1 00:00:00,05 --> 00:00:02,04 - [Presenter] So let's talk about earned value management. 2 00:00:02,04 --> 00:00:04,04 Now, some of this you've actually seen 3 00:00:04,04 --> 00:00:06,00 already used in the course, 4 00:00:06,00 --> 00:00:08,04 but I want to provide a little bit more focus here 5 00:00:08,04 --> 00:00:12,00 because EVM is a very important concept 6 00:00:12,00 --> 00:00:13,05 in project management, 7 00:00:13,05 --> 00:00:16,08 and it helps us understand how we're performing 8 00:00:16,08 --> 00:00:18,00 in an objective way, 9 00:00:18,00 --> 00:00:20,09 so it gives us some data to evaluate our performance. 10 00:00:20,09 --> 00:00:24,09 And the other thing is that it integrates various risks 11 00:00:24,09 --> 00:00:26,02 into the metrics themselves. 12 00:00:26,02 --> 00:00:28,07 So it helps us understand the scope, the cost, 13 00:00:28,07 --> 00:00:31,01 and the schedule, and where we are with all of those things. 14 00:00:31,01 --> 00:00:33,09 And finally, it helps the people in your organization 15 00:00:33,09 --> 00:00:37,01 understand what the future of the project's going to be. 16 00:00:37,01 --> 00:00:38,03 So let's talk about three metrics. 17 00:00:38,03 --> 00:00:40,05 We've used them in some way already, 18 00:00:40,05 --> 00:00:41,08 and you're likely to come across them 19 00:00:41,08 --> 00:00:43,05 as you manage projects as well. 20 00:00:43,05 --> 00:00:45,09 Okay, so planned value is the total cost 21 00:00:45,09 --> 00:00:48,07 of the work planned to be completed. 22 00:00:48,07 --> 00:00:51,06 So that means that you take the amount budgeted 23 00:00:51,06 --> 00:00:53,05 and you proportion it out 24 00:00:53,05 --> 00:00:55,05 to the amount of time that's elapsed. 25 00:00:55,05 --> 00:00:58,02 So it's like if we were going to spend a certain amount, 26 00:00:58,02 --> 00:01:01,05 by this time, we should have already spent this amount. 27 00:01:01,05 --> 00:01:03,07 Now earned value is how much of the work 28 00:01:03,07 --> 00:01:05,07 you've actually completed to date 29 00:01:05,07 --> 00:01:09,00 against how much you planned to complete. 30 00:01:09,00 --> 00:01:10,06 And then finally, the actual cost 31 00:01:10,06 --> 00:01:12,02 represents the real expenses, 32 00:01:12,02 --> 00:01:13,05 the real costs that have incurred. 33 00:01:13,05 --> 00:01:15,05 So you may actually see these 34 00:01:15,05 --> 00:01:16,09 being used under different names, 35 00:01:16,09 --> 00:01:19,08 but know that all the calculations you want to know 36 00:01:19,08 --> 00:01:23,01 are going to tie back to these three metrics, 37 00:01:23,01 --> 00:01:24,07 at least in this course. 38 00:01:24,07 --> 00:01:26,09 So some key performance indicators. 39 00:01:26,09 --> 00:01:28,06 Again, we've already done schedule performance 40 00:01:28,06 --> 00:01:29,07 and cost performance index, 41 00:01:29,07 --> 00:01:32,03 but let's talk about schedule variance and cost variance 42 00:01:32,03 --> 00:01:33,05 'cause they're also important. 43 00:01:33,05 --> 00:01:36,04 So schedule variance is really easy. 44 00:01:36,04 --> 00:01:39,09 It's just the earned value minus the plan value. 45 00:01:39,09 --> 00:01:42,02 If it's positive, we know we're ahead of schedule. 46 00:01:42,02 --> 00:01:45,05 If it's negative, we know we are on a delay. 47 00:01:45,05 --> 00:01:49,06 Now cost variance is going to be the expected value 48 00:01:49,06 --> 00:01:52,01 less the actual cost. 49 00:01:52,01 --> 00:01:55,05 So again, if the resulting calculation is positive, 50 00:01:55,05 --> 00:01:57,03 then we are good, we're under budget. 51 00:01:57,03 --> 00:01:58,08 If it's negative, we are over. 52 00:01:58,08 --> 00:02:00,04 And just as a reminder, 53 00:02:00,04 --> 00:02:04,00 scheduled performance index is going to be EV divided by PV. 54 00:02:04,00 --> 00:02:06,00 So earned value divided by plan value. 55 00:02:06,00 --> 00:02:07,05 Greater than one is good. 56 00:02:07,05 --> 00:02:09,00 Less than one is bad. 57 00:02:09,00 --> 00:02:12,01 And cost performance index is going to be EV, 58 00:02:12,01 --> 00:02:14,02 so earned value divided by actual cost. 59 00:02:14,02 --> 00:02:16,00 Greater than one is good. 60 00:02:16,00 --> 00:02:18,02 Less than one is bad. 61 00:02:18,02 --> 00:02:19,07 All right, so now that we know the metrics 62 00:02:19,07 --> 00:02:21,03 that are important to earn value management, 63 00:02:21,03 --> 00:02:25,00 let's talk about how to build an EVM calculator in Excel.