We recently caught up with Amanda Babb from Præcipio Consulting to talk about Earned Value Management. Find out more about it in this podcast.
Thank you for tuning into Tempo’s podcast on Earned Value Management. In this episode, we have with us Amanda Babb from Praecipio to share her insights on this topic.
Optimizing the processes of industry-leading clients, Amanda combines strategic planning and implementation, process improvement, and has over 11 years of track record of translating an organization’s vision into operational goals.
Her work expertise includes multiple industries such as software, manufacturing, nuclear power, workweek management, aviation, and automotive.
A versatile and progressive professional with hands-on field experience to implement change initiatives, ensuring client goals and satisfaction, Amanda has a keen understanding of business priorities.
Recognized for consistent success in analyzing current-state processes and developing processes, as well as procedures to streamline operations and enhance revenue performance, Amanda delivers best-in-class Atlassian solutions.
Without further ado, let’s hear what Amanda has to say on earned value management, or in short, EVM.
Thank you for joining us all the way from Austin, Amanda. It’s a pleasure having you here to share your knowledge on Earned Value Management. So, There’s a saying, “If you can’t explain it to a 6-year-old, you don’t understand it yourself”. How would you explain EVM in a nutshell?
It’s an awesome question. Pretty much “Are you on time and on budget?” It’s the age old question of any project management framework that you’re trying to answer.
What’s your plan, what actually happened, and identify the variance. And in this case, that plan includes value-based milestones in your Work Breakdown Structure and helps you track toward providing return on investment to the business itself.
So essentially, it’s just yet another way for us to track projects and understand whether or not we’re on time and under budget.
How did you first learn about it and what made you decide that it was the best for you?
Before I started with Praecipio consulting, I was actually a management consultant and all of our projects were actually based on EVM. Which, of course, we didn’t call it EVM because we have to call everything a little bit different. So we call it becoming cashflow positive.
But in any event, what we would do is we would promise the client a specific return on investment and we would basically let them know at what point the project would become cashflow neutral, meaning having us on site was essentially the same as the efficiency gains that the client was realizing.
We would take a master schedule and determine the sort of the key milestone pieces and say “Okay. At this point, you’re going to be cashflow neutral” which is usually within about 6-8 weeks and then we’d start actually showing them that they were starting to actually save money by having us on site because of the fact that they were spending less than they were gaining in terms of whether it was headcount reduction or throughput or those kind of things.
It was a lot of fun!
When is EVM best applicable?
So, this question gets asked a lot. Because everybody says EVM is very specific to one type of project management. But, really, what we look at is; any time an organization wants increased visibility, early warnings of possible project problems, and to be able to focus management’s attention on overspends or overruns, then that’s when you use Earned Value Management.
And so if you hear that. Really, ultimately, that’s pretty much any time you’re managing a project because what are all those things? Project managers and PMOs are there, really, truly, to demonstrate value back to the business. And if the value isn’t being provided, by some objective measure–like EVM, then it’s impossible for an organization to succeed.
So, again, do you want to know if your projects are going off rails almost immediately? Yes. Then, that’s Earned Value Management.
Okay, that sounds simple enough. What are your own experiences with EVM?
As I mentioned before, I was a management consultant and we worked our projects through EVM. But what’s more fun now for me is actually working with clients who are managing projects with Earned Value Management.
Anybody who knows me or listens to me on a panel or interview or anything like that before knows I absolutely abhor spreadsheets and I really think that’s actually a four-letter word. It’s just I don’t like spreadsheets.
When I left management consulting and eventually joined Praecipio Consulting, I was lucky enough to be introduced to Folio at that time which then eventually became Tempo Folio which is now Tempo Budgets. It was like “Oh my gosh, I was so excited!”
It was like an awakening to me because instead of having to work with this awkward spreadsheet and all that stuff, basically you just lay Budgets on top of JIRA and you were able to manage a project with Earned Value Management with little to no fussing around. With spreadsheets, X-s and O-s saying that “Yes, this thing was completely of whatever”.
The JIRA issue goes into the ‘Done’ column and after that tells you that “Hey, by the way, this is completed and you’ve earned that value and you’re ahead of schedule and you’re behind budget which is fantastic!” or “You’re behind schedule and over budget which is horrible”.
So getting the opportunity to implement it with clients has been just a lot of fun. And is great to kind of align those PMOs, project management organizations with those project management or implementation teams while being able to reap the benefits of Earned Value Management.
That sounds good. They definitely complement each other really well. Could you probably share another example or a case from your own perspective?
Yea, sure. Absolutely. One of our clients is actually an extremely large medical supply company and they were looking specifically to implement Tempo Budgets and Tempo Planner to help their PMO and their IT organization align on projects. So their needs were pretty much the same or similar as most organizations that have that really robust PMO.
So, how much does it cost to implement a project? Are they going to be on time? All of that good stuff. Of course, what was the PMO was working in combination of Microsoft Project as well as Excel, it’s another four-letter word to me, and of course the IT organization. Where were they working? They were working in JIRA.
Ultimately, what the PMO wanted to do is to make a fundamental shift towards really understanding Plan, Actual, and Variance. And whether they were really providing value on time and on budget.
So that’s a similar situation where you say “Okay, we’ve completed 50 percent of the work, we’ve spent 50 percent of our budget or cashflow neutral, this is perfect, this is exactly where we needed to be” and that’s what they wanted to be able to tell and demonstrate back to their clients. Actually get reporting back to their clients.
There’s a little bit of tuning that needed to happen to JIRA but at the point in time when Tempo Budgets came in, they were finally able to really understand what their overall project cost were in additional to their project schedules and be able to understand relatively quickly if they were behind and why and start asking those questions just to see what exactly was causing them to be behind on a project delivery.
So, to sum it up a little bit, just to do a little recap. Could you just probably mention the main benefits of Earned Value Management and what sort of challenges does it address?
Simple statement. I think is even shorter than the first question’s answer which is how quickly do you want to know when a project is going off the rails? Do you want to know immediately? Or would you like to know a week or a month after the fact?
Yea, I think the answer is definitely immediately.
Exactly! Exactly, Serena. You want to know immediately. And Earned Value Management helps provide for you.
How does EVM help organizations understand the Return on Investment?
So when you’re looking at return on investment. Basically you’re saying, okay, we’re gonna take, let’s just say, make the number easy on me because sometimes Math and I, we don’t get along, We’re going to take a million dollars.
And if we spend this million dollars, we expect to get three million back. 3 to 1 ROI. Essentially, what we’re saying is, over this period of time that we’re going to spend this million dollars, we expect to get a cashflow neutral position at, maybe let’s say, over this year, maybe at month four, we expect to be getting two million dollars. At month eight, and then eventually we’ll get our three million dollars back on month twelve.
So, that’s what EVM does. It’s to say “Okay, at month four, at month eight and month twelve, this is where you’re going to start providing more value or getting more money back gaining efficiencies or throughputs or whatever those are in those milestones” than you would get if you just basically say “Okay, here’s the budget, here’s the timeline. Eh, we’re good”.
I hope that answered that question.
Yea, I think that answers it perfectly well. Could you elaborate more on ROI tracking with a project management definition?
Again, that return on investment example that I just used with that whole...if we’re going to spend a million dollars, we expect to get three million dollars back.
So, project management has your iron triangle–your scope, your timeline, and your resources.
With that million dollars, you have a million dollars with that timeline in that year, what are you going to do from a resource perspective. Are you going to make sure that from the schedule perspective, if you need to add resources to the project team, what is that going to do on your return on investment?
Does that essentially mean that instead of month four, you might actually end up at month six to realize cashflow neutrality? Or does that mean at month eight, that’s when you realize cashflow neutrality if you’re adding all these resources to this project because you can’t change your timeline, can’t change your budget?
So, then, essentially, if that at month eight you’re doing that, then you have four months to gain basically an additional two million dollars out of your project and is that even possible? Is that even feasible?
From a project management perspective, it allows you to get ahead of that iron triangle and see if the timeline is fixed, if cost is fixed, then what can we do with resources and what kind of impact is that going to have on that expected ROI ratio?
If we expected 3:1 and we end up having to resource up, does that mean that we’re only going to be at 2:1 or even just a cashflow neutral situation?
That sounds pretty thorough. Do you have any tips or tricks you’d like to share with project managers who are interested in implementing EVM or trying it out for the first time?
Yea, just go do it.
That’s a good one. That’s a really good one. And that’s how we learn. We learn by doing.
Exactly. I’ve worked with a lot of organizations that, over the years, end up in this paralysis by analysis situation.
What’s great about the Tempo products as a whole, is the fact that, of course you get an evaluation license for 30 days. If you have a sandbox instance that kind of maybe closely resembles production, go ahead, roll in Tempo Budgets as an evaluation to start.
Spend a day and go mess with it. Go see what happens with moving items through your workflow and how that uptakes your actual earning of value in an earned value management folio. Go look at what it takes to get staff in there. Go look at all the appliance cost for a particular project. Spend a day and do the data inputs and everything like that and see how it reacts.
Because as many times as I’ve worked with Earned Value Management or with the Tempo products itself, it took me actually implementing it internally (because by the way, we use all the Tempo products) to really understand how Earned Value Management works and why was it important from a Tempo Budgets and JIRA perspective.
And as soon as I got that, I was like “Wow, this is awesome! I don’t understand why more people aren’t doing this”.
This is the answer to everything.
Exactly. This like lightbulb moment for me. The heaven’s opened and the sun shone.
So, we have a question from Marta, who’s also currently here at the moment. Do you think time-tracking makes EVM more accurate?
In purest sense of the word, yes. In terms of the fact that folks basically say “Okay, I expected this thing was going to take 30 hours or 50 hours or 60 hours, and ultimately, the team ended up spending 40 hours on it”.
Because basically you’re saying “Okay, we ended up spending less time on it than we thought we would. Hey, that puts us ahead of plan in terms of the value that we’re earning because we’re able to finish it ahead of schedule”.
So, definitely, it makes it more accurate in that you’re going to get better data out of it. Did that answer that question, you think?
Yes, definitely. Is there anything else that you’d like our listeners to know about EVM?
About Earned Value Management specifically is...there’s anecdotes out in the project management world about how painful, how exquisitely painful, it is to actually really demonstrate and work with Earned Value Management in other products that are out there.
I’d mentioned an organization using Microsoft Project/Excel. I used that as a management consultant back in the day, all of these things kind of helped with the scheduling piece of it. But when it finally comes down to realizing dollars and cents, which is what most organizations are really looking at, the best thing that is out there that I have found so far has been Tempo Budgets working alongside and working well with very well implemented JIRA instance.
So, not that that’s a shameless plug for Tempo Budgets or anything. But it kind of is!
That is good to know!
And that’s a wrap! Thank you for tuning in. And huge thank you to Amanda once again, for sharing her expertise on earned value management. If you would like to know more about Earned value management, drop us a shout out in the comment section of this podcast.