Creating Strategic Capital for EVM. EVA th June 2012 Andrew Hill PROJECT CONTROLS CONSULTING

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1 Creating Strategic Capital for EVM Responsible for the successful delivery of projects for our clients EVA th June 2012 Andrew Hill

2 Strategic Capital What is strategy? Analytical thinking & commitment of resources to action and innovation. Making decisions today about an uncertain future. Taking the right risks while exploring opportunities. Peter Drucker so what is this to do with EVM?

3 Components of a strategy Foundation of Vision, Values & Mission Scenario Planning Understanding of External and Internal Environment Measures & Monitoring Evaluation of Options in context of Reality Comms Involvement & Celebration

4 Components of a strategy Foundation of Vision, Values & Mission Scenario Planning Understanding of External and Internal Environment Measures & Monitoring Evaluation of Options in context of Reality Comms Involvement & Celebration Failure to execute is the single greatest reason for strategy failure

5 A few basic (but demonstrable) assertions: Projects are key to strategy implementation for many organisations Executives are accountable for strategy implementation Poorly implemented strategy causes Executives to get fired Project failure impairs strategy implementation Projects are more likely to succeed if: They follow good processes Their performance is closely monitored to make early interventions when needed EVM is the most effective way of monitoring project and programme performance

6 So you would think... For organisations which rely on success from their projects Measurement and monitoring systems for projects would be key to ensuring success Top management would require: Reliable status updates for the delivery of their key projects Assurance that the monitoring systems they are using can be relied upon to convey accurate status Understanding of project controls would be a key requirement amongst senior groups

7 What is the reality? Survey

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14 For the programme I work on EVM has just started to be used but it's level of use is not that high only the very basic level of reporting is undertaken i.e only BCWS, BCWP & ACWP are reported. I was very surprised to find out that the organisation did not use EVM to manage / get an idea of how the programmes are performing I think it is a very powerful tool to assist Managers / Project / Programme Managers and Directors manage their Projects.

15 I work with a wide range of organisations that are clients of the construction industry. A recurrent theme in discussions about EVM is the resistance amongst their contractors to making objective assessments of progress using techniques like EVM. This is partly because the commercial managers and QSs that dominate the administration of sub-contracts usually see progress measurement as a contractual matter rather than as a practical management issue. But it is largely due to the lack of expertise amongst contractors - they just don't know how to do it.

16 EV is an issue in several organizations I do work with. However, it's understood by a handful of people and not seen as a general concept for all parts of the organization. Understanding the benefits seems to be the biggest challenge. 5/30/2012

17 EVM has a recognised presence within my Company, although the inputs (complex processes and 'workarounds' to enter data into systems to support this) create outputs that are then difficult to analyse. Consistency across varied delivery programmes and portfolios continues to be a challenge. Baseline Management / Change Management needs to be better understood and utilised across the business. Objective progress measurement using key quantites needs to be better understood.

18 EVM is used specifically at project level but this is far from universal. The strategic drivers for EVM at business level are not understood. Mechanics of EVM is probably understood but the analysis of the output is lacking.

19 The organisation I am consulting to is quite keen on doing things right, but don't really understand EVM and therefore too readily play around with the inputs (usually via the programme) which then affect the outputs. The systems are available, they are simply not enforced which then means they are not used or at least not consistently. Clients want EVM in place, but don't take the time to test that it reflects reality.

20 We rely heavily on Tier 1 contractors who constantly play games To ensure commercial leverage. They also are very clever at not providing what the contract requires.

21 So what is this telling us Use of EVM is seen as very important or critical to the majority of organisations involved in survey Less than one third of participants believe they are currently dealing with strong implementations of EVM Only one quarter of participants see their Board management as driving EVM EVM is not delivering its potential in terms of the strategic value Understanding is low around many Board tables

22 Top action themes Improving delivery models with stronger integration Improved systems and processes Education / Training: What it is The value it brings Getting EVM to the heart of the strategic agenda in organisations

23 Fine but how?

24 We need to be more like Finance Finance Clearly recognised profession Statutory requirements Company Law Well established and increasing Standards IFRS Audited by independent professionals At the heart of Board focus EVM Less recognised as a profession No statutory requirement Standards exist but not enforced Generally voluntary Less central to Board management and not always understood

25 Gaining strategic capital for EVM needs: A battle for hearts and minds through: Communication / advocacy (Big Beasts?) Promotion of the benefits Greater understanding of the risks which can be better controlled through EVM More visible celebration of success stories More education / training at Board level help to create the demand Increasing professional recognition for practitioners

26 Processes Investment in processes is critical More companies need to invest in establishing / embedding proper processes for EVM Standardisation will help: Consensus on best practice standards Mobility of resources Almost all quality improvement comes via simplification of design, manufacturing... layout, processes, and procedures. Tom Peters Success dependent on: Integration Compliant culture Simplification (ease of use)

27 Systems / Tools Great systems and tools exist Lots of organisations trying to do EVM without building adequate systems solutions to support them Need to avoid the Excel trap The best solutions focus on: Integration (consistency) Data integrity /quality (reliability) Process alignment (efficiency) There is almost always a strong business case There is a cost to implementing systems but not implementing them costs a fortune

28 Trends More organisation understanding the value that EVM can bring. Key major projects promoting and successfully using EVM T5, Olympics, Crossrail. Increase in relationship based contracts (e.g. NEC 3) as a means of improving project outcomes Trend towards management of project issues as a priority over commercial issues Positive trends for EVM but old habits die hard!

29 So..one day EVM will be recognised as essential to the majority of organisations with significant projects Professional status of EVM practitioners will rise along with the expectations of them Most boards will use EVM to hold management accountable for the status of their projects Executives and many non-executive directors will be familiar with at least the fundamentals of EVM More projects will succeed as a result of better management But

30 When will this happen? Questions / discussion