Changing Cost Management in a Profitable Manner
Organizations that are first timers to Earned Value Management (EVM) often find themselves in the age-old dilemma of putting the cart in front of the horse. The cart is the organization's identity - who they are and what product they make. The organization most likely has been perfecting this cart for years. Then one day an ominous word arrives in a paragraph nestled within a request for proposal from a federal government customer. That word is a stipulation that further cart purchases will now require motive power - a horse. That horse is called EVM.
So now the organization has to somehow put a new horse in front of an established cart that it has been producing for a long time. The challenge is clear: The organization must adapt to a unique form of performance management without upsetting the cart or transporting it in a manner for which it wasn't designed.
At first glance, implementation of an Earned Value Management System (EVMS) may seem overwhelming in scope and upfront costs. This can be true, but isn't necessarily so. An organization can win a contract requiring an EVMS without first implementing its more expensive and complex aspects Even more important, the organization can adopt some of the most significant components of EVM with little expense and can dramatically improve the management of cart building. This can be accomplished by adoption of the EVM approach to development of a Work Breakdown Structure (WBS), Organizational Breakdown Structure (OBS), a Responsibility Assignment Matrix (RAM), Control Accounts and Work Packages.
Using these fundamental components of an EVMS, an organization can find new capabilities of:
- controlling costs
- authorizing work
- protecting against scope creep
- preventing unauthorized work
- managing critical path and
- tracking progress.
All of this can be accomplished even before adding the most important but somewhat expensive component of EVM - the EVM engine (the horse).
In upcoming blogs, I'll go into some detail about how an organization can cost-effectively prove EVMS readiness in proposals where an Earned Value Management System is required.