MGT 645 Module 7 Measurement Example

Are We on Track? Earned Value and Success Measures for a Gluten-Free Line at Month Eight

Student Name

Master of Business Administration, Aspen University

MGT 645: Project Management Essentials

Instructor Name

Month Day, Year

Are We on Track? Earned Value and Success Measures for a Gluten-Free Line at Month Eight

Eight months into the fourteen-month plan, the project sponsor at Chippewa Valley Pizza opened the steering group meeting with one question: are we on track? The construction stream had passed two phase gates, the equipment had arrived late, and recipe cycles were going well. Answering honestly requires a measurement system that shows where the project stands, where it is heading and whether it will deliver what the company wants. This paper builds that system and applies it.

Earned Value

Anbari (2003) described earned value as a method that brings scope, schedule and cost into one frame. Planned value is the budgeted cost of the work scheduled to date, earned value is the budgeted cost of the work actually completed and actual cost is what that completed work cost. Two ratios follow. Dividing earned by actual gives the cost performance index, and dividing earned by planned gives the schedule performance index. Anbari also set out extensions, including forecasts of the final cost and the time needed to finish, and argued that the method gives early warning when applied consistently.

Month Eight in Numbers

The late equipment explains most of the schedule gap: installers sat idle for three weeks and were paid for standby, which also explains much of the cost gap. The forecast assumes the current cost efficiency continues. If the standby cost was a one-time event, the final cost will be lower; if start-up repeats the plant's history, it will be higher.

The Limits of the Indices

Earned value measures work against the plan, not against value. A project can earn value on schedule while building something customers will not buy. The schedule index also loses meaning near the end, because earned value converges on planned value as work finishes, even on a late project. The team therefore tracks the start-up dates directly as well as the index.

Two More Forecasts

A second useful figure is the efficiency the remaining work would need to stay within budget. Dividing the work still to be earned, $2.7 million, by the money left in the work budget, $2.5 million, gives 1.08: the rest of the project would have to run 8% better than plan to finish without touching contingency. Few projects improve that much in their last months, and this one still faces start-up, so the steering group treated the contingency as committed. A rough time forecast divides the fourteen-month plan by the schedule index, giving about fifteen and a half months. Because the six-week buffer before the customer ship date absorbs most of that, the date promised to retailers still holds, but the buffer is now half used.

How Progress Is Counted

Earned value is only as honest as the rules for claiming progress. For construction, the contractor's progress is claimed against inspected milestones rather than estimates of percent complete. Equipment earns no value on delivery, only on successful installation tests. Product cycles earn value when a recipe passes its panel test. These rules make earned value slower to rise but harder to inflate, which is the point when a steering group relies on the numbers.

Success Has Several Dimensions

Shenhar et al. (2001) studied a large set of projects and concluded that success is a multidimensional, strategic concept. They identified dimensions ranging from project efficiency, meeting cost and time, through impact on the customer and direct business success, to preparing the organization for the future. These dimensions become visible over different spans of time, so a project judged only at handover is judged on its narrowest dimension: efficiency at completion, customer impact soon after, business success over a year or two and future preparation over several years.

Stakeholders and Time Frames

Turner and Zolin (2012) built on this by developing scales to forecast success as judged by different stakeholders at different times, from the end of the project through the months that follow and into the years after. Their work suggests that a measurement system should ask whose view of success it is reporting and when that view can be judged. For the gluten-free line, the sponsor cares about cost and the ship date at handover, retailers about product quality and fill rates in the first months, the plant manager about running cost and swab results over the first year and the board about sales and the company's position in gluten-free food over three years.

The Dashboard

The monthly dashboard has three parts. The first reports the cost and schedule indices, the cost forecast and contingency remaining. The second reports leading measures for the outcomes that cannot yet be seen: the share of trial run swabs below the certification threshold, the number of crust sizes approved by both retail buyers and the share of line workers trained. The third lists open risks and decisions needed. Each measure has an owner and a trigger; for example, a cost index below 0.92 for two months sends a recovery plan to the steering group. After handover, the dashboard passes to the plant manager and the head of sales, who keep the benefit and running cost measures for three years letting the board weigh the investment decision it made, not only the project that carried it out.

Conclusion

Anbari's earned value answers whether the work is on plan, and at month eight it shows a project slightly behind with little cushion left. Shenhar and colleagues and Turner and Zolin show that this is only part of the answer, and the dashboard adds the measures that will tell the company whether the line succeeds.

References

Anbari, F. T. (2003). Earned value project management method and extensions. Project Management Journal, 34(4), 12-23. https://doi.org/10.1177/875697280303400403

Shenhar, A. J., Dvir, D., Levy, O., & Maltz, A. C. (2001). Project success: A multidimensional strategic concept. Long Range Planning, 34(6), 699-725. https://doi.org/10.1016/S0024-6301(01)00097-8

Turner, J. R., & Zolin, R. (2012). Forecasting success on large projects: Developing reliable scales to predict multiple perspectives by multiple stakeholders over multiple time frames. Project Management Journal, 43(5), 87-99. https://doi.org/10.1002/pmj.21289