Net Present Value (NPV) is the current worth of an income stream in today's currency. It is used to make a decision to proceed with an expenditure, for example: The construction of a new building Proceeding with a new business line Purchase of equipment Net Present value takes into account the time value of money. It uses a discount rate to convert future … [Read more...]
In 1986, the NASA Space Shuttle Challenger exploded spectacularly upon take-off in front of one of the largest live TV audiences in history (to that time). The investigation concluded that several tiny O-rings that sealed the rocket booster to the fuel supply failed. These O-rings were about 1 foot in diameter. Just like the tiny O-rings were able to bring down the … [Read more...]
Six Sigma was a powerful quality improvement system developed by Motorola that took the world by storm in the early 2000's with high profile adoptions by General Electric, Honeywell, and others. Lean was a manufacturing methodology originated by Toyota, which turned manufacturing on its head by focusing on minimizing idling products (inventory) rather than minimizing … [Read more...]
In the operating room, Doctors monitor the vital signs of their patients using a device called an electrocardiogram. This device is familiar to most people - It's the monitor that displays the electrical pulses of the heart. In project management, project health is measured by the Cost Performance Index, usually abbreviated as CPI. The Cost Performance Index is one of … [Read more...]
In project management, getting an early indication of problems is the silver bullet that allows the project manager to correct the problems before they start. Cost Variance, usually abbreviated as CV, is one of the fundamental outputs of Earned Value Management. It tells the project manager how far ahead or behind the project is at the point of analysis, usually right … [Read more...]
Every profession has a unique way of thinking, a perspective that must be adopted to practice it well, and project management is no different. In this day of agile project management, critical paths are as important as ever. Yes, it's a hard number, that is, a calculation that results in a completion date for a set of tasks. But more than that it's also a mindset. … [Read more...]
Earned Value is a method of calculating project status. It does this from two perspectives: Time (schedule) and Cost. After applying the earned value method the project manager will know whether the project is: behind or ahead of schedule. over or under budget. In this post we will outline each formula in the earned value management system. The first three … [Read more...]
Projects don't manage themselves. Professional project management requires the development of a plan that outlines how it will be managed. According to the Project Management Body of Knowledge (section 4.2), the project management plan fulfills this purpose. Although it includes any and all items that define the management of the project, there are certain … [Read more...]
Earned value analysis is a project management method used to calculate the project status from two perspectives: Schedule. Is the project ahead of or behind schedule? Cost. Is the project over or under budget? Let's say you are the project manager for the renovation of 3 hotel rooms. The tasks are as follows: Preparation. Jan. 1 - Jan. 10, … [Read more...]
It's amazing how many projects do not know their true status until near the end, when there is little that can be done to ensure they finish on time or budget. The proper time to rigorously track project status is at the beginning, not at the end. This is when project risk can be managed and changes made to get it back on track. Earned value analysis is the … [Read more...]
