Showing posts with label Earned Value Management. Show all posts
Showing posts with label Earned Value Management. Show all posts

August 28, 2011

Can't Live With Them, Can't Live Without Them

I remember years ago, my father used to joke about my mother (who occasionally got on his nerves :-): "you can't live with them, and you can't live without them."

Following the frequently dismal state of IT project performance generally, I'm beginning to think that way about technology projects.

On one hand, technology represents innovation, automation, and the latest advances in engineering and science--and we cannot live without it--it is our future!

On the other hand, the continuing poor track record of IT project delivery is such that we cannot live with it--they are often highly risky and costly:
  • In 2009, the Standish Group reported that 68% of IT projects were failing or seriously challenged--over schedule, behind budget, and not meeting customer requirements.

  • Most recently, according to Harvard Business Review (September 2011), IT projects are again highlighted as "riskier than you think." Despite efforts to rein in IT projects, "New research shows surprisingly high numbers of out-of-control tech projects--ones that can sink entire companies and careers."

  • Numerous high profile companies with such deeply problematic IT projects are mentioned, including: Levi Strauss, Hershey's, Kmart, Airbus, and more.

  • The study found that "Fully one in six of the projects we studied [1,471 were examined] was a black swan, with a cost overrun of 200% on average, and a schedule overrun of almost 70%."

  • In other words there is a "fat tail" to IT project failure. "It's not that they're particularly prone to high cost overruns on average...[rather] an unusually large proportion of them incur massive overages--that is, there are a disproportionate number of black swans."

  • Unfortunately, as the authors state: "these numbers seems comfortably improbable, but...they apply with uncomfortable frequency."
In recent years, the discipline of project management and the technique of earned value management have been in vogue to better manage and control runaway IT projects.
At the federal government level, implementation of such tools as the Federal IT Dashboard for transparency and TechStats for ensuring accountability have course-corrected or terminated more than $3 billion in underperforming IT projects.
Technology projects, as R&D endeavors, come with inherent risk. Yet even if the technical aspect is successful, the human factors are likely to get in the way. In fact, they may be the ultimate IT "project killers"--organizational politics, technology adoption, change management, knowledge management, etc.
Going forward, I see the solution as two-pronged:
  • On the one hand we must focus on enhancing pure project management, performance measurement, architecture and governance, and so on.

  • At the same time, we also need to add more emphasis on people (our human capital)--ensuring that everyone is fully trained, motivated, empowered and has ownership. This is challenging considering that our people are very much at a breaking point with all the work-related stress they are facing.
These days organizations face numerous challenges that can be daunting. These range from the rapid pace of change, the cutthroat global competition at our doorsteps, a failing education system, spiraling high unemployment, and mounting deficits. All can be helped through technology, but for this to happen we must have the project management infrastructure and the human factors in place to make it work.

If our technology is to bring us the next great breakthrough, we must help our people to deliver it collaboratively.

The pressure is on--we can't live with it and we cannot live without it. IT project failures are a people problem as much as a technology problem. However, once we confront it as such, I believe that we can expect the metrics on failed IT projects to change significantly to success.

(Source Photo: here)


September 12, 2010

Earned Value Management - Made Easy

Some exceptional Earned Value Management (EVM) instructional videos. These are great whether you are studying for your Project Management Professional (PMP) exam or wanting to apply EVM to your projects at work:

  • Part I: Basic Concepts

  • Part II: Calculating Variances and Indexes

  • Part III: Forecasting Completion


November 30, 2009

Leadership: Fight or Flight

When we are confronted with difficult situations, people tend to two different responses: fight or flight.

Generally, people will stand and fight when they are either cornered and have no other option, when they will suffer undue harm if they just try and “let it go”, or when the issue is something that they really believe strongly in (like a principle or value such as equity, justice, righteousness, etc. that they feel is being violated).

In contrast, people typically will flee when they feel that they can get out of a bad situation mostly unscathed and their principles will not be violated (such that they can live with their personal and professional dignity intact). Often, people consider fleeing or a change of venue preferable to “getting into it” when it’s possible to avoid the problems that more direct confrontation can bring.

There is also a third option not typically addressed and that is just “taking it,” and letting it pass. In the martial arts, this is akin to taking someone’s best shot and just absorbing it—and you’re still standing. You go with the flow and let it go. This is sometimes feasible as a less dramatic response and one that produces perhaps less severe consequences (i.e. you avoid a fight and you still yield no ground).

Harvard Business Review (December 2009) in an article called “How to Pick a Good Fight” provides some guidelines on when as a professional you should consider standing up and fighting, as follows:

  1. “Make it Material”—Fight for something you really believe in, something that can create real value, noticeable and sustainable improvement.
  2. Focus on the Future”—Don’t dwell on the past or on things that cannot be changed. Spend most of your time “looking at the road ahead, not in the rearview mirror.”[This is actually the opposite of what 85% of leaders do, which is trying to figure out what went wrong and who to blame.”
  3. Pursue a Noble Purpose”—Make the fight about improving people’s lives or changing the world for the better.” I’d put it this way: stay away from selfish or egotistical fights, turf battles, empire building, and general mud slinging.

“The biggest predictor of poor company performance is complacency.” So leaders need to focus “the good fight” on what’s possible, what’s compelling, and what’s high impact. Great leaders shake things up when the fight is right and create an environment of continuous improvement. Leaders create the vision, inspire the troops, and together move the organization forward to greater and greater heights.

As for fleeing or “turning the other cheek” those venues are best left for issues of lesser consequence, for keeping the peace, or for times when you are simply better off taking up the good fight another day.


November 14, 2009

Delivering Obsolete and Broken IT Projects, No More

NextGov reported on 9 Nov 2009, that the Government Accountability Office (GAO) released a report that “forecasts $3 billion in cost overruns on 16 major projects.”

What’s so of baffling is that these overruns occurred despite the agency’s use of earned value management.

According to Dave Powner, director of IT management issues at GAO, “Every one of the agencies had major problems in determining earned value management…as a result the agencies were unable to accurately identify the progress contractors had made on IT projects.”

These finding are expected to drive the 2009 Information Technology Oversight and Waste Prevention Act to increase oversight of IT investments.

This bill calls for “a Web site to publish information on the status of federal IT investments, similar to the Federal IT Dashboard,” but with more accurate data and with explanations on why projects are over budget.

Certainly, the use of measurements and dashboards to display and track these are helpful in understanding how we are doing in managing our IT investments—so they are on schedule, within budget, and to customer specification.

Clearly, we can only begin to better manage that which we measure and track. Our IT investments and their execution are no longer a black box or so it’s supposed to work.

However, to make these metrics and dashboard effective to improve IT execution, there are a number of critical success factors:

  1. Transparency—This is a concept that is in common use these days, and we need to continue to put it in action. All IT investments need to be measured, not just the “major” ones, and their success and failures need to be visible. The purpose must not to scrutinize or shame project managers, but to be able to genuinely guide projects to successful conclusions. This is what the control phase of capital planning and investment control is all about. We need to course correct projects early and often, if necessary, before they are billions of dollars out of control.
  2. Honesty in Reporting—Projects need to be reported accurately—no gaming the system. If the facts are sugarcoated or whitewashed, then no dashboard in the world is going to catch the problems that are misreported to begin with. Unfortunately with project management, the elements of scope, schedule, and cost can be manipulated to make it seem as if a project is okay, when it isn’t. One example is de-scoping the project to enable a delivery on schedule and on cost, even though what’s being delivered is not what was asked for or agreed upon.
  3. Skills Enhancement—With better measurement of IT investments, we need to provide more training to our project managers. We can’t just expect perfection day 1. We need to work with people and grow them to be better project managers. We can do this with training, mentoring, coaching, and so on. Remember, it’s generally the people that make the IT project a success or failure, not the technology—so let’s invest in our people to make them better project managers.
  4. Accountability—We shouldn’t be looking to exact a pound of flesh for genuine human foibles—mistakes do happen. But at the same time, people must be held accountable for fraud, waste, and abuse. Sometimes, people get complacent and they need a reminder that there are real implications to an IT project’s success or failure—mission and people are depending on you to do your job, so you had better do it responsibly and to the best of your ability.
  5. Continuous Improvement—Ever since business school, I’ve always loved the Japanese management practice of Kaizen—continuous improvement. This concept is right on the mark with our IT investment and project execution. We are not going to magically put up a dashboard and whoola—better IT projects. It’s going to be a process, a transformation over time. We need to incrementally improve our IT project success rate through learning measurement, and best practices implementation. Of course, time is money, and we need to move quickly, but we do not want to artificially create the appearance of short-term performance improvement at the expense of genuine long-term success.

All the power to IT performance measurement and dashboarding, but with the absolute commitment to not only track and measure, but also grow and improve our customer results. It’s not a gotcha that we need, but a how can we help you succeed.


July 3, 2008

Earned Value Management and Enterprise Architecture

“Earned Value Management (EVM) is a project management technique used for measuring project progress in an objective manner. EVM combines measurements of technical performance (i.e., accomplishment of planned work), schedule performance (i.e., behind/ahead of schedule), and cost performance (i.e., under/over budget) within a single integrated methodology. When properly applied, EVM provides an early warning of performance problems.” (Wikipedia)

There is a terrific article on EVM called “If the Pharaoh Had Only Used An Earned Value System in Building the Pyramids,” by Lt. Col. William Neimann USAF (Ret.) Lt. Col. Neimann demonstrates very effectively how to use EVM (a scary topic to many) in a humorous scenario of ancient Egypt and the building of the pyramids.

The article starts as follows:

"The developer of the great pyramid of Egypt might be looked upon as the father of program management. He had one of the first programs in recorded history that required a great deal of integration and coordination (i.e. program management). He did not, however, have the relatively new concept of "earned value" to assist in the management of this ambitious program. An "earned value" concept is the heart of all defense contractor management information systems, which comply with DoD Instruction 5000.2 concerning the earned value management control system (EVMCS). But let's go back nearly 5,000 years to the construction of the pyramids to see if "earned value" would have been of any utility in managing that program.”

So what are the key measures in EVM for identifying cost and schedule variances?

(Positive is favorable, Negative is unfavorable)

  • Cost Variance (CV) = Budgeted Cost for Work Performed (BCWP) - Actual Cost for Work Performed (ACWP)

So, if the Pharaoh’s project manager budgeted 14 million shekels for the pyramid construction, but actual cost came in at 13 million shekel, then the project has a positive or favorable cost variance of 1 million shekels. The pyramids are under budget.

  • Schedule Variance (SV) = Budgeted Cost for Work Performed (BCWP) – Budgeted Cost for Work Scheduled (BCWS)

So, if Pharaoh’s project manager calculates that work performed was budgeted at $10 million shekels, but was scheduled to be 14 million shekels complete, then the project has a negative or unfavorable schedule variance of 4 million shekels. In other words, the pyramid builders have performed 4 million less work than planned. The pyramids are that behind schedule.

To calculate the overall project status at any given time:

  • % Schedule = (Budgeted Cost for Work Scheduled (BCWS)/Budget At Completion (BAC)) * 100
  • % Complete = (Budgeted Cost for Work Performed (BCWP)/Budget At Completion (BAC)) * 100
  • % Spent = (Actual Cost for Work Performed (ACWP)/Budget At Completion (BAC)) * 100

How efficient is the project?

Greater than 1 is favorable, less than 1 us unfavorable:

  • Cost efficiency = Budgeted Cost for Work Performed (BCWP)/Actual Cost for Work Performed (ACWP)
  • Schedule efficiency = Budgeted Cost for Work Performed (BCWP)/Budgeted Cost for Work Scheduled (BCWS)

(Adapted from Earned Value Management Gold Card, Defense Acquisition University)

There are a number of other measures, but you get the idea.

EVM is important to Enterprise Architecture, why?

Enterprise architecture planning and IT governance is all about making order out of chaos in managing IT. By setting strategic direction with the architecture and enforcing it with sound governance, we set the stage for more successful IT project delivery. EVM is a way to measure IT projects success in terms of cost, schedule, and performance. Through EVM, we can measure our IT projects to ensure that we are meeting our EA plan and making course corrections as necessary through the governance process.

EA, IT governance, and EVM are ways to ensure that we no longer manage IT by the “seat of our pants” approach (gut, intuition, politics, and subjective management whim). We now have tools to plan, govern, and measure transformation.