This is a continuation of the posts I’ve published earlier using Earned Value Management as an alternative to what I call the “traditional approach” to performance measurement. When starting a project using (EVM) there are several things that a PM needs to take into consideration to set up the proper controls to execute the project.
Fundamentally the project can only exist if a contract was awarded to the company and a project team was formed and selected to start and execute the project. Sometimes but not always the project team is already made up of several people with varied disciplines who worked on the winning proposal. The proposal submitted had a project plan which conformed to the guidance and scope of work the proposal was written for. The scope of work can also be described as the statement of work (SOW), and it’s usually written with a structure that incorporates elements of a work breakdown structure (WBS). Some proposals already pre-define the WBS, some leave it to the contractor to define a WBS that will work for them.
Project organization takes into consideration the integration of the work at a systems and subsystems level by the team disciplines or groups. The team I’m describing in this case are made up of the various groups used to collect and manage EV data on the project. These team mates include but are not limited to the folks working on budgeting, scheduling, accounting, purchasing, contracts, engineering, planning, and inventory (for techie projects, and will vary for other types of business).
The Organization Breakdown Structure (OBS) can be used to describe the organization of the various disciplines’ reporting structure. Sometimes the OBS alludes to the company overhead structure. The OBS provides insight into how the company organizational structure might influence the cost of a project. For example does the parent company add additional fees or G&A costs to a subsidiary actually doing the work?
The prudent PM will identify those areas responsible for, and contributing to project overhead. A decent amount (OK… I know I’m not being too specific here) of the costs sunk into a project will be influenced by the company overhead structure. Finally project organization includes the integration of the WBS and the OBS. The combination of both structures are used to describe the Resource Assignment Matrix (RAM). These are the most critical points of interest for the PM when establishing good project plans and control. This is where the proverbial rubber hits the road!
In order for the PM to be successful, the project needs to have identified the integration of the people doing the work, with the work being done. This is vital, and it cannot be stressed enough. Many projects have failed because the proper identification of the work matched to the right skill set(s)/people was never done. This is where a RAM is most needed for example.
A project plan describes what work has to be done, but it doesn’t define the time it will take to do the work (that’s the role of the schedule). A project plan also identifies the disciplines involved in doing the work, and how that work is to be done. When an Earned Value Management System (EVMS) is established, there are five major items/categories which are used to arrange and organize the way the work is to be done. These are:
Work Breakdown Structure (WBS)
Organization Breakdown Structure (OBS)
Responsibility Assignment Matrix (RAM)
Planning, Scheduling, & Budgeting
Finance & Accounting
I’ll get into each one and describe their importance in the next few posts. I promise to get quantitative and show EVM at work in upcoming posts. Next post will be about the WBS, hope you’ll tune in.