A crucial project tool, SPI communicates several important things, such as when to complete which tasks, their due dates, milestones that have been reached and are yet to be achieved, the resources assigned to do tasks, and so on. SPI in project management stands for Schedule Performance Index. It is a measure of the conformance of actual progress to the planned progress.
Schedule Performance Index 101: Measuring Project Scheduling Efficiency
The schedule performance index (SPI) determines how closely any project adheres to the planned schedule.
A project that is behind schedule can set off a chain of events that are adverse to the project's success. The project could go over budget, or the deliverables could be of poor quality, making the stakeholders unhappy, and everyone involved with the project stressed.
Hence, project managers use a variety of strategies and tools to keep things on track, such as PERT charts, Gantt charts, the prioritization matrix, and so on, regardless of the project management framework they use. And the schedule performance index (SPI) is the indicator used to compare the project's actual performance to the timetable.
What Is SPI in Project Management?
SPI is a component of Earned Value Management (EVM), a common technique for monitoring project success. EVM demonstrates how the work finished to date compares to the estimations determined during the project planning phase.
Schedule Variance (SV), an EVM metric, and SPI determine if a project is behind, on, or ahead of schedule. SV measures how far the actual work deviates from the planned timeline, whereas SPI is the proportion of completed work to scheduled work.
It measures scheduling efficiency and presents the project's status in percentage terms about the timeline.
Key Terms Used in SPI
A few key terms are critical components of the schedule performance index equation and calculating the SPI in project management correctly.
- Earned Value Management: This is a technique used for measuring project performance. Earned Value Management is a part of the SPI process.
- Planned Value: The Planned Value (PV) shows where you had expected to be on the project's schedule. PV presents how much you intend to achieve by a specific date. This is normally in the form of hours worked or, occasionally, units produced.
- Earned Value: The Earned Value (EV) shows the reality of where a project is on the schedule. This figure should be near or equal to the planned value, indicating that everything is on track. An SPI calculation verifies this.
- Schedule Variance: Another type of analysis in the EVM approach is Schedule Variance (SV), and it is vital to understand how it varies from the schedule performance index. The amount by which a project deviates from its original schedule is measured by schedule variance. While SPI, on the other hand, calculates the ratio of work completed to work planned (scheduled).
- Cost Performance Index (CPI): The SPI is sometimes mixed up with the cost performance index. The cost performance index measures the value of work to its cost. To put it more simply, work is divided by cost. The difference between CPI and the schedule performance index is that SPI measures time efficiency and CPI measures cost efficiency.
CPI vs SPI
The CPI is an earned value metric. SPI evaluates schedule efficiency, whereas CPI measures the cost efficiency of the project. It is the proportion of finished work to the total cost spent to complete the task.
The calculate the CPI, you need to divide the EV or Earned Value by the Actual Cost (AV):
CPI = EV / AC.
If the CPI calculation is:
Greater than 1: The project is under budget. The value of the performed work is more than the money spent.
Equal to 1: The project is on budget.
Less than 1: The project has exceeded the budget. The value of the performed work is less than the money spent.
To calculate the EV or Earned Value, you need to multiply the percentage of completed work by the Budget At Completion (BAC):
EV = % Completed work x BAC
BAC is the project's total budget.
AC is calculated by getting all the costs associated with the tasks performed. It includes machinery, labor, software licenses, travel, and so on.
Cost Schedule Index (CSI)
The cost schedule index is another earned value formula that assesses the overall efficiency of the project and determines how feasible it will be to recover a project that is deviating from its baselines.
CSI is calculated by multiplying the Cost Performance Index (CPI) with the Scheduled Performance Index (SPI):
CSI = CPI x SPI.
As CSI goes farther away from 1.0, it becomes more unlikely for a late or over-budget project to recover.
What Is the Formula for the SPI in Project Management?
The project's SPI can be computed by dividing the EV or Earned Value by the Planned Value (PV):
SPI = EV / PV.
If the SPI value is:
Greater than 1: The project is ahead of schedule. Work has exceeded expectations.
Equal to 1: The project is on schedule. Work is proceeding as expected.
Less than 1: The project is behind schedule. Less work has been done than planned.
Earned value can be calculated using the formula already mentioned above. To calculate the PV, multiply the percentage of the project completed (planned) by the Budget At Completion (BAC).
PV = % of the planned project completed x BAC.
Let’s Explain It With an Example.
If the project is scheduled for two weeks and the team has been working on it for exactly one week, according to the plan, 50% of the project should be completed.
Example SPI Calculation No. 1
Project A has a budget of $5,000 and is scheduled to be completed by the end of 30 days. To date, 50% of the work has been completed, which aligns with the project's schedule, and the actual cost is $3000.
Thus, the earned value is:
EV = % Actual Complete x BAC
EV = 50% x $5,000
EV = $2,500
The planned value to date is:
PV = % Planned Complete x BAC
PV = 50% x $5,000
PV = $2,500
Using the SPI formula, if we substitute EV and PV, we get:
SPI = EV / PV
SPI = $2,500 / $2,500
SPI = 1.00
Because the SPI equals 1, the project is on track. You get one hour's worth of work for every hour put into the project.
As we can see, the SPI is 1, but the project has exceeded the budget since the actual cost is $3000. Since we cannot measure cost efficiency with SPI, we need to use CPI or Cost Performance Index.
CPI = EV / AC
CPI = $2,500 / $3,000
CPI = 0.83
A CPI less than 1 means that the project has gone over budget, and for every $1 you spend on the project, you are getting $0.83 back.
Example SPI Calculation No. 2
Project B has a schedule of 15 days and a budget of $10,000. According to the schedule, 75% of the schedule should have been completed by now, but the team worked beyond expectations and completed 80% of the work, and the actual cost incurred was $8000.
EV = % Actual Complete x BAC
EV = 80% x $10,000
EV = $8,000
PV = % Planned Completed x BAC
PV = 75% x $10,000
PV = $7,500
Thus, the schedule performance index is
SPI = EV / PV
SPI = $8,000 / $7,500
SPI = 1.06
As the SPI is greater than 1, it means you get back 1.06 hours' worth of work for every hour you put in.
And the cost performance index is
CPI = EV / AC
CPI = $8,000 / $8,000
CPI = 1.00
The project's cost-effectiveness is equal to 1, which means for every dollar spent on the work, you get one dollar's worth of work.
When Should We Calculate the Schedule Performance Index?
One of the leading causes of project failure is falling behind schedule, which can be simply eliminated by calculating the schedule performance index at regular intervals throughout a project. The regular intervals of when the SPI will be calculated can be planned while creating the schedule since it may differ depending on the length and type of the project.
3 Tips to Work With the Schedule Performance Index
SPI has its limitations, and thus, it is important to remember the following considerations when working with SPI.
Tip 1: A Good SPI Isn’t Always Good
SPI in project management cannot differentiate between critical and noncritical tasks, which means that unimportant tasks that may be ahead of schedule could potentially mask critical tasks that have fallen behind schedule. As a result, SPI in project management may show that the project is proceeding at a good pace when it is not.
Furthermore, irrespective of the actual completion date, the SPI is always marked as 1 at the end of every project. So, even if the project was completed six months late, the SPI will say it was completed on time.
Tip 2: SPI is Only as Good as the Data You Keep.
The accuracy of the data provided for the SPI is critical. SPI won't be of much use if the data you're working with is flawed, such as delayed cost reporting or an incomplete task breakdown.
Tip 3: SPI Shouldn’t Be Used on Its Own
If the SPI indicates one thing and CPM indicates another, the SPI values should be studied alongside other project management methodologies, particularly CPM or the critical path method, to obtain an accurate picture of the project's schedule performance (CPM).
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