). The graphs of SAI and the rework cost forecast are shown in Figure 5. The two plots are shaped similarly, both

The Measurable News

Lipke, W. 2003. Schedule Is Different. The Measurable News, March & Summer. Lipke, W. 2004. Connecting Earned Value to the Schedule. The Measurable News, Winter. Lipke, W. 2008. Schedule Adherence: a useful measure for project management. CrossTalk, April. Project Management Institute. 2005. Practice Standard for Earned Value Management, Newtown Square, PA: PMI. About the Author Walt Lipke re- tired in 2005 as deputy chief of the Software Division at Tinker Air Force Figure 5. Rework forecast (real data). Base. He has over 35 years of ex- having negative trends. The graphs both notional and real data to illustrate perience in the clearly show schedule adherence im- their application and simplicity. development, maintenance, and man- proving after the project is 40% com- The additional capability afforded by agement of software for automated plete. Assuming the improving trend ES, to identify the impact of rework testing of avionics. During his tenure, continues, the rework cost at comple- from poor schedule adherence, pro- the division achieved several software tion will be less than $40 thousand, vides project managers an additional process improvement milestones, in- only 1.6% of BAC. and valuable tool for guiding their proj- cluding the coveted SEI/IEEE award Summary ect to successful completion. for Software Process Achievement. Mr. Lipke has published several articles From the time of the introduction of the Final Comment schedule adherence measure, P, there and has presented at conferences, in- To encourage application and uptake of ternationally, on the benefits of software has been a desire to have the capabil- the capability discussed in this paper, a ity for understanding its implications; i.e., process improvement and the appli- calculator is made available for down- cation of earned value management the cost of the induced rework. It was load from the Calculators page of the long thought that the complexity and dif- and statistical methods to software Earned Schedule website, http://www. projects. He is the creator of the tech- ficulty of performing the necessary cal- earnedschedule.com/Calculator.sht- culations would far outweigh the benefit nique Earned Schedule, which extracts ml. The calculator is titled, “SA Index & schedule information from earned from having the resultant information. Rework Calculator.” The calculator pro- However, as has been shown in this value data. Mr. Lipke is a graduate duces values and graphs for the accrual of the USA DoD course for Program paper, the calculations are not that en- and forecast of the total cost for rework, cumbering. Having the values for the Managers. He is a professional engi- along with the value of the EV for work neer with a master’s degree in physics P-Factor, the cost of rework can be fore- accomplished out of sequence. The cal- cast with relative ease. And thus, the and is a member of the physics honor culator includes instructions and exam- society, Sigma Pi Sigma (SPS). Lipke importance of executing schedule, as in- ple data for trial use. tended, can be quantified by cost; i.e., achieved distinguished academic hon- the amount of waste caused by imper- References ors with the selection to Phi Kappa FKF fect schedule performance. Henderson, K. 2003. Earned Schedule: Phi ( ). During 2007, Mr. Lipke received the PMI Metrics Specific Interest In this article, the introduction of the A Breakthrough Extension to Earned Value Theory?, A Retrospective Group Scholar Award. Also in 2007, he schedule adherence index (SAI) is Analysis of Real Project Data. The received the PMI Eric Jenett Award for shown to be integral to the forecast of Measurable News, Summer. Project Management Excellence for his rework cost. The approximation meth- leadership role and contribution to proj- od for making the forecast calcula- Henderson, K. 2004. Further Developments In Earned Schedule. ect management resulting from his cre- tion is diagrammed and discussed. The Measurable News, Spring. ation of the Earned Schedule method. The calculation methods are applied to Mr. Lipke was recently selected for the 2010 Who’s Who in the World.

14 A Winning PArtnershiP

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Earned Value Management Community of Practice • 101 South Whiting Street, Suite 320 • Alexandria, VA 22304 703.370.7885 • 703.370.1757• www.pmi-cpm.org PMI Earned Value Management Community of Practice presents… Join us on May 16–18, 2011, for the premier conference on Earned Value Management (EVM) 27th Annual International Conference May 16–18, 2011 • Naples Grande Resort Naples, FL • 888.422.6177 www.naplesgranderesort.com • www.naples-florida.com

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EVM World® 2011 Naples Grande Resort www.pmi-cpm.org Naples, FL 703.370.7885 • fax 703.370.1757 May 16–18, 2011 [email protected] The Measurable News

The Challenge for Earned Value in Commercial Industry Jack Kersbergen Popular solutions to provide for management success come and go with ever increasing frequency. While some management philosophies ap- pear and disappear after brief periods of popularity, many make solid and sustained management improvement contributions. Earned value management (EVM) in U.S. government contracting has been the singular most successful stand-alone technique for project management in the U.S. government contracting environment for decades. (Note: I have from memory ability to understand, establish, and ef- proved it, implemented it, and paid for borrowed a portion of this introduction fectively plan, execute, and control a it to be used with oversight and disci- from another source and don’t remem- disciplined baseline of cost, schedule, pline on every contract or subcontract ber who.) EVM and U.S. government and technical requirements. where it was ever required. programs have had a special relation- Over its entire lifetime, EVM has suc- EV, however, is not a “system” that ship for the entire life of EVM, from cessfully supported the ability to un- fixes organizational or management EVMS’ early days as Cost/Schedule derstand, establish, and effectively problems or replaces the need for de- Control Systems Criteria. For some plan, execute, document, and con- cisions, action, management respon- time now, earned value (EV) has been trol a project baseline of cost, sched- sibility, and the required procedural increasing in use and popularity in all ule, and technical requirements. Quite discipline. Where it has not been suc- types of commercial, non-government simply, the principles of EV work be- cessful, true commitment, responsibili- projects in both the domestic and for- cause EV is nothing more than good, ty, action, and procedural direction and eign environment of professional proj- basic, sound management principles. discipline are lacking and the imple- ect management, due in most part However, all principles, no matter how mentation has not been well executed. to the Project Management Institute. well conceived, require commitment, This same discipline and regulatory Commercial industry EVM, howev- support, and discipline to be success- oversight in government contracting er, does not enjoy the same support ful in practice. Where EV has been that supports EVMS does not always structure, oversight, discipline, imple- successful, the principles have suc- exist in commercial industry, causing a mentation, and sometimes even the ceeded because of true commitment, shift in emphasis from disciplined inte- complete and comprehensive under- support, and disciplined processes grated baseline development and thor- standing which exists in U.S. and for- and procedures. ough planning to an emphasis on the eign government EVM programs. In EVM has been successful, but its suc- EVM metrics of variances and “perfor- this article, I attempt to identify some cess has been due directly and largely mance efficiency” factors of CPI and special issues and challenges to the to the ownership, commitment, re- SPI. tremendous opportunities for apply- sponsibility, and significant investment The benefit of EV, however, is not the ing EV in commercial industry project of the U.S. government agencies at identification of variances, or status re- management. risk as customers for cost and sched- porting, but the thoroughly integrated, A project’s success is measured by ule on major/critical programs. This accurate, early planning process that its achievement of quality, schedule, successful heritage of earned value is required to establish a realistic in- cost, and technical performance com- belongs mainly to the U.S. govern- tegrated cost and schedule baseline. mitments. Consequently, the key to ment and the individuals, agencies, The features and advantages of EV successful project management is the and companies that developed it, im- are the status reporting, data metrics,

18 The Measurable News

and the ability to control and re-plan shore with all their gear and two trophy at the shore, the pilot pulled back on an in-process project. moose all packed and ready to go. He the stick, and the plane tipped clum- Let me provide an example: uttered some words under his breath sily off the lake and into the air, only to and brought the plane down gently on crash in the trees. The plane fell to the Two project managers chartered a the lake. ground amidst a cloud of smoke, dust bush plane to go moose hunting in the “I told you only one moose,” he shout- and debris. All three climbed out un- Canadian wilderness. The bush pilot hurt but shaken. In complete confusion flew them to their hunting camp on the ed at them when he got out of the plane. “Calm down,” replied one of the the disoriented pilot asked, “Where shore of a remote pristine turquoise the hell are we?” One of the project lake surrounded by a vast expanse project managers. “We’ve been doing this for a lot of years. Every year we managers looked around studiously of emerald green forest and a maze for a moment and then replied, “Looks of other lakes and waterways. As the come up here and shoot moose, and take them home. Same gear, same like we’re about two hundred and fifty pilot prepared to leave after unload- yards from where we were last year.” ing his passengers and their supplies, kind of plane and same approach he told them. “I’ll be back for you in each year. Different places some- Hey! The EV System worked! It pro- a week.” After a slight pause he add- times, and different pilots, but basi- vided status. So what’s the point? The ed, “You’d best shoot only one trophy cally we’ve done this for years now.” point is; success still depends on re- moose. With all the stuff you brought, I Reluctantly, the bush pilot was finally sponsible management decisions and don’t think I can fly everything and two persuaded after all the earnest assur- actions based upon a comprehen- moose out of here. This plane doesn’t ances from the project managers of all sive and completely thorough, accu- have the lift capability for a load like their past successes in situations iden- rate, baseline planning process and that. I’ll see you in a week. OK?” A tical to this one. His fully-loaded plane integrated change control. Scope week went by and he returned to pick skimmed the top of the lake, bounc- baseline, schedule baseline and cost up the hunters. As he circled to land ing off the waves as it picked up speed baseline planning are required. The on the lake, he spotted them on the for takeoff. Approaching the tree line mere existence of EV data and asso-

19 The Measurable News

ciated reports is not a guarantee for fectly for the other person. They can In summary, there are a lot of differ- success and it doesn’t fix bad estimat- see better. You have to try harder. ences between commercial industry ing and lack of thorough and personal Look again. They still don’t work well and government contracting that do control account planning However, in for you? Why is that? What? They are not allow for commercial industry to much of commercial industry, empha- prescription glasses? Your mean these just start using the “prescription eye- sis is placed on the data and reports, glasses are a prescription for a specif- glasses” of earned value employed in because that is what management ic vision problem, a problem that was government contracting without some emphasizes. diagnosed and then a corrective action assessment of the required manage- was determined precisely for that di- ment systems maturity in order to ex- The benefit of EV is not the identification of variances, or status report- agnosed problem and not yours? Oh! ecute EVM. ing, but the thoroughly integrated, You don’t have a problem. I see! I’m There is great opportunity in the com- sorry.” I think you get the point here. If accurate, early planning process that mercial market for EVM professionals is required to establish a realistic in- EV is a solution for commercial indus- and for the PMI. There is a great risk, tegrated cost and schedule baseline try, then a potential customer would however, in too easily identifying EV like to see a comprehensive definition at the Control Account level. The fea- as simply a plug and play solution, and and diagnosis of his/her problem and tures and advantages of EV are the as a management cure all for project status reporting and the ability to con- how EV solves it. Is there a problem? problems in commercial industry. trol and re-plan an in-process project. In the government contracting environment for cost reimbursable develop- About the Author I believe the features, advantages, ment programs the risks of cost and Jack Kersbergen, and the benefits of EV are already schedule growth are relatively well un- PMP, has spent well understood in the government derstood. Earned value planning and almost half of his contracting environment and that com- control is a solution. I believe it can career in earned mercial industry represents a tremen- be a solution for commercial industry value in the aero- dous new potential for the benefits of projects and programs as well, but like space and de- earned value planning and baselining. the eyeglass example used by Covey fense industry In a true commercial environment, out- so effectively, there is a need to first and the last 10 side of the cost reimbursable world of understand the enterprise assets re- years in engineering and construction. government contracting, specific man- quired to execute EVM. This includes agement requirements are not usually accounting systems and manage- He has also been a successful pri- directly and completely funded by the ment systems capable of WBS hierar- vate consultant for earned value to customer. It’s paid for internally. To im- chical summarization, and integrated the US Navy and private industry. plement change or new management accounting and scheduling coding He was most recently with Zachry practices, the specific benefits of add- protocols. Much of this is in place in Construction Corporation in the elec- ed value have to be well proven before government contracting but not in tric power generation industry and is they will be supported financially. commercial industry. One other issue currently engaged with a major aerospace contractor, involved with EVM, I am reminded of the Steven Covey is that the government contracting en- scheduling, and agile software de- training I received (twice). At one vironment operates under both GAAP velopment. His previous position point, Mr. Covey borrowed a pair of accounting and Cost Accounting was with Raytheon Engineers and eyeglasses from an audience member Standards (CAS), while commercial in- Constructors on the United States and gave them to another audience dustry operates in a GAAP only envi- Antarctic Program for the National member and asked them to put the ronment, which isn’t fully supportive of Science Foundation constructing the glasses on. He then asked how well EV and actually calculates variances new South Pole Station in Antarctica. the person could see. When informed with reversed plus and minus polarity Jack often speaks at the IPM and that the glasses caused vision blur- from EVM. EVM World Conference in Washington ring and focus difficulty, he responded DC and Florida, respectively. “What do you mean? They work per-

20 The Measurable News

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Is Something Missing from Project Management?1 Abstract There are many elements to a project … requirements, schedule, cost, quality, human resources, communications, risk, procurement, and… Every project is complex and extremely difficult to manage to successful completion, even those considered “small.” The majority of the life of a project occurs during its execution. Although the execution phase is preponderant, there doesn’t seem to be much emphasis on it. The literature, the training, professional meetings, and conferences do not commit proportionate energy to methods and techniques to prepare project managers for monitoring and reporting performance. Neither do these venues for knowledge transference bring focus to addressing performance measures and indicators, or using them for controlling the project. This paper examines the assertion and proposes the application of Earned Value Management and its extension, Earned Schedule, as a way forward.

Walt Lipke, PMI Oklahoma he had learned from Walter Shewhart found knowledge.” Profound knowl- City Chapter at Bell laboratories. edge could never be achieved with “job hopping” managers and employ- Introduction During the 1980s Japan’s automobile industry began to make noticeable in- ees. Dr. Deming espoused that deep Over the last 30 years, from about roads into the U.S. market. Their suc- understanding of the company and 1980 until the present, there has been cess was an alarming wake-up to U.S. its products only comes from years a significant evolution in software de- manufacturers, who recognized that of experience and progression with- velopment, quality systems and proj- they truly had serious competition. in the organization. Deming insisted ect management. The foundation for Thus began the quality revolution in that quality improvement required hav- this advancement in practice is strong- the United States. ing complete understanding of the ly connected to a few devoted qual- process by which the products of the ity experts and world events occurring No longer was quality perceived as an business were made. Dr. Deming, in more than 70 years ago. expendable portion of the production his characteristically blunt style, acer- process, largely ignored. During this After World War II the United States bically denigrating management, most period, Deming videos and seminars (U.S.) was the predominant industri- likely would have said it this way, “How were commonplace. Every industry al nation in the world. The U.S. pro- can you improve if you don’t know was determined to improve their oper- duced. The world consumed. The what you are doing?” ation and business practices using the quality of the U.S. products was of lit- methods and practices of Dr. Deming. Other extremely notable influences to tle concern; they would sell regard- With pervasive emphasis, the meth- the quality revolution in the U.S. came less. This economic position was held ods of statistical process control and from Joseph Juran and Philip Crosby. until about 1970 after which the mar- continuous improvement were taught Juran focused on the education and ket for U.S. products declined. to managers and workers alike. For training of management and the hu- Beginning with the post war recon- man relations problem of resistance to those of you who are old enough to 2 struction, Japan’s business leaders have experienced that quality training, change. The “Pareto principle,” was learned and adopted manufactur- I am certain you will recall vividly the introduced to the vocabulary of qual- ing practices the U.S. utilized during ity due to the work of Juran. Philip “Red Bead” experiment, which opened 3 and prior to the WWII. Most notably, our eyes and minds to the concept of Crosby’s book, Quality is Free , made, the Japanese were taught the meth- natural variation. If you have never unequivocally, the business case for ods of quality by W. Edwards Deming. heard of the experiment, I highly rec- quality and the improvements it of- As Deming had prophesied to Japan’s ommend doing a bit of research; it will fered. Succinctly stated, the invest- leaders, economic growth came from be well worth your time. ment and implementation of a good their dedicated use of the techniques quality system will pay for itself many Along with the increased focus on times over. Crosby also put forth the quality came Deming’s idea of “pro-

1 Originally published in PM World Today on-line journal (December 2010). 2 Pareto principle: eighty percent of the problems come from twenty percent of the causes. 3 Crosby, Philip B. Quality is Free, Penguin Books, New York 1979.

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Quality Management Maturity Grid, Possibly the most recognized con- best practices, a growing percentage which represents the characteristics of tribution of the SEI to improving the of projects should complete with good the quality system using five evolution- software development process and quality, on time and within budget. ary stages: (1) uncertainty, (2) awak- product quality was the creation of the ® ® Both the SEI and PMI have the same ening, (3) enlightenment, (4) wisdom, Capability Maturity Model (CMM ). objective of institutionalizing quality and (5) certainty. By utilizing the grid, Through Watts Humphrey’s initial work6, ® in organization, process, and prod- businesses have a template for under- the CMM evolved from the adapta- uct. However, in comparing the two standing and improving their quality tion of Crosby’s Quality Management approaches it is observed that an or- system. Maturity Grid to a staged improvement ® 7 ganization utilizing the PMI method approach for software development. would likely be rated, at best, as ma- Quality Culture ® The CMM is characterized by five turity level 3 (defined) of the five lev- The startling success of Japanese levels of process maturity: (1) initial, els defined for the CMM®. The CMM® business, coupled to the loss of mar- (2) managed, (3) defined, (4) quanti- makes a distinction between desirable ket share along with project failures in tatively managed, and (5) optimizing. characteristics for projects and orga- the U.S., created the impetus for dra- ® The CMM provided software organizations, whereas it is not so clear in matic change. The terminology de- nizations a template for improvement the PMBOK®. Depending upon how scribing this abrupt departure from that could be objectively assessed. organizations approach using the present business practice and culture Evidence supports the assertion that PMBOK®, there may not be compa- is “paradigm shift.” These words have software projects performed by organi- ny policy for managing its projects. If become commonplace and are integral zations attaining maturity levels 4 and management methodology is inconsis- to the jargon of those involved in pro- 5 are significantly more likely to de- tent and not tailored to the application cess and quality improvement today. liver products that satisfy the require- 8 from the standard for the organization, Out of the desperate desire to im- ments of the customer. Although the the best the company could be rated is prove and the recognition of quality as SEI focused its efforts toward military CMM® level 2 (managed). the pathway came the creation of the software, primarily U.S. Air Force sys- ® 9 The more significant difference is Software Engineering Institute (SEI) in tems, the CMM came to be used the aspiration for each of the two ap- 1984 and the firstProject Management extensively by commercial software proaches. The CMM® seeks con- Body of Knowledge (PMBOK® Guide)4 companies, as well. tinuous improvement, whereas the in 1987. To heighten the emphasis ® The PMBOK , now in its fourth edi- PMBOK® with the PMP certification is for embracing the culture of quality, 10 tion , is the recognized embodiment limited to the improvement offered by the U.S. government in 1987 created of the knowledge and practice of proj- standardization. The CMM® approach the national award for performance ect management. Professional project at level 4 seeks evidence of manage- excellence, the Malcolm Baldridge management is presented as activi- ment’s use of data for project control National Quality Award. 5 The award 11 ties for nine knowledge areas occur- and process improvement. Also, this was intended to incentivize and rec- 12 ring over the five life-phases of the maturity level requires a quality sys- ognize U.S. business for achieving project process. The quality improve- tem that prevents defects from propa- world-class quality. To receive the ment view of the Project Management gating through the process. At level 5, award a company must show excel- ® Institute (PMI ) is that by standard- the application of Statistical Process lence in seven areas of performance: ® izing the methods in the PMBOK Control (SPC)13 is utilized to under- (1) leadership, (2) strategic planning, and certifying managers through the stand process changes intended to (3) customer focus, (4) measurement, Project Management Professional reduce the natural variation in the or- analysis, and knowledge manage- (PMP) examination, improvement in ganization’s processes. Achievement ment, (5) workforce focus, (6) process project results can be expected. That of levels 4 and 5 leads to the appli- management, and (7) demonstrable is, by increasing the number of proj- cation and the long term benefits of results. ect managers knowledgeable of the knowledge management.14

4 For brevity, PMBOK® Guide is shortened to PMBOK® hereafter. 5 The Malcolm Baldridge Award has its basis in the The Malcolm Baldridge National Quality Improvement Act of 1987. 6 Humphrey, Watts S. Managing the Software Process, Addison-Wesley, New York 1989. 7 Paulk, Mark C., Weber, Curtis, Chrissis. The Capability Maturity Model: Guidelines for Improving the Software Process, Addison-Wesley, Boston 1995. 8 Goldenson, Dennis R., Gibson, Ferguson. “Evidence About the Benefits of CMMI,” SEPG 2004 (http://www.sei.cmu.edu/library/assets/evidence.pdf). 9 Although the CMM® has evolved to the CMMI, only the former is referenced for the purpose of this paper. 10 ANSI/PMI 99-001-2008, A Guide to the Project Management Body of Knowledge, PMI, Newtown Square, PA 2008. 11 Knowledge areas: integration, scope, time, cost, quality, human resource, risk, procurement. 12 Project phases: initiation, planning, executing, monitoring & controlling, closing. 13 Pitt, Hy. SPC for the Rest of Us, Addison-Wesley, Reading, MA 1994.

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The PMBOK® mentions the use of having an understanding of whether or trol, quality control, and risk monitoring data and measures for performance not best practices are used, how can and control. reports and has a brief discussion of success or failure of a project be eval- From the viewpoint that execution uti- Earned Value Management (EVM) uated? How can the organization im- lizes the most project resources over as a method for project control.15 prove its methods and policy, thereby ® the longest phase of the project, it Furthermore, the PMBOK alludes to providing an environment where proj- would seem appropriate that the meth- having and using project performance ects are delivered successfully, waste ods and tools for these important con- data and quality measures, but there is reduced, and business flourishes? trol processes would be discussed in is little verbiage compelling a project The methodology intended to fill this detail. Although Measure is an impor- manager or his/her organization to be 16 void is the Organizational Project tant stage in the OPM3 approach to data driven. Without performance Management Maturity Model, more improvement, there is minimal guid- measures and indicators, manage- commonly termed “OPM3.” The proj- ance for what constitutes its success- ment decisions come solely from ex- ect management model for improve- ful achievement. OPM3 does describe perience and intuition. Doesn’t it make ment was issued initially in October the characteristics of measures, but to sense for managers to be as well in- 2003 and was later updated in progress and advance to the Control formed as possible concerning their December 2008 to align with the fourth and Continuously Improve stages project’s performance? And doesn’t it edition of the PMBOK®. OPM3 is a something more specific would be also seem reasonable that better in- best practice standard for assessing helpful. formed decisions increase the proba- and developing project management bility of a successful project outcome? capability. It is an approach for un- The Way Forward Similarly, making systemic improve- derstanding project management be- To emphasize the importance of mea- ment has little basis when measures havior and bringing focus to areas of sures, the quotations of Lord Kelvin and indicators are not ingrained in the performance needing improvement. are often used. One especially makes the point: organizational culture. How is it known OPM3 is meant to serve the field of an improvement is needed? And, af- project management in a similar man- “In physical science the first essen- ter a change is introduced, how can ner to the CMM® for software pro- tial step in the direction of learning management know if improvement is cess improvement. The improvement any subject is to find principles of achieved when there is no or scanty stages ascribed to OPM3 are (1) numerical reckoning and practica- evidence of how the present process Standardize, (2) Measure, (3) Control, ble methods for measuring some performs or the quality of its prod- and (4) Continuously Improve. The quality connected with it. I often ucts? Likewise, when measurement process characterization for each of say that when you can measure and analysis is not common practice, these four stages is very much the what you are speaking about, and there is low need for the application of same as those for the software model. express it in numbers, you know knowledge management for improving Initially, the organizational processes something about it; but when you project planning and understanding are standardized. Once standardiza- cannot measure it, when you can- long term process improvement and tion is in place, measurement of the not express it in numbers, your performance drift. process can proceed. Having mea- knowledge is of a meager and un- satisfactory kind; it may be the be- Improving the Practice sures in place, controlling and subsequently improving the process become ginning of knowledge, but you have The message to this point should be possible. The OPM3 project domain scarcely in your thoughts advanced obvious: the PMBOK® establishes a framework identifies nine process ar- to the state of Science, whatever standard for good practice, but does 18 eas that show correspondence be- the matter may be.” not promote a culture of continuous tween PMBOK® processes and OPM3 improvement. Unlike the CMM®, there Although Lord Kelvin is addressing his best practices.17 Of the forty four is no assessment to see if the best comments toward the hard sciences, PMBOK® processes within the nine ar- practices of the PMBOK® are imple- such as physics and chemistry, his eas, only four directly relate to project mented and performed well. Without point is equally applicable to project execution: schedule control, cost con- management. When a project manag-

14 Knowledge management is the deliberate effort of an enterprise to gather, organize, refine, and disseminate knowledge, tacit and explicit, concerning its practices, processes and products for the purposes of retention and transference. 15 Reference PMBOK 7.3.2 (Control Costs: Tools and Techniques). 16 Reference PMBOK 4.4.1.2 (Performance Reports), 10.5.3 (Report Performance: Outputs). 17 Northrop, J. Alan. Every Organization Can Implement OPM3, Triple Constraint Inc., Marion, IA 2007. 18 Lord Kelvin quote is from http://zapatopi.net/kelvin/quotes/, October 2010.

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er does not have objective measures provide the quantitative measures and implement. When this is the per- of performance for cost and schedule, to advance project management to ception, the likelihood of employing he/she cannot react intelligently and, the level of science. It is supported EVM is very low. It is contended that consequently, has little chance of guid- by standards19, 20, textbooks21, an im- this attitude persists and is prevalent ing the project to successful comple- provement model22, training23, certifi- within the project management com- tion. Under these circumstances, the cations for both individuals24, as well munity today. 25 manager has only his/her personal as organizations , and automation ap- This negative reputation for EVM, knowledge and intuition as a basis for plications are readily available from 26 however, is not the present circum- action. several vendors . As all of the foot- stance, at all. As expressed earlier, As discussed earlier, EVM is men- notes associated with the previous there is considerable support avail- tioned only briefly in the PMBOK® as sentence attest, EVM is a well devel- able. EVM can be implemented a “Tool and Technique” for control- oped technology with considerable and applied without undue difficulty. ling cost and schedule performance. infrastructure. EVM, in fact, is approx- Possibly the most troublesome hurdle imately twenty years older than the Furthermore, OPM3 identifies the ® to implementation is the reporting of performance measures and indica- PMBOK and possibly more mature in earned value; i.e., assessment of proj- tors from EVM as merely an approach its application. ect accomplishment. Disciplined re- to be considered for satisfying the The known capability and availabil- porting is a difficult transition to make Measure stage of project management ity of the management method lead for most, people and organizations, improvement. Unquestionably, the us to the question, “Why isn’t the use as well. However, once reporting be- power and usefulness of the earned of EVM more prevalent?” The rea- comes a commonplace expectation, value methodology has not been ex- sons cannot be stated with certainty, an environment of transparency and ploited to the degree it should be. but the following is offered as a ratio- accountability is created for every- Therefore, it becomes arguable that nal summation for consideration. In one involved. Both characteristics are the lack of emphasis from these two its beginnings, EVM was imposed on most assuredly desirable outcomes. principal documents, regarding EVM, defense contractors performing de- Certainly there are more implementa- has slowed the advancement of the velopment of major weapon systems. tion hurdles, but generally, these per- project management profession to the In the late 1960s and throughout the tain to the need or desire for having a “state of Science.” 1970s, the creation of custom EVM sophisticated, or even a certified EVM When the performance of a project is systems for each application was not system. known in qualitative terms, we can say a simple matter. The computing capa- Of significant importance is the real- we know something about it. However, bility to connect time accounting, the ization that the elements prescribed in general, the qualitative description project schedule, earned value (work by the PMBOK® to prepare the proj- is not enough information for analysis accomplished), and actual costs was ect for execution are the necessary and management action. Only when expensive to develop. EVM was in its ingredients for applying EVM; i.e., performance is described by objective infancy, as was the necessary comput- Work Breakdown Structure, estimates measures can project managers truly ing technology to make its use prac- of task cost and duration, task se- gain deeper understanding and formu- ticable. The early EVM systems were quencing, and creation of the sched- late reasoned tactics for improving the very likely cumbersome to use and not ule. The additional step of aggregating opportunity for success. that accurate either. All of these things the information into the Performance created the prevailing reputation that Measurement Baseline (PMB)27 cre- EVM is more than 40 years old; a well EVM is terribly complex, difficult to do, defined project management meth- ates the necessary reference for EVM overly burdensome to employees and performance analysis. The key point odology, which has the capability to managers, and expensive to create

19 Earned Value Management Systems, ANSI/EIA 748-B, Arlington, VA June 2007. 20 Practice Standard for Earned Value Management, PMI, Newtown Square, PA 2005. 21 Several text books are available. One I highly recommend is Project Management Using Earned Value, Humphreys & Associates, Inc., Orange, CA 2002. 22 Stratton, Ray W. The Earned Value Management Maturity Model, Management Concepts, Vienna, VA 2006. 23 Very good training is readily available. The following sources are well respected: Humphreys & Associates, Performance Management Associates, and Management Technologies. A good analysis course is available from Project Management Training Institute. 24 For individuals, the certification process to obtain the credential of Earned alueV Professional® is administered by the Association for the Advancement of Cost Engineering International. 25 For organizations, The Defense Contracts Management Agency certifies compliance to the requirements of the ANSI/EIA 748-B standard. 26 A few sources for EVM tools are: Deltek, Dekker, Primavera, Artemis, ProTrack, ProjectFlightDeck, EVEngine, and Microsoft Project. 27 The PMB is the time phased budget plan used as the reference for project performance analysis.

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from this discussion is that, when the mance is poor, ES used with EVM Summary accepted project management guid- gives project managers the ability to Quality in the 1980s became the ance is utilized, taking the next step develop tactics for recovery. It should driving force for product and pro- to employ EVM is not an overwhelm- be clear from this discussion that the cess improvement. The approach for ing undertaking. Conversely, when numerical methods inherent with EVM achieving quality is derived from the employing EVM is the organization’s and ES provide the ingredients to pro- initial work of Walter Shewhart, with standard method of project control pel project management to the “state subsequent evolutions contributed by and reporting, it encourages and rein- of Science.” Deming, Juran, and Crosby. Building ® forces PMBOK guidance and OPM3 Beyond the application to monitoring on the significant work of these men, best practice. Also, once implement- and controlling the project in its exe- Humphrey and the SEI formalized the ed, EVM greatly facilitates improve- cution phase, the numerical data con- quality system for organizational ap- ment to project management practice, tribute to creating a project archive. plication to software development. and thereby promotes achievement of The execution history, aggregated Subsequently, PMI adapted the ideas the higher levels of OPM3: Measure, with other project documents, form a and concepts from the SEI to project Control, and Continuous Improvement. complete project record. The assem- management. EVM has a primary focus on the cost bly of formalized project records fur- The embodiment of quality for project aspect of projects, but does have in- ther promotes making the data useful management is the collection of best dicators for assessing schedule perfor the planning of new projects and practices included in the PMBOK®, formance. However, these schedule for analysis of improvement initiatives. while the methodology for improve- indicators are limited in usefulness As a natural consequence, without ment of the practice is contained in due to their flawed behavior for late emphasis, the organization will gravi- OPM3. The observation is made that performing projects. To overcome this tate to the employment of knowledge EVM and ES are not sufficiently em- deficiency, Earned Schedule (ES) was management. phasized by the two PMI documents. 28 created in 2003. ES extends EVM Through the use of EVM with ES, the Implementing EVM and ES is encour- and provides reliable analysis of the aged and shown to reinforce good 29 argument is made that project perfor- schedule performance. mance will improve as well as the or- practice and support quality. The stat- Together, EVM and ES provide in- ganizational practice. The numerical ed expectation from the application of credible capability for measuring and evidence of performance with the ac- EVM along with ES is improvement in analyzing project performance. With companying analysis capability, as a project performance, while advancing the employment of EVM project man- result of their application, provides pri- and maturing organizational behavior. agers can assess present cost per- mary input to the achievement of the The proposition is made that the ap- formance status, forecast final cost, higher levels of OPM3. Performance plication of the system of measures and determine performance neces- measures are available for stage 2 and analysis methods from EVM and sary to meet the cost objective. In an (Measure). Analysis of the measures ES advances project management to analogous manner, the application and derived indicators yield methods the “state of Science.” And ultimate- of ES provides the ability to perform of project control necessary to achieve ly, achieving this state leads to knowl- schedule analysis; i.e., report status, stage 3 (Control), and the applica- edge management and continuous forecast completion, and determine tion of knowledge management facili- improvement. the future performance required to tates the accomplishment of stage 4, About the Author achieve the desired completion date. Continuous Improvement. Walt Lipke re- Additionally, ES introduces a new con- A quantum advance for project man- tired in 2005 as cept, schedule adherence. The mea- agement is readily available through deputy chief of the sure of schedule adherence increases the implementation of EVM and its ES Software Division understanding of how the project is extension. at Tinker Air Force being performed. The concept yields Base. He has the ability to analyze critical path per- over 35 years of formance, identify constraints, impedi- experience in the ments, and potential areas of rework. development, maintenance, and man- Furthermore, when project perfor- agement of software for automated testing of avionics. During his tenure,

28 Lipke, Walt. “Schedule Is Different,” The Measurable News, March 2003, 10–15. 29 Lipke, Walter H. Earned Schedule, Lulu Publishing, Raleigh, NC 2009.

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the division achieved several software of the technique Earned Schedule, During 2007 Mr. Lipke received the process improvement milestones, in- which extracts schedule information PMI® Metrics Specific Interest Group cluding the coveted SEI/IEEE award from earned value data. Mr. Lipke is a Scholar Award. Also in 2007, he re- for Software Process Achievement. graduate of the USA DoD course for ceived the PMI® Eric Jenett Award for Mr. Lipke has published several ar- Program Managers. He is a profes- Project Management Excellence for ticles and presented at conferenc- sional engineer with a master’s de- his leadership role and contribution to es, internationally, on the benefits of gree in physics, and is a member of project management resulting from his software process improvement and the physics honor society, Sigma Pi creation of the Earned Schedule meth- the application of earned value man- Sigma (SPS). Lipke achieved distin- od. Mr. Lipke was recently selected for agement and statistical methods to guished academic honors with the the 2010 Who’s Who in the World. software projects. He is the creator selection to Phi Kappa Phi (FKF).

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