Sample Selection from Distributed Systems Project Management

8.4 Productivity Measurement

While earned value has been used on projects since the 1960s, productivity measurement was not recognized as important until later. One of the earliest papers to clarify the importance of productivity measurement was [Howes 84] titled Managing Software Development Projects for Maximum Productivity. At the time it was written, monitoring the cost performance ratio was not widely practiced. By the 1970s, it was common for projects to use the rudimentary productivity measurement method of comparing achieved (actual) unit rates for tasks with the budgeted unit rates. But even this was not widely practiced. Since comparing unit rates involves quantification, it was not clear how this technique could be generalized to summary level control packages in the WBS because the unit of measure for a control package is independent of the units of measure for the tasks it contains.

Also at that time, it was not understood that estimating variances should be separated into quantification variances and productivity variances as explained earlier. This caused the earned value calculations to be performed in a non-uniform manner over the project lifetime because the budget that project management was using for project control was continually being corrupted by the addition of productivity variance components. This tended to make the earned value look better as the productivity got worse. Nor was it understood that productivity measurement should be undertaken systematically for the purpose of discovering the cause of productivity deviations. Since that time, the author has made progress clarifying these concepts both in papers and in project management computer systems. The first of these systems to provide productivity reporting was copyrighted by the author in 1983 but not distributed widely. It had much of the functionality of the Modern Project toolset provided with this book.

8.4.1 The Productivity Ratio

The productivity ratio PR(t) is defined as PR(t) = EM(t) / AM(t) where EM(t) is the earned man-hours at time t and AM(t) is the actual man-hours expended at time t. In [Howes 01] it is proven that the productivity ratio at time t is same as the ratio between the budgeted unit rate to the actual unit rate, which was the old method of calculating productivity for tasks that were statused using the unit method of statusing. The importance of the productivity ratio PR(t) for a task t, lies in the fact that it can be defined for each control package and each work package, i.e. it is a generalization of the old productivity measurement that agrees with the old method in the case where statusing is the most objective.

8.4.2 The Productivity Report

The Productivity Report for the example project is shown in Figure 8-8. It plays the same role with respect to the Cost Performance Trend Chart as the Cost and Schedule Variance Report does for the Earned Value Chart. If the Earned Value Chart reveals an unfavorable trend, the Cost and Schedule Variance Report can be used to isolate the problem work packages. Similarly, if the Cost Performance Trend Chart shows an unfavorable trend, the Productivity Report can be used to isolate the offending work packages. Consequently, the Productivity Report also lends itself to the management by exception philosophy.

The productivity of a project is the most important thing a project manager can manage. The project manager may not be able to manage quantification deviations or changes in the scope of the work. These are essentially estimating errors and the project manager may not have made the estimate. It is often the case that a business development department develops the project plan and the project manager is not selected until after the contract is successfully negotiated. In this case these deviations have already happened and are waiting to be discovered by project management. Also, the client over whom the project manager may have little control may introduce changes in the scope of the work.

But productivity is occurring each day. Project labor expenditures are usually the dominant cost component on a project. Enhancing productivity is where the project manager can increase project performance and build a cushion against possible future difficulties. Experienced project managers know that the primary resource over which they have control is the labor resource.

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