Earned Value Management and its Significance

Earned Value Management (EVM) is a technique used for measuring and controlling project performance which is used by project managers to monitor the progress of the projects and also to predict the final outcomes of the project. Earned Value Management is obtained by measuring the actual work completed against the planned work. In Earned Value Management few parameters such as Planned Value (PV), Actual Cost (AC), and Earned Value (EV) are considered for measurement of the project performance.

Planned Value is the budgeted cost of the work that was planned to be completed, Actual Cost is the actual cost of the work that has been completed and Earned Value is the value earned from the work that has been completed. Earned Value Management acts as a tool that helps project managers track the progress of their projects in real-time providing an accurate understanding of the project’s status and helping the project manager to identify any deviations from the plan. Using this information, the project managers are able to take informed and well-educated decisions for the project and take corrective action accordingly.

What Are the Steps Involved in Earned Value Management?

Earned Value Management involves the following steps −

  • Develop a Project Plan −The first step in EVM is to develop a project plan including the scope of the project, a work breakdown structure (WBS), a schedule, and a budget that sets the tone for the rest of the project.

  • Establish the Baseline − Once a developed project plan is achieved, the project manager focuses on the establishment of the project baseline including the Planned Value (PV), Actual Cost (AC), and Earned Value (EV) for the project.

  • Track Actual Progress − By measuring the Actual Cost (AC) and comparing it to the Planned Value (PV), the project manager tracks the actual progress of the project.

  • Calculate Earned Value (EV) − By measuring the value of the work completed at a certain date, the project manager calculates the Earned Value (EV).

  • Analyze the Data − In order to estimate the project's cost and schedule variances, data such as Planned Value, Actual Cost, and Earned Value are analyzed by the project stage.

  • Take Corrective Action − In this stage, any outliers outside the acceptable range or bottlenecks are identified following which the manager takes corrective action to bring the project back on track.

  • Predict Final Outcome − The data regarding Earned Value including the estimated cost at completion (EAC) and the estimated completion date (ECD) is used by the project manager to predict the final outcome of the project.

  • Monitor Progress − Finally, using the Earned Value Management metrics, the project manager continues to monitor the project's progress and adjusts the project plan wherever required to ensure the success of the project.

What Are the Advantages of Earned Value Management?

The primary and significant benefit of Earned Value Management is the provision to predict the final outcome of the project by utilizing comparing the actual progress of the project to the planned progress which is used to calculate the cost and schedule variances. By monitoring these matrices, any potential problem can be identified early on which allows the project manager to take corrective action before the problem becomes critical.

The metrics used in Earned Value Management are standardized and provide a common framework for communication among team members, project managers, and stakeholders hence it can be said that EVM provides a significant advantage of a common language for communication among stakeholders. Such a model helps in reducing and potentially preventing confusion and misunderstandings and improves communication, this leads to better collaboration and decision-making.

Earned Value Management is also used in identifying the critical path of the project and this is done by utilizing the analysis of Earned Value data. Project managers are thus able to identify the activities that have the most significant impact on the project’s schedule and cost and prioritize resources and ensure that critical activities are completed on time. Thus Earned Value Management is used to improve project performance by tracking the progress of the project in real-time. Project managers can identify areas of the project that are underperforming and take corrective action such as adding additional resources, changing the project plan, or revising the schedule.

What Are the Common Mistakes in Earned Value Management?

Mistakes made in Earned Value Management will lead to inaccurate data and incorrect decisions. A few of the most common mistakes in EVM are as follows −

  • Not Establishing a Baseline − Not establishing a baseline at the beginning of the project can prove to be a harmful mistake as a baseline plays a vital role in measuring progress and calculating variances accurately.

  • Using Inaccurate Data − Any mistake in the accuracy of the data used such as cost or schedule, incompleteness of the data used, or use of data that is not up-to-date can lead to incorrect measurements and incorrect decisions.

  • Ignoring Variance Analysis − Underestimating the contribution of variance analysis is a mistake that can lead to incorrect conclusions about project performance.

  • Focusing Only on Earned Value − Solely relying on only one metric is one critical mistake a project manager could make as it can lead to a skewed understanding of project performance and can result in incorrect decisions.

  • Not Adjusting the Plan − Project managers should be open to change and be flexible to adjust the project plan when required but this should be done based on EVM data which helps project managers make informed decisions and adjust the plan more accurately.


By utilizing a technique as significant as Earned Value Management, project managers are able to measure and control project performance, view the real-time progress of the project, predict the final outcome of the project, identify the critical path of the project, improve project performance, establish the project baseline, calculate Earned Value, analyze the data, identify any deviations from the plan, take corrective actions, while facilitating a common language for communication among stakeholders. Earned Value Management thus provides the project managers with valuable insights and ensures project success and avoids costly mistakes.

Updated on: 21-Mar-2023


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