The earned benefit method for controlling program performance

Abstract

PMI's The Standard for Program Management—Second Edition describes the program management life cycle, the benefits management life cycle, and the roadmap, and proposes that the Monitor and Control Program Performance process should use earned value as a tool. This presentation explains how to integrate these concepts and tools into a consistent earned benefit model for a consistent and coherent planning and tracking approach.

Introduction

PMI®'s The Standard for Program Management (Project Management Institute, 2008a) refers to benefits management and provides a diagram of the benefits management life cycle; however, it does not provide an explanation of how to apply benefits management in an integrated way across the life cycles for managing programs. This paper provides and presents one possible approach for this. It describes how the life cycles should correspond to each other and proposes a new technique—earned benefit management—for planning and tracking the realization of program benefits. All quotations are from PMI's The Standard for Program Management—Second Edition.

In the same way as for earned value (Fleming & Koppelman, 2000), there is the need for an organizational approach to make the earned benefit technique effective (PMGS, 2011). This is addressed in the first part of the paper (Current Life Cycles and Modified Benefits Realization Life Cycle). The second part of the paper explains the earned benefit technique in detail (Towards the Earned Benefit Method to Conclusion), followed by a worked example (see Appendix: Example of Earned Benefit Calculations).

The starting point, therefore, is a review of the program management phases, as defined in The Standard for Program Management, Second Edition.

Current Life Cycles

The Program Management Phases

Program Management Life Cycle

Exhibit 1. Program Management Life Cycle.

Exhibit 1 is adapted from The Standard for Program Management:

  1. Pre-Program Preparations

    img   The goal of this phase is “to establish a firm foundation of support and approval for the program.”

  2. Program Initiation

    img   “To continue to develop in greater detail how the program can be structured and managed…”

  3. Program Set-up

    img   “To establish the required infrastructure, develop a detailed roadmap, create the required set of planning documents and integrate them into a program management plan.”

  4. Delivery of Program Benefits

    img   “To initiate the component projects of the program and manage the development of the program benefits…”

  5. Program Closure

    img   “To execute a controlled closedown of the program.”

    ▪   The PMI standard does not have a phase-end checkpoint to the program closure phase. For completeness, one could be defined as, for example, “Approval by the Program Board, based on input from the sponsor and client.” As will be shown further on in the paper, this gate would then match a similar control at the benefits level.

Just as for the project management life cycle, the program management life cycle is designed to provide control over the work and the use of resources to accomplish it. It is not directly concerned with the technical aspects of the work to create the deliverables associated with the product scope. For programs, however, there is a layer that fits between the program scope and the product scope, since programs use the products to deliver benefits: this therefore requires its own, benefits management life cycle as described in the next section.

The Benefits Management Life Cycle

The Benefits Management Life Cycle (adapted from PMI (2008a)

Exhibit 2. The Benefits Management Life Cycle (adapted from PMI (2008a).

As can be seen in Exhibit 2, adapted from the PMI Standard for Program Management—Second Edition, the “benefits management life cycle” as shown only covers the realization of the benefits and not the long-term operational delivery. The term “benefits realization management” would be a better description of this life cycle.

The PMI standard does not describe a relationship between the two life cycles—and the benefits management life cycle was modified between the first and second editions of the standard. The next section proposes a solution, by taking the tasks within the phases above and reallocating them into a modified benefits realization life cycle aligned with the program management phases.

Modified Benefits Realization Life Cycle

Defining the Modified Life Cycle

Approach and Scope

The approach taken here starts with the benefits realization management life cycle: benefits should drive programs not vice versa, since programs are run in order to deliver benefits. This is therefore a bottom-up approach starting with the definition of the sequential benefits realization processes and then grouping them into phases aligned as closely as possible to those defined in the PMI standard.

Note also that the goal is not to define the entire life cycle of managing benefits, but only the portion that the program is concerned with—that is, the realization of the benefits: their creation and transition into the operational environment. The longer-term delivery and exploiting of these benefits for the operational responsibility of the organization is outside the scope of a program. Within the program, it is important to define a clear set of steps for achieving the benefits-related objectives. The key steps are therefore described next.

Benefits Focus Steps

A program needs to take into account the following five levels of focus:

  1. Strategic focus
    • Providing vision
  2. Business focus
    • Ensuring viability
  3. Benefits focus
    • Achieving value
  4. Program focus
    • Creating benefits
  5. Project focus
    • Delivering capabilities

A life cycle then needs to be applied to lead the program though these focusing steps, from vision to capabilities. The resulting life cycle is shown in (Exhibit 3). The first phase of PMI's benefits management life cycle (benefits identification) has been modified to cover identification and assessment; the second phase (benefits analysis and planning) has been split into two parts; benefits realization is structured to indicate the potentially staged approach used in many programs; the final stage has been renamed as completion to indicate its goal more clearly. These phases are explained in more detail below.

Aligned program management and benefits realization life cycles

Exhibit 3. Aligned program management and benefits realization life cycles.

Benefits Assessment

This is adapted from the PMI standard benefits identification phase. It is launched when a vision has been elaborated.

It is then up to the business change manager to help translate the vision into a set of benefits to be achieved in order to achieve the vision. There are three main steps:

  1. Develop Mission Statement
    • The first step, however, is to translate the vision into a more concrete description of the organizational change required in order to achieve the vision (not mentioned in PMI life cycle). This is the responsibility of the business change manager and will take the form of a mission statement.
  2. Identify Benefits
    • The goal of this step is to determine the relevant benefits that contribute to the overall goal, as well as their interdependencies and any “dis-benefits” that could occur as side-effects. This can be developed in the form of an “outcome relationship model” (OGC, 2007).
  3. Assess Benefits Qualitatively
    • At this point there is not enough hard data for the viability (that is, the business case) to be assessed numerically. However a qualitative analysis can be carried out in order to decide whether the idea is sufficiently promising to pursue. This is the draft business case and is used as input to the Initiate Program process. If it is decided to carry on, the qualitative analysis is accepted and the subsequent phase launched.

Business Case Development

The goal of this phase is to develop the first part of a business model: a numerical estimate of the benefits.

This requires the following steps to be carried out:

  1. Derive Components
    • Decide on the projects and non-project work that is needed in order to achieve the organizational change described in the mission statement.
  2. Map Benefits
    • Provide the interdependency diagram between components and benefits: the component-benefit matrix described later in this paper.
  3. Define Units
    • Benefits can only be measured if the criteria and the corresponding metrics are defined (e.g., a balanced scorecard).
  4. Derive Metrics
    • Define completion criteria and the value of completion with respect to the relevant units.
  5. Estimate Component Costs

  6. Quantify Business Case
    • At this point, the quantified benefits can be added to the draft business case to provide a financial feasibility analysis. This is the basis for approval of phase completion and the go/no-go decision for the next phase.

    •   Linguistic note: the term benefit (in the singular) refers to the total, integrated amount, whereas the term benefits (in the plural) corresponds to the individual outcomes. That is why the method, which addresses progress towards the integrated outcome, is called earned benefit (in the singular).

Once the business case is accepted, the next step—in fact, the next phase—is to plan in detail how to achieve it.

Benefits Realization Planning

The goal of this phase is to produce the benefits realization plan. This is built up as follows:

  1. Determine Component Interdependencies

  2. Prioritize Components

    • Prioritization is based on a chosen set of criteria such as time, value, etc.
  3. Derive Initial Roadmap

    • This gives the sequencing of components and the benefits milestones (Exhibit 5)
  4. Create Benefits Realization Plan

    • Link the roadmap to the component duration, cost and value estimates.

    •   This plan allows the cumulative benefit curve to be developed (see Exhibit 7).

    • Establish benefits realization monitoring.

    •   This defines how earned value, earned benefit and the cumulative benefit curve are applied for the specific program (see Towards the Earned Benefit )

    • This benefits realization plan is the basis for the go/no-go decision to start to create the capabilities and realize the benefits, so it first needs to be approved.

Benefits Realization Plan Review

The Standard for Program Management does not mention any benefits-specific phase gates. However, once the life cycles have been aligned, the review of the benefits realization plan should form part of the gate review prior to the program setup phase, to ensure an on-going and effective link between the management of the program and the management of the business.

Benefits Realization

This phase is composed of one or several, serial, overlapping stages, each of which delivers incremental benefits.

The steps in any stage are as follows, in overlapping cycles. Once these are complete, only the final tidying-up will then remain.

Benefits Realization Completion

In theory, once the final stage reaches completion, all of the integration and transitioning actions will have been carried out. However, since programs can be large and complex, they need a specific focus on ensuring that the final result has reached a stable operating state and no longer needs support from the program team.

This phase completes with the official approval for program closure.

Now that a benefits realization life cycle has been developed, it is important to ensure that tools are available to ensure that it provides the required level of control. The way in which this control is set up and managed across this life cycle will now be described. This is where the earned benefit technique comes in.

Towards the Earned Benefit Method

This section uses the newly developed life cycle (Exhibit 3) to show how the earned benefit concepts are developed, planned for, and applied within programs.

img

Benefits Assessment

The key output of this phase is a clear definition of each of the benefits required from the program. The first step is to clarify and agree the mission.

Define the Mission

Before defining the various benefits, an overall vision of the desired outcome of the program needs to be translated into a mission statement.

The mission statement says what needs to be done (not how to do it) and includes the mechanisms for defining completeness. The mission statement needs to provide a high-level definition of the capabilities that need to be created, as well as the realization strategy that needs to be defined, that is what approach should be taken for realizing the benefits (e.g., quick wins, minimal cost exposure, high-risk first, etc.). The corresponding benefits can then be determined.

Identify the Benefits

The benefits description is based on an analysis of what will have changed (for the better) from the current state to the state described in the vision. Once the benefits have been identified, they need to be assessed.

Assess the Benefits

These benefits should be described in purely qualitative terms: the benefits criteria should be defined along with a definition of the meaning of qualitative assessment terms (such as “high”, “medium,” and “low”).

Once the benefits have been identified and assessed in line with the vision and mission, they provide the basic building-blocks for the earned benefit technique in parallel with developing the business case as explained in the next section.

Business Case Development

img
Derive Components

Once the set of required capabilities has been defined, these have to be investigated in order to determine the set of projects (and non-project work)—components—required in order to deliver these capabilities. Prioritization will depend on the contribution of the component to achieving the strategy. This requires the component-benefit matrix to be developed as explained next.

Map Benefits

It is unlikely that each component contributes to a single benefit, so a “component-benefit matrix” needs to be developed at the same time A similar idea describing the key performance portfolios is described by Sanchez and Robert (2010).

Each cell of the matrix (denoted by Vij) indicates the relative contribution of a component (row i) to a benefit (column j); a value of zero indicates that the component does not contribute to that benefit; ideally, the values are then normalized so that each column adds to 1, as shown in Exhibit 4.

Unnormalized, and normalized, examples of a benefit-component matrix

Exhibit 4: Unnormalized, and normalized, examples of a benefit-component matrix.

Define Benefits Metrics—Part 1: Units

In order to allow tracking and consolidation, the qualitative analysis in the previous phase needs to be transformed into a quantitative forecast; this entails defining the units in which benefit will be measured as explained in the section on Business Case Development.

Define Benefits Metrics—Part 2: Quantities

For each benefit, the following must be defined:

  • Benefit capability completion criteria is how to determine whether all of the capabilities required to achieve the benefit are in place.

  • Benefit value is measured in the predefined units. The symbol Bj will be used to denote the value of Benefit number j.

Estimate Components

This implies estimating the cost and duration of each component using standard project management estimation tools (see Chapter 7 of A Guide to the Project Management Body of Knowledge (Project Management Institute, 2008b) and Practice Standard for Project Estimating (Project Management Institute, 2010).

Quantify Business Case

Developing a quantified business case is beyond the scope of this paper (see example in IIBA (2009)), but is required in order to obtain approval to start planning on how to achieve it.

Benefits Realization Planning

img

Although the overall business case has been developed, we do not yet have a clear idea of how to achieve it. That is carried out in this phase.

Determine Dependencies

The way in which the components work together (e.g., the output of one is the input for another) defines constraints on the order in which the components can be implemented. Given these constraints, the overall plan will need to apply a priority order for the components. There are a number of options as shown next.

Establish Priorities

The component-benefit matrix (Exhibit 4) is a useful basis for component prioritization: the question to be answered is: how much does each component contribute individually to the total program Benefit?”

You can calculate the contribution of a given component, Ci, (“component contribution to benefit” (CCBi)) as follows:

CCBi = sum over columns j of {Vij * Bj}

Where Vij is the value in cell (i,j) of the component–benefit matrix and Bj is the value of benefit j.

The prioritization is then be determined by sorting the components based on their CCB value. The strategy adopted for prioritization must be documented and agreed upon within the program core team. It can be modified during the life of the program based on a similarly formal decision.

Once the priorities have been determined, the benefits realization plan, starting with the program roadmap, can be established taking into account all constraints (dependencies, resources, etc.).

Develop Roadmap

The roadmap provides a high-level view of the order in which the benefits will be realized along with the schedule of executing the program components to deliver of capabilities required for realizing these corresponding benefits (as shown in Exhibit 5).

Program roadmap based on the example in the Appendix

Exhibit 5. Program roadmap based on the example in the Appendix.

The planning algorithm is simply:

A Component sequencing

  • In priority order, list all components for which all precedence requirements are satisfied.

B Benefit milestone determination

  • For each component from step A, determine if it completes the work on a benefit.

•  If so, define the corresponding “benefit realization stage complete” milestone.

 A2, B2…repeat from A until all components have been dealt with

•  The last benefit milestone corresponds to “all benefits realized”; stop.

This will provide an initial roadmap for sequencing the work. However, operational and strategic constraints then need to be factored in before a realistic realization plan can be established. Examples of such constraints are:

  1. Operational constraints

    • Resource limitations

    • Budget limitations

  2. Strategic constraints

    • Maximum number of projects of a given type at any time

    • Cumulative risk exposure

This roadmap provides a guide to establishing the benefits realization plan, described next.

Create Benefits Realization Plan

This planning is carried out in close collaboration with the program setup phase. The planning will subdivide the delivery of program benefits phase of the program management life cycle into successive stages. Each stage normally corresponds to the delivery of all of the components required for a given benefit. If all of the benefits are only achievable when all of the components are complete, the Delivery of Program Benefits phase may be composed of a single stage.

Although the roadmap should not be changed arbitrarily during the realization phase, the detailed plan needs to be reviewed and, as necessary, updated as the operational and strategic environments evolve— whence the need for effective monitoring as described next.

…and Monitoring

The monitoring technique should be defined—this is where rarned benefit, as described in the next section, comes into its own.

This then provides all of the information required for tracking the realization phase.

Benefits Realization

All of the analysis and planning elements defined in the benefits management phase will contribute to the evaluation of benefits realization progress. That is the domain of the earned benefit method described in the next section.

The Earned Benefit Method

The concept of “earned benefit” for a program is a natural extension of the project management earned value method to program management.

The approach is to recognize that projects aim at deliverables, whereas programs aim at benefits. For a program, therefore, the goal is to translate from progress on delivering the scope of the projects, into progress on realizing the benefits. This is described below and then explained by use of a worked example in the Appendix which helps to demonstrate how earned value on its own can give a misleading view of genuine program progress. The corresponding curves are also shown in the Appendix along with a glossary of earned benefit terms and abbreviations, plus the value of each formula with respect to the example.

Basic Earned Benefit Parameters

The Component-Benefit Matrix

The CBM was defined in the section on Map Benefits and then used in the section on Establish Priorities.

In this section, it is shown to be the core of the earned benefit method.

Calculating Earned Benefit

As we saw in the section on Establish Priorities, completed component(i) contributes CCBi to the total benefit, so when partially complete, it contributes a correspondingly reduced amount (the “component earned benefit” (CEBi))

img
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To calculate the total earned benefit, just sum all of the component earned benefit contributions, as follows

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Planned Benefit

The planned benefit at any point in time is the forecast value of earned benefit up to that point. This can be plotted against time in a cumulative benefit curve (benefit values on the Y-axis, dates on the X-axis—see Benefits Realization Planning, and a sample curve in Exhibit 7).

Earned Benefit at Completion

The earned benefit at completion value of a stage is the value of the planned benefit at the end of that stage.

Earned Benefit Performance Calculations

It should be noted that earned benefit can be measured in any unit (financial or non-financial) that best suits the situation, so it may not be the same units as those used for earned value. This is allowed for in the following set of definitions.

Percent Complete

This is calculated as the ratio (earned benefit) / (earned benefit at completion).

Benefit Performance Index

This is calculated as the ratio (earned benefit) / (planned benefit).

Benefit Variance

This is the difference between the earned benefit and the planned benefit (EB – PB) at a chosen data date.

Earned Benefit Equivalent Date (EBED)

Evaluate the date at which the current earned benefit was planned to be achieved. This can be translated into earned benefit equivalent duration, that is, the elapsed time by which that benefit should have been earned.

Benefit Schedule Variance (BSV)

This is the difference between the earned benefit equivalent date and the current program duration up to the data date. A negative value for the BSV means the program is late (behind schedule).

Benefit Schedule Performance Index (BSPI)

This can be calculated by dividing (earned benefit equivalent duration) by (current program duration).

Earned Benefit Financial Calculations

The Benefit-Value Curve

In order to track performance with respect to costs, a benefit-value curve has to be developed as follows:

  • Start with the cumulative benefit curve (see section on Benefits Realization Planning).

  • Take the program cumulative cost curve—a deliverable of the program planning process (an example is shown as Exhibit 6).

  • Replace the dates on the X-axis of the cumulative benefit curve by the corresponding planned value at that date.

An example is provided in Exhibit 8, which shows two curves plotted against the forecast spend:

  • The planned benefit curve

  • The planned value curve—obviously it is simply the straight line represented by (X-value) = (Y-value) since the planned value at any point is defined to be the cumulative cost. The example used the same (financial) units for EB and EV. (Note: this curve can only be included if EB and EV use the same units.)

The reason for showing the two curves together where possible is to underline the point that the cumulative costs at certain times during the program can exceed the potential financial benefits that have been realized up to that point, even though the program is on-schedule, on-budget, and has a valid, profitable business case. It is important to make sure that the sponsor and other decision makers are aware of this possibility so that they do not erroneously take this as a valid reason for cancelling the program at that point.

The Equivalent Benefit Cost (EBC)

The equivalent benefit cost is the planned cost for achieving a given benefit value. It is the X-value on the benefit-cost curve that corresponds with the given value of benefit (Y-value). Note that the EBC can be higher than the PB part of the way through the program, as shown in Exhibit 8. The converse of this measure is the value equivalent benefit which is explained next.

The Value Equivalent Benefit (VEB, VED)

This is the value of EB for given spend (or the actual cost AC), that is, the Y-value on the benefit-cost curve (Exhibit 8) corresponding to a given X-value. This can then be used to determine the value equivalent date based on the AC in the same way as for the EBED (see section on Earned Benefit Equivalent Date (EBED)).

The Benefit Value Schedule Variance, Benefit Value Performance Index

This is a more abstruse measure, but one which provides a combination of progress and spend in a single number.

  1. Take EB to determine the EBED (see section on Earned Benefit Equivalent Date (EBED)).

  2. Take AC to determine the VED (see section on The Value Equivalent Benefit (VEB, VED)).

The benefit value schedule variance (BVSV) = EBED – VED indicates schedule variance in achieving the benefit value corresponding to the actual cost. Negative values are bad news: lateness and over-budget conditions make the value progressively worse. You can also calculate the benefit value performance index:

benefit value performance index (BVPI) = 1 – (BVSV / duration to date)

Earned Benefit Reviews

At each progress review, calculate the following:

cost performance index = earned value / actual cost (that is, the standard earned value cost tracking approach)

benefit performance index = earned benefit / planned benefit

benefit schedule performance index = benefit equivalent duration / current program duration

And, possibly, the benefit value performance index, combining the time and cost information as defined previously.

Naturally, any value less than 1.0 in any of these index values indicates a slip in either cost or time—or both—which will need to be explained.

Communicating the Information

At first sight, just as for earned value, the concepts and formulae may seem excessively complex or involved. However, it should be remembered that the approach provides a coherent link across the full life cycle and, as such, directs and adds value to all of the steps in the benefits realization process and becomes easier to understand the more you apply it. That is not to say that the program manager should expect the management chain or the customer to understand the finer points of the technique. On the contrary, with a good understanding of what the numbers really indicate, the program manager will be able to translate them back into concepts linked to the relevant stakeholder's domain of interest.

Conclusion

A consistent benefits realization life cycle has been defined, along with the main processes for planning and tracking the benefits from inception to termination. The planning and tracking technique builds on the concepts of earned value, with the addition of the recognition of the potentially complex contribution of the separate components to the overall benefits of the program. The example in the appendix demonstrates the EV and EB can provide very different images of actual program status.

The revised benefits realization life cycle puts the focus of program management back where it belongs—into managing the realization of the required benefits. It also helps to explain the main responsibilities of the key roles in the program.

Although different program environments will have different constraints and objectives, the framework shown herein is universally applicable in its broad lines.

Fleming, Q. W., & Koppelman, J. M. (2000). Earned value project management. Newtown Square, PA: Project Management Institute.

IIBA. (2009). The guide to the business analysis body of knowledge. Toronto: International Institute of Business Analysis.

Office of Government Commerce (OGC) (2007). Managing successful programmes, Norwich UK: Author.

PMGS (2011). Best Practices in Program Management —3-day training course. Retrieved from http://www.pmgsgroup.com/en/training/curriculums/introductions/article/best-practices-in-program

Project Management Institute. (2008a). The standard for program management—Second Edition. Newtown Square, PA: Author.

Project Management Institute. (2008b). A guide to the project management body of knowledge—Fourth Edition. Newtown Square, PA: Author.

Project Management Institute. (2010). Practice Standard for Project Estimating. Newtown Square, PA: Author.

Sanchez, H., & Robert, B. (2010). Measuring portfolio strategic importance using key performance indicators. Project Management Journal, 41(5), 64–73.

Appendix: Example of Earned Benefit Calculations Plus Abbreviations

Review of Earned Benefit Calculations

The formulae for earned benefit are:

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Sample Situation

A program is aiming at three benefits (B1, B2 and B3). The way in which the components (C1 to C6) contribute to them is shown below in the normalized component benefit table.

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The monetary value of the benefits is forecast to be:

B1 € 100,000
B2 € 200,000
B3 € 300,000

Therefore, the total benefit is € 600,000

The estimated cost of the components is:

C1 € 200,000 from 1 January to 1 April
C2 € 40,000 from 1 February to 1 March
C3 € 60,000 from 1 April to 1 June
C4 € 50,000 from 1 June to 1 August
C5 € 20,000 from 1 February to 1 March
C6 € 100,000 from 1 August to 1 September

Therefore, the total cost is € 470,000.

The program starts on 1 January 2011 and is composed of three stages, aligned with the realizations of benefits:

  1. Stage 1: (B1) completion of components C1, C2, and C5 planned for 1 April 2011.

  2. Stage 2: (B3) adding components C3 and C6. Component B3 to be realized for 1 September 2011.

  3. Stage 3: (B2) adding component C4. B2 to be realized for 1 September 2011.

It is now 1 July and the following has been reported:

  • C1, C2, and C5 are complete.

  • C3 and C4 are 75% complete.

  • C6 is not yet started.

  • Spend to date (actual cost) is € 370,000.

The Earned Benefit Curves

The Planned Value Curve

This curve (see Exhibit 6) is composed of the summed planned values of the components—here it is cumulated on a monthly basis.

The planned value (cumulative cost) curve

Exhibit 6. The planned value (cumulative cost) curve.

The Planned Benefit Curve

This curve (see Exhibit 7) is composed of the summed planned benefits— here it is cumulated on a monthly basis based on the earned benefit formula (see section on Review of Earned Benefit Calculations). For comparison, the planned value curve is shown on the same chart.

The Planned Benefit and Planned Value Curves

Exhibit 7. The Planned Benefit and Planned Value Curves

The Benefit-Cost Curve

As explained in the section on The Benefit-Value Curve, Exhibit 8 shows two curves plotted against the forecast spend:

  1. The planned benefit curve

  2. The planned value curve

A benefit-cost curve showing planned benefit and planned value (or cumulative cost)

Exhibit 8. A benefit-cost curve showing planned benefit and planned value (or cumulative cost).

Some Calculations

Earned Benefit and Percent Complete

Using the component-benefit matrix above, calculate

1) the earned benefit,

2) the % benefit realized for the program

The worked solution is as follows (showing the unnormalized component-benefit matrix; normalization is carried out on-the-fly in Excel):

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Benefit Performance Index. The planned benefit, PB, (earned benefit (EB) if we were on-plan) is € 404,000, giving a BPI of 91% and a benefit variance, BV, of - € 34,300.

Benefit Schedule Variance; Benefit Schedule Performance Index

The benefit schedule variance is the difference between the data date and the EBED: the date at which the current earned benefit was planned to be achieved. This can be read off the planned benefit curve, and shows we are approximately 1 month late.

Looking at this another way, the program has been running for 6 months and has slipped by 1 month, so the benefit schedule performance index (BSPI) is 5/6 or 83%.

Benefit Value Schedule Variance, Benefit Value Performance Index

A simple analysis might say: the actual cost is no greater than the earned benefit, so we may have slipped a bit. In addition, EV and PV are virtually identical so, we are not doing too badly, are we? A closer (benefit-related) analysis puts a less optimistic view on the matter.

The AC (€370,000) corresponds to the PV for 1 month later (the VED); whereas the EB corresponds to the PB for one month earlier (the EBED), so we are, in essence 2 months adrift after 6 months, which equates to 4/6 or a 67% benefit value performance index. For comparison, the BSPI is (6-1)/6 or 83% at this point, since it ignores the budget overrun.

All of the values from this example as well as a number of EB indicators that have not been explained previously have been provided in the following table for any reader who might like to check their understanding of the concepts (and of Excel!)

Earned Benefit Abbreviations and Values

AC Actual Cost Total spend to date € 370,000
AD Actual Date Date of data 01-Jul
ADD Actual Date Duration Days since start 181 days
BAC Budget At Completion Total Budget € 470,000
BCPI Benefit Cost Performance Index EBEV / AC 86%
BPI Benefit Performance Index EB / PB 92%
BSPI Benefit Schedule Performance Index EBEDD / ADD 83%
BSV Benefit Schedule Variance EBEDD – ADD -30 days
BV Benefit Variance EB – PB -€ 34,000
BVPI Benefit Value Performance Index EDD – (VEDD – EBEDD) / EDD 66%
BVSV Benefit Value Schedule Variance EBEDD – VEDD -61 days
CBM Component-Benefit Matrix See example
CCBi Component Contribution to Benefit sum over columns j of {[CBM(ij) * B j}
CEBi Component Earned Benefit % complete i * CCBi
CPI Cost Performance Index (EVM Formula): EV / AC 93%
EB Earned Benefit The sum of all the CEBi € 370,000
EBAC Earned Benefit at Completion Total forecast benefit value € 600,000
EBEC Earned Benefit Equivalent Cost The PV for a given EB € 320,000
EBED Earned Benefit Equivalent Date Planned date for current EB 01-Jun
EBEDD Earned Benefit Equivalent Date Duration Days since start 151 days
EBEV Earned Benefit Equivalent Value The EV that corresponds to the EB € 320,000
EDD Elapsed Duration AD – PSD 181 days
EV Earned Value Sum of component Earned Values € 342,500
PB Planned Benefit The EB expected at a given date € 404,000
PPC Program Percent Complete EB / EBAC 62%
PED Planned End Date Program or stage completion date 01-Sep
PEDD Planned End Date Duration Days since start 243 days
PSD Start Date Origin for calulating durations 01-Jan
PV Planned Value Sum of component Planned Values € 345,000
SPI Schedule Performance Index (EVM formula): EV / PV 99%
        •Time:TCPT/ BSPI 178%
TCPFx To Complete Performance Factor     •Cost: TCPIC / BCPI 173%
        •Benefit: TCPIB / BPI 128%
        •Time: (PEDD – EBEDD) / (PEDD – ADD) 148%
TCPFx To Complete Performance Index     •Cost: (BAC – EBEC) / (BAC – AC) 150%
        •Benefit: (EBAC – EB) / (EBAC – PB) 117%
VEB Value Equivalent Benefit The PB for a given AC € 437,500
VED Value Equivalent Date Planned date for spending AC 01-Aug
VEDD Value Equivalent Date Duration Days since start 212 days
This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI or any listed author.

© 2010, Crispin (“Kik”) Piney
Originally published as PMT01 in 2011 PMI Global Congress Proceedings – Dublin, Ireland

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