Earned Value Management Systems Will Keep Us Out of Trouble…Don’t Count on It!
November 9th, 2004 by HalAre you a project executive? Consider the lead to this article, Is Project Management a Crime?, published yesterday:
Is poor project management a crime? The answer could be 'yes' now that the Sarbanes-Oxley Act makes senior executives criminally liable for misrepresenting financial information.
Pay attention. If the following is true then we all better get in action.
What can project-based organizations do to help ensure compliancy with the Sarbanes-Oxley Act? If they do not already have a properly defined internal process for project management, then — according to Section 404 — they will need to implement one.
So what are we to do? Of course the author is ready with a recommendation: adopt an Earned Value Management System (EVMS). Huh? She cites Boeing and BAE Systems as two companies that endorse EVMS as best practice.
I've read the article three times. I'm beginning to think that the author actually believes what she is saying. So let's put her advice in perspective. The vast majority of projects involve just a few people. That's right, just a few people working for a short time. The last thing any of those people need is a highly structured reporting system for managing their projects. For the bulk of the projects EVMS will just add time and expense to the project without improving project performance. On the other end, let's consider the large projects. EVMS is a system designed for authorizing payments from the customer to the performing organization based on a baselined project plan usually created 90 or more days ahead of time. Large projects need a steering mechanism that adjusts to unexpected conditions. I've not seen an EVMS that will do that.
I doubt EVMS will satisfy SOX. Companies need more than a formal approach. Project and company executives will sleep at night when they know their project teams are managing their projects in the midst of the uncertainty of today's world. No over-the-shoulder tool will help them do that. They need an approach and skills that produces a coherent set of commitments to satisfy the promise(s) to the customer.
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November 10th, 2004 at 4:20 am
I couldn’t help myself…
November 11th, 2004 at 3:12 pm
Hal, I agree with you. We have far too many top-down controls and too little emphasis on getting the right people, treating them right(training, empowerment, good processes); giving them worthwhile (ie strategy related) work to do and exercising management best practices.
November 12th, 2004 at 12:33 am
There is a culprit that is getting away virtually undetected and that is spreadsheet risks, errors and fraud.
The Sarbox Act does little to address this weakness directly. It may put some internal controls in place but it does not necessarily stop Excel from being used for mission critical projects.
December 30th, 2005 at 11:53 am
A company using EVM certainly should use EV projections as one method to estimate revenue… that’s just common sense that takes on more meaning with SOX. And EVM is a path to better controls. But there’s a larger point. Hal, I must disagree with your definition of EVM. It is definitely not “a system designed for authorizing payments from the customer.” One could get that impression if one’s experience was limited to very complex US govt contracts. That’s where I cut my teeth (disclaimer - I was responsible for US defense EVM implementation from 1982-99). Its purpose always has been to provide an effective way to integrate resources, schedule and technical performance management and measurement. But in govt, the “reporting” or “oversight” aspects tend to be overemphasized.
Way back in 1993, I saw a presentation titled “Real Time Earned Value: Controlling a Maintenance Shutdown at Australian Paper Manufacturers, Maryvale Mill,” by Len Miller, Director, LMA Partnership Pty Ltd. His take — “During the hurly-burly of a maintenance shutdown, management control can be made easy using earned value graphical techniques. This proven technique can help analyse performance and take away a lot of uncertainty and sleepless nights often associated with a major plant shutdown.”
He goes on to describe “simple, clear, easy to read information” with results “obtained and processed within hours… quick turnaround times and faster feedback to the people who need it most results in a project that runs more smoothly. Tensions are reduced when staff are confident in the knowledge that progress is being achieved.”
A 10-day maintenance shutdown is not a complex project. The value of EVM has been shown again and again around the world. Its essential elements are explained in PMI’s new Practice Standard for Earned Value Management (available free of charge to PMI members; others may purchase thru the PMI web site). I always encourage EVM be used as intended — as a management tool — with reporting a natural by-product.
December 30th, 2005 at 12:34 pm
I’ve been involved with numerous planned maintenance projects at power stations. I can’t imagine doing a shut-down without an EVMS approach. My posting addressed the vast majority of projects. Most projects are managed with Excel. And those projects don’t need more than that. But we may not have appropriate protocols for conforming to SOX. We need an approach that captures the developing network of commitments on the project.