1. Purpose of Variance Analysis: Variance analysis systematically compares the actual performance with the planned or baseline performance. By identifying deviations early, project managers can take corrective or preventive actions to ensure the project remains on track.
  1. Steps in Variance Analysis:
    • Data Collection: Gather actual performance data. This could be in terms of scope completed, costs incurred, time spent, or any other relevant metric.
    • Comparison: Compare the actual data with the baseline or planned data. This will highlight any deviations or variances.
    • Identify the Cause: Determine the root cause of the variance. Was it due to external factors, incorrect estimation, resource constraints, or other reasons?
    • Evaluate the Impact: Assess the potential impact of the variance on the project’s objectives, deliverables, timeline, and budget.
    • Recommend Actions: Based on the cause and impact, recommend corrective or preventive actions. Corrective actions address the current variance, while preventive actions aim to avoid future variances.
  1. Tools & Techniques for Variance Analysis:
    • Performance Dashboards: These visually represent the project’s performance against the baseline.
    • Trend Analysis: This involves examining project performance to identify patterns or trends.
    • Cause and Effect Diagrams: These help identify the root cause of variances.
    • Expert Judgment: Engaging experts can provide insights into the reasons for variances and potential solutions.
  1. Decision Making: Once the variance is identified and analyzed, the project manager or the project steering committee needs to decide:
    • Accept the Variance: If the variance is minor and doesn’t significantly impact the project’s objectives.
    • Take Corrective Action: If the variance is significant and needs immediate attention to bring the project back on track.
    • Take Preventive Action: If there’s a potential for future variances, take actions to avoid them.
    • Update the Baseline: In some cases, updating the project baseline to reflect the new reality might be more practical.
  1. Continuous Monitoring: Variance analysis is not a one-time activity. Continuous monitoring and periodic reviews are essential to ensure the project remains on track. Regularly comparing actual performance against the baseline will help in the early detection of deviations and timely interventions.

Conclusion:

Variance analysis is a critical aspect of project management. It ensures that projects remain aligned with their objectives and provides a mechanism for early detection and correction of deviations. Project managers can proactively identify and address variances to ensure successful project delivery.