Earned value has been around for a long time, so how did this valuable way of tracking project performance evolve? In this article we’ll look at the earned value history story and why the tool is still relevant today.
The early days
The concept of tracking what you said you would do against what you actually did is not a new idea. In a paper for PM World Library, author Bertille Hu shares pictures of efficiency and progress charts that date back to the early 1900s. They show that the ideas of earned value and earned time were understood and used back then.
What’s happened since has been structuring and codifying our approach so that internationally project teams are using common vocabulary and methods to track performance – even if the earned value management tools in place vary from company to company.
The Department of Defense policy
Earned Value Management (EVM) as we know it today originated from work in the Department of Defense back in 1967 – or as it was then known, the Cost/Schedule Control Systems Criteria policy.
The need that drove the DoD to come up with this idea was the requirement to manage complex programs in the defense arena and Program Evaluation and Review Technique (PERT) just wasn’t up to the job.
The original policy gained ground because it was not prescriptive and instead listed criteria around how to track and manage schedules and costs. There was nothing in the policy that talked about using a particular scheduling tool or budgeting approach. At the core of the idea was the concept that a whole project must run on an integrated basis: performance measurement must cover cost and schedule. The idea of an integrated baseline is today fundamental to the concept of making sure projects using earned value start off on the right foot. The integrated baseline review is an important milestone after the award of a contract.
Moving out of Defense
For a long time, EVM was something only large defense projects needed to use. In 1979, the idea of earned value was introduced to the engineering and built environment industries through a magazine article, and it gained traction within the architecture industry. The evolution of earned value management had started. EVM started to break out of its defense roots and find warm welcome in other industries.
Approaches that originate in government tend to gain wide adoption because contractors who partner with government have to abide by those standards. We saw that with the growth in importance of PRINCE2 as a project management approach in Europe, and also with EVM. It also helped that earned value had senior supporters in the US government and was understood and championed by people like the Secretary of Defense.
In the 1990s, EVM was widely used although it wasn’t without challengers. The limitations of earned value then were the same as now: EVM isn’t a magical master plan that will keep your project on track while you sit back and do nothing else.
The shift came as managers started to understand the reports and earned value technique was seen as a tool to drive delivery – not just something for the finance analyst on the project team.
Becoming a project management standard
The very first PMI version of A Guide to the Project Management Body of Knowledge (PMBOK® Guide) in 1987 included an overview of earned value management, and since then the mentions of EV formulas, tools and techniques have expanded to meet the needs of today’s project management community. The principles of earned value are still part of the Project Management Professional (PMP®) exam so as adoption of PMI approaches to managing projects has grown over the last 30 years, so too has the knowledge of earned value outside the worlds of large scale defense projects and construction.
In 2018, the ISO standard for earned value management in project and program management was published, helping to standardize and structure the practices for professionals around the world. The same year saw the publication of the ISO standard relating to work breakdown structures, so there is a common standard for multiple aspects of the earned value landscape now.
The future of EVM
The earned value method has evolved into a flexible, practical way to report and forecasts performance across projects in a wide number of industries. While there will always be some projects that are not a fit for earned value, there are plenty more that would benefit from using the tools and techniques.
The history of earned value continues, as we implement the principles and benefit from this robust way of managing performance on projects today.
Earned Value Management has been around for over 50 years. There can’t be that many management concepts that are still being actively used after such a long time. It’s because earned value has practical applications and is so flexible that it is still a tool we turn to time and time again. Here’s to the next 50 years!