How do you handle AC and EVM for agile or hybrid projects?

1 Adapt the EVM metrics

The traditional EVM metrics, such as schedule variance (SV), cost variance (CV), schedule performance index (SPI), and cost performance index (CPI), may not be suitable for agile or hybrid projects, as they assume a fixed baseline and a linear progress. Instead, you can adapt the EVM metrics to reflect the value delivered by each iteration or sprint, using the agile earned value (AEV) formula:

AEV = (BAC / Total Sprints) x Sprints Completed x % of Sprint Goal Achieved

This formula calculates the earned value based on the budget at completion (BAC), the number of sprints completed, and the percentage of sprint goal achieved. You can then compare the AEV with the AC to get the agile cost variance (ACV) and the agile cost performance index (ACPI).

2 Use story points or features as units of measure

Another way to handle AC and EVM for agile or hybrid projects is to use story points or features as the units of measure, instead of hours or dollars. Story points are a relative measure of the size and complexity of a user story, while features are the deliverables that provide value to the customer. By using story points or features, you can estimate the EV of the work done in each iteration or sprint, and compare it with the AC in terms of resources consumed or money spent. For example, if you have 100 story points in your backlog, and you complete 20 story points in a sprint, your EV is 20% of the total value. If you spend $10,000 in that sprint, your AC is $10,000. You can then calculate the SV, CV, SPI, and CPI using these values.

3 Track the value stream and the flow efficiency

A third way to handle AC and EVM for agile or hybrid projects is to track the value stream and the flow efficiency of the work done. The value stream is the sequence of activities that deliver value to the customer, from ideation to delivery. The flow efficiency is the ratio of the value-added time to the total lead time. By tracking the value stream and the flow efficiency, you can identify and eliminate waste, optimize the flow of work, and increase the value delivered per unit of cost. For example, if your value stream consists of five stages: analysis, design, development, testing, and deployment, and each stage takes 10 days on average, your total lead time is 50 days. If the value-added time in each stage is 5 days, your flow efficiency is 50% (25/50). You can then use the flow efficiency as a proxy for the EV, and compare it with the AC to measure the cost-effectiveness of your project.

4 Align the EVM reporting with the agile cadence

A fourth way to handle AC and EVM for agile or hybrid projects is to align the EVM reporting with the agile cadence and feedback loops. Instead of reporting the EVM metrics at fixed intervals or milestones, you can report them at the end of each iteration or sprint, or even more frequently, using tools such as burn-up charts, burn-down charts, cumulative flow diagrams, or dashboards. This way, you can monitor the project performance and progress in real time, and adjust the scope, budget, schedule, or quality as needed, based on the customer feedback and the business value delivered.

5 Involve the team and the stakeholders

A fifth way to handle AC and EVM for agile or hybrid projects is to involve the team and the stakeholders in the EVM process. EVM is not only a technical tool, but also a communication and collaboration tool that can help you align the expectations and priorities of the team and the stakeholders, and foster a shared understanding of the project goals and value. By involving the team and the stakeholders in the EVM process, you can ensure that the EVM metrics are relevant, accurate, and transparent, and that they reflect the voice of the customer and the team. You can also use the EVM metrics as a basis for discussion, feedback, learning, and improvement, rather than as a source of blame or control.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?