Using Earned Value on Agile Projects
October 25, 2006
Q: Does Earned Value work for software projects?
A: Absolutely, Earned Value Analysis (EVA) is a statically valid reporting approach that can be applied to any endeavour. It compares actual progress and spend against projected progress and spend.
Q: Can you use Earned Value on Agile projects?
A: You can, but I would not recommend it. There are fundamental problems using EVA on agile projects relating to baseline plan quality. Also there are better alternatives available for agile projects.
Earned Value analysis and reporting measures conformance and performance to a baselined plan. So, given that on agile projects we know that our initial plans are likely to change, why track progress against a weak plan?
An excellent reference to Earned Value reporting is “Earned Value Project Management, Second Edition” by Quentin Fleming, Joel M. Koppelman. In it the authors list 3 critical success factors for Earned Value reporting.
1. Quality of the project’s baseline plan. Earned Value is compared against the baseline plan, whether the plan is accurate or not. Therefore, cost ‘overruns’ will occur if the project costs are under-budgeted, and scope creep will occur if the initial project scope hasn’t been adequately defined.
2. Actual Performance against the Approved Baseline Plan. i.e. whether the actual performance tracks to the baseline plan.
3. Management’s Determination to Influence the final results. Final results for a project based on earned value projections can be modified based on management’s commitment to take action as soon as deviations from the plan are observed.
Agile projects fail to meet the first two critical success factors. First, the quality of the original baselined plan is very low from a completeness and scheduling perspective. We could try to use EVA against our continuously evolving plans, but the figures become meaningless if you keep changing the baselined plan. Each time you do so the performance indexes and variances change making tracking and forecasting extremely problematic. Secondly, since our initial baselined plan may be little more than “today’s best guestimate“ critical success factor number 2 “whether the actual performance tracks to the baseline plan” would be more a matter of luck than anything else.
Given these challenges, what should replace EVA on Agile Projects? Are there agile equivalents of Cost Performance Index (CPI), Schedule Performance Index (SPI), Cost and Schedule variances (CV and SV), and Estimate at Completion (EAC)? The good news is that all of these metrics can still be obtained and even better, if you are using Cumulative Flow Diagrams, you are half way there already.
A colleague, Anthony Cabri of Quadrus Development and I wrote the attached Research paper “Agile and Earned Value Reporting” for this year’s Agile2006 conference in Minneapolis. It explains Earned Value reporting, the problems with agile usage and provides alternatives for each of the EVA metrics. I hope you find it useful and welcome your feedback.
Mike: The Agile 2006 article includes these two sentences: "An equivalent measure to CPI can be observed as: Planned Costs / Actual Costs. An overrun occurs when the Actual Costs are over the Planned Costs, and the CPI value is < 1."
However, comparison of actual cost to planned cost is what Earned Value Management works so hard to eliminate. In other words, if feature completion is ahead of schedule, there may be no overrun at all, even though actual costs are over planned costs. If we don't compare actual cost to earned value, we can't know the cost performance until all features are complete.
I do agree with tracking schedule performance using feature completion, and I recommend an Earned Schedule approach instead of showing schedule variances vertically, as in Figure 7. See www.earnedschedule.com /Garry
Posted by: Garry L. Booker | January 07, 2007 at 10:24 PM
What are good EVA equivalent metrics to track on agile projects and how do we track them ? The frequency is also important, so what gives the most valuable info.
Posted by: Ipsita | June 05, 2007 at 03:32 PM
Feature or story tracking provides the equivalent EVA metrics on agile projects. If you download the paper listed in the article and look on page 5 it explains how metrics such as EV, CPI and SPI can be calculated for agile projects.
Posted by: Mike Griffiths | June 06, 2007 at 09:56 AM