How to calculate earned value
In project management, the ability to measure progress effectively is crucial for ensuring project success. One valuable tool used by many project managers is Earned Value Management (EVM), which provides a comprehensive snapshot of a project’s current status. A key component of EVM is calculating earned value (EV), which helps to determine the project’s performance and predict its future trajectory. This article will outline the steps on how to calculate earned value, offering insights into effective project management.
Understanding the Components of Earned Value Management
Before diving into calculating earned value, it’s important to familiarize yourself with the key components of EVM:
1. Planned Value (PV): The cost planned to be incurred on a specific task or activity up until a given point in time.
2. Actual Cost (AC): The money already spent on a task or activity up until a given point in time.
3. Earned Value (EV): The monetary equivalent of the work completed up until a given point in time.
Step-by-Step Guide to Calculating Earned Value
Step 1: Break down your project into tasks and activities
Begin by dividing your project into individual tasks or activities. Each task should be clearly defined, have an assigned budget, and an estimated duration to complete.
Step 2: Determine Planned Value (PV)
For each task or activity, calculate the planned value by multiplying its estimated duration by the assigned budget. Add up the planned values for all tasks or activities that were supposed to be completed at this point in time.
Step 3: Determine Actual Cost (AC)
For each task or activity, calculate the actual cost spent up until this point in time. Add up these values for all tasks or activities that started and might not yet be completed.
Step 4: Determine Percent Complete for Each Task
For each task or activity, calculate the percentage of work that has been completed. This can be done by comparing the actual work completed to the total work planned.
Step 5: Calculate Earned Value (EV)
For each task or activity, multiply the percent complete by its planned value. Add up these values for all tasks or activities to find the total earned value for the project at this point in time.
Calculating earned value is an essential component of effective project management as it delivers insights into a project’s current performance and can predict its future success. By using EVM and understanding how to calculate EV, you will be better equipped to make informed decisions, identify potential issues early on, and keep your project on track.