Research Paper on "Earned Value Management Project"

Research Paper 6 pages (1919 words) Sources: 5

[EXCERPT] . . . .

Earned Value Management

Project management is one of the most important activities that companies are involved in, and that require diversified skills from managers. The process of project management refers to the system used in planning, organizing, and managing companies' resources in order to reach certain goals and objectives. The purpose of project management is to increase effects while reducing the necessary resources.

There are numerous issues that must be taken into consideration when discussing project management. Such an issue is represented by earned value management. The activity of earned value management is a project management technique used in measuring the performance and progress of projects based on objective factors. This tool is preferred by numerous specialists in the field because of the advantages it provides.

The most important advantage of earned value management is represented by its ability of combining measurements of schedule, objectives, and costs and integrating them into a system that is simpler and easier to use and understand by the project team and its leader. In addition to this, earned value management can help project teams develop accurate estimations of different factors. These factors have great influence in determining a series of problems that can influence the performance of the project. Therefore, it is necessary to benefit from accurate estimations that can provide an image of different aspects that the project team must focus on.

The importance of earned value management also relies on its impact of the activities of planning and control. It has been observed that the application of earned value management techniques leads to improved efficiency of the project team during the planning step of the project. The planning if the project is one of the most important steps in project management that insure an increased level of performance. Therefore, it is important to focus on developing a proper planning process that is in accordance with the objectives, activity, and necessities of the project in case.

In addition to this, earned value management can be successfully used in the control process of different projects (Budd, 2010). The success of projects also relies on the control and evaluation performed by the project team. Therefore, it is important to increase the efficiency of the control process by using strategies based on earned value management. The increased efficiency of the control process also helps reduce the risks determined by numerous factors that can influence the project (Solanki, 2009).

The earned value analysis answers to project managers' questions regarding certain deviations from budget planning, scope, and schedule definitions. This method integrates the elements of planning and execution of the project's scope, cost parameters, and schedule. Earned value management is a demand that must be integrated within the project. For example, the client can be informed about the progress of the project by using the earned value analysis.

This process is usually applied to outsourcing projects. The reasons behind this situation rely on the reduced level of control that the company has on the project in such cases. By outsourcing certain projects, companies have difficulties in monitoring and controlling the progress of the project. This increases the risks associated with these projects. Therefore, in these situations, project managers use earned value management in order to inform their clients about the progress of the project.

Earned value management can also be considered a communication instrument within the project, but also towards the exterior of the project. This is because the method is a technical, impartial measurement tool that helps present the progress or plan deviations. In addition to this, earned value management is an important component of risk management.

In order to understand earned value management, it is important to describe the most important elements that this technique must take into consideration. Planned value is the value of the budget allocated for developing a planned activity, a work breakdown structure component, or of the entire project (Kerzner, 2009). Earned value represents the value of the work developed within the project expressed in the value of the budget associated with these elements, the components of the work breakdown structure. In other words, earned value represents the sum of budgets associated to activities in the work breakdown structure and implemented in a certain period of time.

The actual cost represents the sum of costs allocated to the implementation of certain activities in the work breakdown structure of the project. Therefore, the actual cost can be considered hours of work, or direct costs, or the sum of direct and indirect costs. The budget at completion represents the total costs of tasks or projects calculated on the plan basis. The estimate at completion represents an estimated value of total real costs. Earned value management also includes estimate to complete and variance at completion.

Project managers must also understand the fact that earned value management is differently applied in the case of small projects in comparison with large projects. This is because small projects have smaller budgets and their schedule is shorter. Therefore, project managers in this case must deal with a reduced number of activities. This can reduce the complexity of the project and the risks associated with developing it, but it can also influence a series of deviations from the plan.

Specialists in the field have identified the difficulties of using earned value management in small projects. It seems that this type of projects do not encourage the use of earned value management. This is because the reduced duration of the project makes it difficult to identify the costs of the activities involved in the project. Therefore, this is an important challenge of small projects that team managers must deal with.

However, this does not mean that project managers cannot use earned value management in the case of small problems. The difference is that this technique must be modified in order to be in accordance with the characteristics of smaller projects. There are several strategies that can be used in order to reach this objective. For example, it is recommended to develop simple structures in the case of small projects. These structures help project managers better allocate the resources that are required in order to reach the objectives of the project (Cleland & Ireland, 2007). In addition to this, it helps project managers to better monitor and control the progress of the project. As a result, the risks associated with the project are significantly reduced, while the efficiency of the project team can be increased.

Project managers of small projects can also develop simpler earned value management techniques. In order to increase the efficiency of this strategy, it is recommended to define mean values and big units of efforts. This objective can be reached by using standard measurement methods like the level of effort. This is intended to reduce the efforts required by project management.

The importance of earned value management must be discussed in order to better understand the benefits of this technique. Therefore, the importance of this technique relies on the objective measures of status against the costs, schedule, and objectives of the project provided by earned value management. This strategy is able to provide important information for companies involved in different projects. This information is mostly used in correctly analyzing the situation of the project, evaluate performance, and identify the risks that can affect the success of the project (PMIS Consulting, 2011).

Based on these facts, earned value management can be considered a fundamental tool that project managers must use. The importance of earned value management increases in the case of large projects. This is because such projects are characterized by more important risks. The success of these projects also depends on identifying these risks and their effect. The risks must be identified in time so that the team develops proper strategies that can be used in counteracting their effects, while the company allocates the required resources in these situations. This is one of the reasons for which the earned value strategy is recommended in the case of large projects.

There are several issues that must be taken into consideration when developing a strategy based on earned value management. This refers to the requirements determined by this strategy. It is recommended to define and properly communicate the earned value management requirements to customers in order to better establish the objectives that must be reached. In addition to this, it is recommended to correctly evaluate the merits of payment by earned value management. Other requirements also refer to establishing the most efficient data access and reporting requirements. The performance review process is another factor that must be taken into consideration.

In my opinion, earned value management is an important technique that project managers should use in developing the strategies of their projects. This is because the benefits provided by this technique must be included in the objectives that must be reached by most projects. However, it is important that companies understand the phenomenon of earned value management correctly. In other words, they must also take into consideration its… READ MORE

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