Project Management Basics

Just starting Steem and I thought I'd talk about something I know dearly.

I have interviewed many project managers and a common question I ask is "How do you know if your project is on budget and on schedule?" I am shocked with how many projects give a poor answer to this simple question. So, I'll give the answer here. Note that this answer is in line with what the Project Management Institute teaches.

The first concept to understand is earned value (EV). This is essentially your actual progress. Assume you have a project with 4 tasks. You estimated the first task as taking 10 hours. When that task is complete, you will have 10 hours of EV. If it actually took you 5 hours or 500 hours, you will still have 10 hours of EV.

Ok, so let's move onto the budget situation. With the example above, assume the task took 5 hours. Those hours will have a cost associated with them. To determine if you're on budget, simply divide the earned value (EV) by the actual cost (EV/AC). So assuming a rate of $100/hr, we'd have $1000/$500 yielding a value of 2.0. Anything less than 1.0 is underperforming and anything greater than 1.0 is providing more value than expected. Note that this does not take into account time. Those 5 hours could have been spread over 5 months putting you terribly behind schedule. No worries - we're talking about budget here.

Well, let's talk about schedule now. Continuing the example above, let's discuss the concept of Planned Value (PV). This is essentially how much earned value you expected to have at a given time. The Schedule Performance Index is the ration of Earned Value to Planned Value (EV/PV). Ahead of schedule would correspond to a SPI greater than 1.0 and behind schedule less than 1.0.

Well that's it for now. If there's sufficient interest I'll glad provide more information