What are the best practices for integrating EVM with agile methods?

Integrating EVM and Agile starts with defining a baseline. If there is one (scope, schedule and budget defined at some level), then EVM can be used for measuring performance. Agile projects typically do have a baseline, not neccessarily defined in the traditional EVM terms. Scope is defined through objectives, not detailed planning packages. Budget may not be visible to Agile roles, but some level of the organization will allocate funds to reach objectives. And while deadlines may not be tied to work packages, expectations on reaching a business objective by a specific milestone effectively define a schedule baseline. The method used to specify and update the baseline will guide how EVM metrics will be adapted to an Agile process.

I developed an EVM for agile almost 15 years ago. I now call it VGM or “Value Gained Metrics”. The key is knowing how you “value” is gained. Do you time box your sprints, do you break down Epics to Features and then onto tasks? The two biggest things are 1. Do you do the same thing across multiple projects (repeatable process), and, 2. How do you want to track value? If you don’t value the cost of an hour for everyone the same, how do you measure the variance between resources used? WVM can be done without those, but you loose a lot that way.

As a CSPO, this often comes up when I advocate for using EVM. All you need to do is adapt the EVM metrics we usually use with Agile concepts. PV(BCWS) and AC (ACWP) become story points or ideal days rather than money. Track progress using burnup (work completed) or burndown (work remaining) charts to show actual vs forecast progress. You can also measure "Earned Business Value" by looking at revenue generated, cost savings and CSAT.

Integrating Earned Value Management (EVM) with agile methods entails adapting traditional EVM metrics to prioritize value-driven indicators within the agile framework. This involves focusing on metrics such as completed user stories or features rather than traditional measures like time or cost variance. Additionally, it requires establishing clear communication channels between agile teams and project stakeholders to ensure transparency and facilitate collaboration. Feedback loops are essential for incorporating stakeholder input and adjusting project plans iteratively. Flexibility is key, allowing for adaptation to changing requirements and evolving project dynamics.

In my mind, EVM and agile don't collide too much. The burndown chart is just a flipped version of the cumulative Earned Value. That being said, if agile is understood to be just blindly going forward without any estimates for completion, then of course, one could assume they are contradictory. Where they are different is in the timing of providing a Planned Value, given that in agile with time boxing, one may only get a proper estimate later in the project. However, in EVM one would also use a Rolling Wave planning approach with the details coming later. I favor the approach to use the retrospective for each sprint to use as a point in time to review the EVM metrics and the time and effort to completion.

The core conflict between Agile and EVM is often due to misunderstandings around planning and change. Agile prioritizes responding to change but doesn't reject having a plan, while EVM requires a baseline plan but doesn't preclude changing it. On the contrary, core benefit of using EVM is the ability to assess the effects of change and respond by modifying the plan. Problems arise when trying to force-fit EVM into Agile processes. One solution is to make EVM transparent to the delivery team, allowing the PM to build an EVM framework that complements Agile without compromising either approach.

To achieve success in applying EVM to an Agile project, PMs should adopt "plans are worthless, but planning is everything" mindset. A common mistake is taking the baseline plan as immutable, which denies the realities of any SW development project. Instead, after each review period, actuals are updated and then replanning is needed to define a new baseline. Continuously updating the baseline and applying EVM provides decision-makers with actionable insights, and the PM with a tool to manage expectations, stay in control of scope-schedule-budget constraints and lead the project to a successful completion.