The earned value reporting system is now the most commonly used method of performance measurement and project control. The reason for the popularity of this reporting system in project management is that it reports performance to cost and performance to schedule in one report. Schedule and cost are both measured in dollars. Where earned value reporting is not used, reports favor measuring performance to schedule or performance to budget.
In any reporting system the principle is to set some standard and then measure the actual performance to that standard, and report on the observed differences. In the earned value reporting system we use the planned budget and schedule and then measure the actual progress in the budget and schedule.
Frequently, the Gantt chart is used to show progress and performance to schedule, but this does not state the case clearly. If a scheduled activity is shown to be three days behind schedule, it is important to know if there is one person involved in this activity or if there are twenty.
In reporting cost, actual cost is frequently compared to budget cost to date. This does not show the full picture either. If a project is behind schedule, the actual cost could be tracking nicely to the expected budgeted expenditures, and the project could still be in a great deal of trouble.
Using the earned value reporting system the progress of the project in terms of cost is measured in dollars. The progress of the project in terms of schedule is also measured in dollars. This may sound confusing to people who are used to thinking of schedules in terms of days ahead or days behind. In fact, it is a more informational description of the condition of the project schedule. If a project activity is reported as being five days behind schedule, and there is one person working on the activity part time, it is very different than an activity that is behind five days that has twenty people working on it.
Obviously, what is needed is a reporting system that combines performance, schedule, and budget. This is the purpose of the earned value reporting system.
In any reporting system the principle is to set some standard and then measure the actual performance to that standard, and report on the observed differences. In the earned value reporting system we use the planned budget and schedule and then measure the actual progress in the budget and schedule.
Frequently, the Gantt chart is used to show progress and performance to schedule, but this does not state the case clearly. If a scheduled activity is shown to be three days behind schedule, it is important to know if there is one person involved in this activity or if there are twenty.
In reporting cost, actual cost is frequently compared to budget cost to date. This does not show the full picture either. If a project is behind schedule, the actual cost could be tracking nicely to the expected budgeted expenditures, and the project could still be in a great deal of trouble.
Using the earned value reporting system the progress of the project in terms of cost is measured in dollars. The progress of the project in terms of schedule is also measured in dollars. This may sound confusing to people who are used to thinking of schedules in terms of days ahead or days behind. In fact, it is a more informational description of the condition of the project schedule. If a project activity is reported as being five days behind schedule, and there is one person working on the activity part time, it is very different than an activity that is behind five days that has twenty people working on it.
Obviously, what is needed is a reporting system that combines performance, schedule, and budget. This is the purpose of the earned value reporting system.