Performance Versus the Project Baseline, Essay Example

Introduction

Performance monitoring is very important for the project to determine whether the expected developments are achievable. Performance monitoring is very important to understand the elements of costs, technical issues and schedule processes for the project. This compared against the baseline of the project inculcates the issues of Planned Value, Earned Value and the Actual cost incurred in the project. Monitoring the performance of the project is cardinal to ensure that the level of performance at each stage matches with the value baseline. Performance management is important to ensure that all the objectives of the project are achieved. The approach enables the organization to determine the future performance and changes in the project lifecycle. The earned baseline provides a suitable stance for comparing the actual performance of the project and the targeted performance. It acts as the benchmark for comparing the current data with the past figures and develop a analysis which can be used asses the performance of the project. The comparison adopted in this study will rely on past data and the current data to ensure a concise and clear comparison. The past data was developed by adhering to proper practices that entailed the project scope, resource estimating techniques, budgets, the earned value calculations, fiduciary responsibility, and the effects of Sarbanes-Oxley compliance, to ensure that information deduced for the project were reliable and enhanced transparency and accountability to the management of the organization and to the shareholders of the company (Alfieri, et al, 2011).

The project baseline and performance monitoring is important to enable the stakeholders and management team of the organization to get feedback on a continuous basis regarding the performance to the various projects in the company. The monitoring process is important to enable the managers of the company to identify the actual problems that hinder the development of the business project. Elements such as efficiency, relevance of the project goals and objectives and the impacts of the project on the performance of the project form some of the most important issues that should be monitored by the project managers of the company. A monitoring process first involves the project managers undertaking preliminary assessments of the progress and a diagnosis of the actual situation in which the project operates. The project monitoring will conduct a mid-term examination of the baseline and the projected performance of the project. The terminal assessments for the past data will form part of the initial assessment for the current data. The need to develop reports based on the recorded difference in performance between various periods and stages of the product’s life (Stratton, 2006).

Performance measurement relies on the cost changes that transpire the in the life of a project. Proper control procedures are very vital for the project coordinators to en sure that the cost and schedule of activities are properly monitored. The change process in the life of project should be used by the project team to communicate, analyze record and approve the programs that need to be in tandem with the change. Performance monitoring in the face of change is therefore deemed necessary to ensure that the project team correspond to the changes to ensure performance measurement at every stage of the baseline. Reconciliation of the actual budget figures with the expected budgets is important to ensure that effective financial management is achieved. This also calls for frequent accounting adjustments to ensure that changes in resource allocation can be properly accounted for (Solomon, & Ralph, 2006).

Tracking performance of the project calls for analysis of the current data and establish the appropriate cost control technique that is important for ensuring that all deviations are monitored, for instance Schedule Variance enables the organization to show whether the project is on the expected schedule or not. Cost variance enables the organization to determine the deviation between the actual budget and the expected budget. Schedule Performance index SPI enables the organization to determine whether the project is on the schedule when all the elements are considered. On the other hand, Cost Performance Index is important to ensure that the project operates under the predetermined budget.
From the current data, Earned value can be determined from the planned value which represents the budget allocation for the current period, the Actual Cost of the project. Earned value for the baseline of the project represents a fraction of what has been accomplished for a given period of time (Stratton, 2006).

The current data for the project in the study are as shown below

Planned Value (PV) = $25,000

Actual Cost (AC) = $15,000

Earned Value (EV) = ($40,000 * 0.5) = $20,000

Schedule Variance (SV) = EV – PV = $20,000 – $25,000 = -$5,000

Schedule Performance Index (SPI) = EV / PV = $20,000 / $25,000 = 0.91

Cost Variance (CV) = EV – AC = $20,000 – $15,000 = $5000

Cost Performance Index (CPI) = EV / AC = $20,000 / $15,000 = 1.11

Estimated at Completion (EAC) = (Total Project Budget) / CPI = $45,000 / 1.11 = $90,000

From the above calculations, it can be conclude that that Schedule Variance (SV) is adverse due to the fact that it is less than, the project is not on the planned schedule due to the fact earned values are less than the planned values giving a deviation of -$ 5,000. On the other hand cost performance index CPI is more than and hence shows that the project is operating as per the budget allocations (Solomon, & Ralph, 2006).

The viability of the project is worth despite the fact the planned value is higher than the earned value and as changes can make the earned value increase in future weeks due to the fact CPI index is above 1 and therefore implies that the project is utilizing the budgeted resources without any additional extra resources that may be costly to the organization. Negative -$ 5,000 deviation between the earned value and the planned value shows that with constant performance index, the earned value can surpass the planned value and hence viability and self sustenance.

It is cardinal to note that performance monitoring of a project should not over rely on Earned value due to the fact it shows a single data mark. Earned Value is subject to change and therefore is appropriate for short term projects such as launching new products in the market. Earned value does not embrace the element of superior service delivery that ensures customer satisfaction. Earned value is based solely on the actual costs and does not embrace other cost elements that are important in the performance of the project (Philipson, E2009).

Management information and relevant reliable information from the project coordinators are very vital for the purpose of monitoring performance. The design approaches and improvement of the project relies on such information provided by the project coordinators. Performance monitoring and is deemed important to ensure transparency and accountability and enhance proper resource allocation in the organization. The initiative is necessary to ensure that the project is improved and strengthened to withstand any form difficulty that may arise during the lifetime of the project. The assessment and monitoring of a project is important to ensure that the best design tools are developed that are necessary to enhance the development and growth of the project for the benefit of the organization.

The previous data in this study act as the best indicators that can be used to develop and change the scope and activities to be undertaken in the project. The indicators enable the management and project coordinators to keep track of the project’s performance and therefore adjust to accommodate any form of changes that may arise. Performance measurement and monitoring calls for establishment of measurable objectives that are deemed important to ensure the success of the project, well organized indicators based on the past data, the data should show the generated revenues or earnings from the project. There should be proper project management to ensure that all the information necessary for the accomplishment of the organization’s activities are pursued without any difficulty. Projective objectives can be easily be determined if they are easily measurable to ensure achievement. Objectives are measurable if proper indicators are identified which rely on the relevant data concerning the project.

Indicators can either be classified as input or output indicators, for instance the former are determined by the time and the amount of resources put in place to ensure that the project’s objectives are achieved by putting it into operation. Proper accounting systems are important to determine the expenditures and compare them against the baseline earnings. Operational costs are the major input indicators in the life of a project that important to ensure the sustenance of the project. Input indicators are derived from the financial statements within an organization and other recorded statements that are related to initial costs of operation. Information for assessment of the two types of indicators is all obtained from the basic records in the organization to complex accounting information. The information obtained is used to appraise the level of attainment of the project objectives as laid down in the project statement (Alfieri, et al, 2011).

The project relies on current data to develop the plans for improvement in performance and increased earnings in the future. The work arrangements for the plan should revolve around the issues of the required budgets, production capacity for the project. The project coordinators and the management team of the organization has to ensure that the performance of the project is acknowledge and reported to the relevant body in the organization or relevant persons within the company. The assessment system of the project should embrace all the improvements and contributions of the project to the business growth of the organization. Credit should be given when all the effort exerted on the project gives a 100% completion of the required tasks in the project. The process of monitoring the performance against the baseline should also aim at identifying the desired value quantities that can be used to elaborate on the conditions of the project. It is important that the project coordinators track the all the important values that the management team need to determine the performance of the project for a given period of time. This monitoring initiative in this approach is aimed at verifying viability of the project, establishing variance thresholds, overhead, and management oversight and schedule variance as a starting point.

The baseline objectives are important for comparing the performance and monitoring of the project. The organization can ensure cost control accounting methods are used to determine the flow of the earnings and the planned value of the project. The contract schedule is important when determining the earnings for a given period of time depending on the nature of the project. The baseline and the performance of the project are the most important elements are useful in determining the validity of the project allocated budgets. The baseline is only viable if the project coordinators have laid down proper strategies that are useful in determining earned value for examining the extent of accomplishment. The coordinators should be to understand the effective variance analysis process to correct any deviations that might be witnessed during performance monitoring. The most important element in variance analysis is to identify the cost and schedule impacts on the activities of the project. It is necessary to integrate the cost schedule and any technical plans of the project. Elements such as

Work authorization documents, project breakdown structure, cost control plans developed by the accounting section in collaboration with the project coordinators, earned value measurement criteria and budget distribution are very important during performance monitoring and comparison of the project.

Earned value management enables the project coordinators to measure the performance of the project and its progress towards the attainment of the set goals. The project cost in this approach is important to enable the coordinators to determine its viability against expectations of the organization. Forecasts of the future cash flows are important to ensure that all the problems and difficulties can be compared against the earnings. The scope of the project is important to determine the activities to be undertaken and the people to be involved in the project. The EVM approach is important as it enables the project coordinators and the management team of the organization to determine the schedule, scope and the project cost (Philipson, E2009).

At the initial stages of the project it is important to determine the cost elements, for instance the Actual Cost, the Planned Value and the Earned Value.

From the graph above, the actual cost of the project only persist at the early stages and tends to reduce as the project progresses. This shows that the difference between the planned value and earned value for the project cannot give a value of zero 0 due to the big margins as shown in the graph. The scheduled variance cannot be determined easily at the early stages of the project life cycle. At this stage the SV is greater than zero and the planned value is on an increasing trend.

This is important for scheduling the activities of the project, and ensures that the earned value can compare favorably with the planned value of the project. Some projects are require early completion where the actual cost incurred can be compared to the expected future earnings, for instance an initiative to launch a prototype of a product may include huge financial expenditure within a short period of time. However, for such projects, the scheduled performance can be achieved at very high costs and low earnings at the initial stages. Launching product development is another example of such stages where the organization may incur a lot of expenditure to develop a new product in the market. The planned value for such projects is usually higher than the earned value within a given period of time. Projects of such nature do not have substantial Schedule Variance due to the shorter scheduling of activities and workflow of the project. The developing a new product by the organization requires the project coordinators and the management of the organization to properly organize the flow of activities to be undertaken and arrange them in order of priority (Philipson, 2009).

For this project, the plan should ensure the achievement of the targeted objectives within the specified time plan. This goes hand in hand with proper identification of the particular activities to be undertaken during the life span of the project. The activities of the project together with the all the processes and procedures of handling various operations in the project are assembled to form part of the valuation process to give the desired planned value. The planned value is an important element when comparing the total investment made into the project and the earnings obtained. The earned values for the project are determined by the predetermined metrics that are important in measuring the total earnings from the project.

The indicators that were used during the monitoring process are applied in this stage to determine the whether the project is headed to the right direction. The indicators enable the project coordinators to determine the deviations from the forecasted performance or the programmed performance. This enables the team to identify whether the project is performing as per the predetermined schedule, for instance if the project is behind the schedule, it is important to identify the sources of the delays and ensure that is corrected. However, in situations where the performance is a head of the schedule it is also important to adjust all the related activities in the organization to move with the pace of the project. The project should enable the team to quantify the progress of the activities using planned value and earned value.

EVM is important in the life of the project as it enables the project coordinators to understand the amount of work that has been accomplished in the project’s life time. Projects operated without the application of the EVM technique are always difficult to determine the time spent and the budgetary allocations making it difficult to quantify the metrics obtained from the performance. In such cases it is always difficult to measure the performance of the project against the set project objectives and quantify the metrics that have predetermined during the forecast (Solomon, & Ralph, 2006).

EVM as a project tracking technique is very important to ensure that applies the proper approaches of determining how to earn the predetermined metrics and measure the amount of work that is done in the projects life cycle. Under the EVM approach, the project team is able to identify the various aspects and elements of the activities and work that have done at each period in time. It enables the project team to identify the planned value for each of the activities and compare against the resources allocated. The flow of activities and work under the EVM technique goes hand in hand with the predetermined budget and thus enables the team to minimize the element of wastages in the life to the project. The approach can be used to develop a critical path follow up technique where each aspect of work has predetermined planned value. The main objective that underlies the EVM approach is to determine the relation the scheduled performance and the cost expenditures incurred into a project and objectively determine the achievement made by the project within a given period of time.

At the initial stage of the project’s life it is important to determine the work structure that is comprehensive and relevant to the goals of the project and of the organization. Work at the initial stages should be categorized according to the nature to ensure proper understanding of the activities to be undertaken during the process. After determining the activities, it is necessary to determine the planned value after identifying the activities and the workflow of the project. The planned value enables the project team to determine the scope of the project. The earning guidelines for the project are established after determining the planned value of the project. The earning guidelines for the project are important to ensure that the cost incurred in the project can be accounted for and the actual value of the project can be easily measured at each stage of the project’s life. It is important to identify the time span of each activity of the project to ensure that those activities that have a shorter time span have different earning guidelines from the ones with longer time spans.

The activities of the project should be pursued according to the planned value and the projected rates of progress. Earned value for each activity in the project is usually calculated according to the earning guide line laid earlier in the initial stages of the project. It is vital to determine the earned value at regular intervals due to the element of change. Earned value guideline is also important to determine the scoreboard for the various activities in the organization.

Projects that have evolved beyond the simple stages, for instance those projects that have been pursued by the organization for a long period of time do not require actual cost accumulation, but the most important thing is to determine the scheduled variance which is the difference between the Earned Value and Planned Value for the project. An advanced project whose schedule variance (SV) is 0 at the completion stage is financially viable due to the fact that all the planned values will have achieved (Solomon, & Ralph, 2006).

Conclusions

Performance monitoring is very important element in project management. The initiative enables the organization to assess the level of contribution and the cost implications of the project. It is important to ensure that the flow of the scheduled activities is handled as per the project guideline. When monitoring the performance of a project it is advisable to avoid over reliance on Earned Value since it does not reflect all the necessary cost elements that are important for the success of the project.

References

Alfieri, A., Tolio, T., & Urgo, M. (2011). Production scheduling approach to production planning with feeding precedence relations. International journal of production. vol. 49(4), pp. 995-1020.

Kapsali, M. (2011). Systems thinking in innovation project management: A match that works. International Journal of project management. Vol 29 pp 396-407Humphreys, Gary (2001). Project Management Using Earned Value. Humphreys and Associates. ISBN 0-9708614-0-0.

Philipson, E. (2009). Earned Value Management. Elanders Sverige AB. ISBN 978-91-977394-5-0.

Project Management Institute (2005). Practice Standard for Earned Value Management. Project Management Institute. ISBN 1-930699-42-5.

Solomon, P. and Ralph, Y. (2006). Performance-Based Earned Value. Wiley-IEEE Computer Society. ISBN 978-0-471-72188-8.

Stratton, R. (2006). The Earned Value Maturity Model. Management Concepts. ISBN 1-56726-180-9.