Boost AEC Project Success with Earned Value Management!

Key Concepts:

• Earned Value Management (EVM)
• Schedule Performance Index (SPI)
• Cost Performance Index (CPI)
• Project Management Office (PMO)
• Project Data Structure
• Scope Percent Complete
• Work Breakdown Structure (WBS)
• Client Experience
• Professional Relationships

1. Introduction and Background

• Anthony Fisano introduces Lynn Browning, PE PMP, Director of Project Management at Henderson Engineers, as a guest on the AEC Project Management Podcast.
• Lynn was instrumental in kicking off the AECPM connect event and will be doing a deeper dive on Earn Value this year.
• The episode aims to provide practical strategies for implementing and using EVM effectively.
• AECPM Connect event is built for project managers who want to improve project delivery, communication, and leadership through practical sessions and tools. Events are currently in Kansas City and New Jersey with more coming soon.

2. Lynn Browning's Career Path

• Lynn started as an electrician, gaining practical field experience before pursuing an architectural engineering degree.
• He graduated from Kansas State University in 2008 and joined Henderson Engineers as a designer.
• He transitioned into project management due to observing inefficiencies in project leadership.
• Lynn emphasizes his love for problem-solving, particularly in managing relationships and constraints within projects.
• In 2020, he became Director of Project Management, focusing on standardizing project management practices and establishing a PM job family.

3. The PM Identity Crisis and the Importance of Dedicated Project Managers

• Lynn addresses the "PM identity crisis" where individuals are often engineers who also perform project management tasks.
• Henderson's separate PM job family signifies the importance of focused project management.
• Dedicated PMs lead to increased client experience, employee engagement, and financial performance (profitability and revenue).
• New PM education programs help individuals connect with their PM identity and apply it effectively.

4. Spark for Earned Value Management (EVM)

• Henderson Engineers underwent a major restructure in 2021, becoming an ESOP company.
• The company's auditor requested EVM metrics as part of the auditing process to justify earned value and remaining work projections.
• Lynn's deep dive into EVM revealed its potential for enhancing project health, resource management, and forecasting.
• The challenge was to implement EVM without burdening PMs with additional work, focusing on automation and data leverage.

5. Evolution of EVM at Henderson Engineers

• Initially, EVM was used solely for revenue recognition under GAAP requirements, updated monthly.
• The shift is towards using EVM as a function of project health, tracking leading metrics at a granular level for dynamic insights.
• EVM allows for monitoring schedule and budget in dollar terms, providing a comprehensive view of project status.
• Traditional methods often involve simply comparing budget to spent amounts, lacking insight into scope completion.
• EVM incorporates scope percent complete data, offering a more accurate picture of project progress.

6. Schedule Performance Index (SPI) and Cost Performance Index (CPI)

• Schedule Performance Index (SPI): Measures the pace of work completion against the planned value. It answers the question: "Are you on pace to complete the project as expected?"
  • Formula: Earned Value / Planned Value
  • SPI = 1.0: Project is exactly on schedule.
  • SPI > 1.0: Project is ahead of schedule.
  • SPI < 1.0: Project is behind schedule (red flag).
• Cost Performance Index (CPI): Measures the value earned for every dollar spent. It answers the question: "For every dollar I spend, how much am I earning?"
  • Formula: Earned Value / Actual Cost
  • CPI > 1.0: Earning more than a dollar for every dollar spent (good).
  • CPI < 1.0: Spending too much and not earning enough (red flag).
• These indices provide automatic red flags for PMs to investigate and take corrective actions.
• Automation simplifies the calculation and tracking of these values over time.

7. Implementing Scope Percent Complete

• Scope percent complete requires manual input from the team, as it cannot be automatically determined by a system.
• Lynn advises developing a workflow in the planning stage and weighting tasks appropriately to quantify percent complete.
• Example: Completing 6 out of 10 tasks on a $10,000 project, equating to $7,000 earned value (70% complete).
• A detailed work breakdown structure (WBS) facilitates measuring progress and following project tasks.

8. The Importance of Planning

• PMs often want to execute immediately after contract, schedule, and fee are established, but planning is crucial.
• Taking time to plan, involving design leads, and gaining their buy-in ensures a plan to monitor during execution.
• When problems occur, a well-defined plan allows for making corrections or adjusting scope to meet needs.
• Spending more time on the planning phase avoids problems down the road.

9. Key Lessons and Challenges in the EVM Journey

• The initial EVM implementation using Excel was rejected by PMs due to its lack of integration with other data.
• The industry is undergoing a digital transformation, necessitating a holistic view of project data structure.
• The focus shifted to integrating EVM with the project data structure to provide actionable, granular data without additional burden.
• The current project structure is primarily based on billing, lacking the granularity needed for effective EVM implementation.
• The goal is to build a project data structure that aligns with billing structures and client invoicing preferences.
• The long-term vision involves leveraging historical data to generate preliminary figures during the fee development phase.
• Executive-level decisions are required to invest in building data structures and integrations.

10. Benefits of the EVM Process

• The biggest benefit is getting PMs to think more thoughtfully about earned value and how it is calculated.
• PMs are shifting away from managing solely on hours to focusing on tasks and deliverables.
• The mindset shift involves prioritizing tasks to meet project deadlines, organically planting the seeds for EVM.
• Even without perfect software, starting to think about scope progress in terms of percent scope complete is a game changer.
• Managers and leaders of PMs also need to understand EVM to hold PMs accountable and ensure consistent language.

11. Establishing a Project Management Office (PMO)

• Start with executive buy-in and a corporate-wide understanding of what a PMO means.
• The PMO should support the business units without being overly command-and-control oriented.
• PMs should be attached to business units to better manage the client experience.
• The PMO should focus on supporting PMs, developing standards, and providing professional development.
• The person in charge of the PMO effort needs to dedicate a significant amount of time and effort.
• Consistency in project management practices, measures, and tools leads to sustainable growth.

12. PM Pitfalls and Professional Relationships

• The biggest pitfall is underestimating the power of professional relationships.
• Younger PMs often focus on relationships for business development purposes but neglect internal relationships.
• Cultivating relationships with engineers, finance teams, admins, permit advisors, etc., brings dividends throughout a career.
• Be proactively human, build trust before you need it, and respect professional relationships at all levels.
• Repeat work is crucial for company survival, and PMs are key to building relationships and securing repeat business.
• PMs also lead employee engagement by influencing how employees perceive working with the firm.
• Focus on both the external client team and the internal project team.

13. Conclusion

• Lynn Browning's insights provide valuable guidance for implementing EVM and improving project management practices.
• The importance of planning, data-driven decision-making, and building strong relationships are emphasized.
• The AECPM Connect event offers an opportunity to learn more from Lynn and other industry experts.
• Subscribing to the channel ensures access to weekly videos on becoming better project managers and leaders.