Posts Tagged ‘earned value’

Breaking the grip of a robust approach in complex situations can be done but it is challenging. This past week validation occurred while working with a Fortune 500 company.

Troubled Projects

We spent the week working on how to turn around troubled projects by assessing the degree of trouble and determining what to do to turn things around.

Using an approach independent of any one individual or personality, i.e., principle-based, they were shown how quickly an assessment can be done by looking for misapplication or complete absence of key principles, e.g., the nine areas of project management espoused by PMI. A strong emphasis was placed on earned value and its importance in forecasting the completion of a project along with the importance of risk management as the ability to do earned value decreases. This was repeatedly challenged and a very interesting discussion evolved over the week.

A huge, challenging project surfaced having to do with integrating a recent acquisition. The argument made against earned value went something like this (sing along if you know the words), “The situation is dynamic and moving quickly. Making a schedule will take too long. Let’s simply use a top-down approach and dictate end dates along with resource- and time constraints. It’s worked in the past, it should work now.”

Gathering Information, Change, and Grieving

A surprising drop in the resistance to moving from this top-down approach occurred when we moved into human dynamics. It had to do with information gathering and belief systems.

An essential part of quickly and accurately assessing a situation is making sure the right context is used for structuring a picture of the situation. In troubled situations if the right context is missing people feel unsure, pull back, and resist participating. The trouble increases. Empathy in terms of getting the context right is extremely critical.

The hanging on to the old method dropped and the “Aha!” occurred when showing the forms of resistance using a graphic adaption of the grieving cycle from Elizabeth Kubler-Ross’s seminal book, “On Death and Dying.”

A director in the PMO saw, and admitted to all present, that denial has been used with this acquisition. What was stated went something like this:

“I’ve been hanging on to the old methods (robustness) and been stuck at denial. It just won’t work. We have to shift to resilience. This includes educating leaders in the company.”

With this statement, an appreciative silence filled the room. You could have knocked me over with a feather! By shifting to resilience the odds of success for integration started increasing immediately.

Ironically, earned value is currently unachievable because the situation is truly complex. This means solutions will emerge from the bottom-up.

Earned value CAN be used but only after new project and process structures emerge (resilience) that permit getting their arms around the situation.

To repeat from the previous blog, this reads easy but does hard. However, it IS possible!

“How stable is the schedule?” is a question that came to mind when preparing to be interviewed by Carl Pritchard for Project Manager Today (based in the United Kingdom) regarding scheduling packages and the benefits and obstacles end-users experience.  (The path to complexity, chaos, and game theory began when introducing distributed project management systems via LANs and WANs.)

The deeper question is, “Can credible earned value calculations be performed?” Earned value is one of the most elegant concepts to come out of project management. The core comprises two simple equations:

Cost Variance = Earned Value (what’s installed) – Actual Cost (what was paid)

Schedule Variance = Earned Value (what’s installed) – Planned Value (what was supposed to be installed by end-of-day today)

So what role do chaos and complexity play when working with schedules? The answer is, “A large one.” Some background will help.

Schedule Stability, Chaos, and Complexity

One thing clients and students will always hear is:

All good schedules sit on a solid foundation the building blocks of which come from quality- and risk management.

Combining this with the earlier question, “Can credible earned value calculations be performed?” leads to an interesting approach for determining if earned value is possible. The approach determines where a project sits on a series of sliding scales. The rule governing the scales is: the more the project and environment are to the left the better the odds of creating a credible schedule. Here is a sampling of the scales:

  1. Closed scope — R&D project
  2. Formal project — Ad hoc, tactical approach with excessive number of workarounds
  3. Stable environment — Dancing terrain
  4. Sufficient resources — Insufficient, multitasking
  5. Risk neutral — shame-based environment with high level of fear and frustration
  6. Synergistic relationships — win-lose relationships
  7. Realistic expectations — greed
  8. Clear reporting — “spin” reporting
  9. High quality, defined acceptance test — disconnected wish-list

Earned Value versus Sunk Cost

With projects solidly to the left of each scale traditional project management tools can be applied. If one is lucky a definitive estimate can be created leaving everyone with a clear understanding how deliverables will be created along with the associated time and budget. Earned value can be calculated.

This begs, almost screams, another question, “What about projects that slide towards the right?” The more movement to the right, the greater the chaos, the more the project crumbles. A hard reality takes shape. Earned value is less and less viable and the team enters the world of sunk cost.

Sunk cost is making an investment without assurances the desired outcome will be reached. It is a gamble.

The inverse of the previous quote regarding good schedules becomes true.

As quality- and risk management suffer, uncertainty increases creating the potential for increased variances. The variances can eventually exceed the initial baseline.

The ability to forecast disappears and deciding what to do with the project becomes a crap shoot.

The point of all this?

Simple. Avoid confusing intention with reality. Wanting to do well and having the ability to do so are two different things. Pay attention to both the strategic components and the tactical nuts and bolts. Have a clear audit trail top-to-bottom and back up. The devil and success sit side-by-side in the details. To the extent you can neutralize the former and amplify the latter earned value can be realized.