How can you calculate the CPI
Earned Value Analysis. Project controlling with the completion value.
The 3 types of earned value analysis
The decisive variable for calculating the EV is the degree of progress (PC). This differs depending on the type of earned value analysis: If you plan traditionally with activities and work packages, then use a value in percent. In agile planning, you use the ratio of the PV of the completed requirements to the PV of all planned requirements. Hybrid projects use a combination of both. Here are a few examples.
1. The classic earned value analysis
In a classic earned value analysis, the PV of an activity is the total planned effort for this activity.
Enter a value in percent as the Percent Complete (PC). It tells you how much work has already been done on the activity.
To calculate the total EV of your project:
- calculate the EV for each work package of an activity,
- sum the EV of the work packages to get the EV of the activity, and
- sum the EV of the activities.
EV project = EV activity 1 + EV activity 2 + EV activity 3 + ...
Example of a classic earned value analysis
An activity has a planned effort of 50 person days. After two weeks you want to determine the completion value for this activity. You can see that the person responsible has entered 15%. Now the EV for the activity is calculated as:
EV = 50 PT * 0.15
EV = 7.5 PT
Do you now have e.g. 3 activities (without work packages) in your project with the following properties:
- Activity 1: PV = 50 PT, Progress: 80%
- Activity 2: PV = 30 PT, Progress: 25%
- Activity 3: PV = 35 PT, Progress: 50%
Then: EV project = 40 PT + 7.5 PT + 17.5 PT = 65 PT
As you can see, the calculation depends on a value that seems very subjective: The employee thinks they have completed 15% of the activity. How did he get that? Was it based on objective measures that suggest 15%? Or did he just guess? Experience shows that people tend to overestimate the work they have completed - the so-called "90% rule" then applies:
You think you are close to the end of the work, but the work takes a lot longer than the stated remaining 10%. To take this into account, you can use the classic earned value analysis to include the degree of progress in the calculation in 4 different ways. For each activity of your project you have to weigh up which form is suitable:
In this method, you allow the specified progress, e.g. 15%, to flow directly into the calculation without any changes. You can use the technique for longer activities, but should be used with caution. Because it is precisely in this case that you encounter the problem of the 90% rule.
Only completed activities are included in the calculation with 100%. Rate all other, incomplete activities with 0%. This technique is suitable for:
- Activities with uncertain results,
- short activities that are ended within a reporting period and
- Projects with many, small activities and short reporting cycles.
The degree of completion (PC) is therefore always underestimated. This makes the 0/100 rule the safest method in earned value analysis.
In this method you always allow 25% as progress for an activity started. Only when the activity is over do you add the remaining 75%. This technique thus mitigates the 0/100 rule, since it takes into account activities that have already started.
A started activity is always calculated with a PC of 50%. This way you rate the first half of the activity duration over and from the second half under. Use this technique for short activities that are started and ended within two consecutive reporting periods.
2. The agile earned value analysis
The agile earned value analysis can be applied to agile team, release and project activities. The total PV of the project corresponds to the originally planned effort for the top project activity.
There are 2 formulas for the degree of progress:
PC = PV of all completed requirements at the time of analysis / originally planned PV of the top project activity
PC = PV of all completed requirements at the time of analysis / PV of all planned requirements at the time of analysis
Why can progress be calculated in different ways? This is due to the agile nature of the project: You plan your requirements to be implemented from sprint to sprint. This realistically results in the actual planned effort of all requirements exceeding the originally planned effort. Would the progress that is calculated with the originally planned effort actually correspond to this?
Example of agile earned value analysis
You originally planned 500 days of effort for the project. You ran a sprint and completed all the requirements. Together, the completed requirements result in an effort of 25 PT. Then:
EV = 500 PT * (25 PT / 500 PT)
EV = 25 PT
You originally planned 500 days of effort for the project. You have carried out several sprints and also planned several requirements, which, however, show a total planned effort of 600 PT. The effort of the completed requirements also corresponds to 25 PT. Then:
EV = 500 PT * (25 PT / 600 PT)
EV = 20.83 PT
If you had calculated 500 PT for the progress, then your completion value would be higher than it is in reality, and the analysis would therefore be falsified.
But what happens if you have not yet fully refined planned features or epics in user stories? How do you then handle the calculation of planned effort and progress so that you do not falsify your earned value analysis? It is advisable to count on the planned effort of the feature or epic until you have completely derived the user stories. For example, plan 60 person-days of effort for an epic. From this you derive 2 user stories, which together result in only 55 person days and are completed. They know you need to refine the epic even further. So use the plan effort of the epic of 60 PT for the earned value analysis until you have completed the refinement. That way, the progression would be 55/60, not 55/55.
3. The hybrid earned value analysis
If you work hybrid, you plan with releases and sprints, but at the same time you have classic activities such as a rollout that is not planned in a timebox. Then look again at the top father activity (project activity) and first calculate the agile earned value of the project. The next step is to calculate the earned value of the classic activities and add up the results:
EV = Agile EV project + classic EV activity 1 + classic EV activity 2 +….
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