Variance refers to the difference between planned (or expected) performance and actual results. In project management, analyzing variance is essential for understanding how well a project is progressing and whether corrective actions are needed.
Project managers primarily focus on two types of variances:
- Cost Variance (CV): The difference between the budgeted cost of work performed and the actual cost incurred. It indicates whether the project is under or over budget.
- CV = EV – AC
- Calculation results interpreted: Positive CV is good. Negative CV is bad.
- Schedule Variance (SV): The difference between the planned progress and the actual progress achieved. It shows whether the project is ahead of or behind schedule.
- SV = EV – PV
- Calculation results interpreted: Positive SV is good. Negative SV is bad.
Together, these metrics provide a snapshot of overall project health and performance.
When variances occur, project managers analyze them by asking four key questions:
- What is the impact on the project?
Determine how the variance affects scope, timeline, cost, and quality. - Is the impact significant enough to require action?
Not all variances are critical—some may fall within acceptable thresholds. - What is the root cause of the variance?
Identify underlying issues such as inaccurate estimates, resource constraints, or unforeseen risks. - Will this variance trigger other variances?
Assess whether the issue could create ripple effects in other areas of the project, such as delays leading to increased costs.
By systematically evaluating variances, project managers can make informed decisions, implement corrective actions, and keep the project aligned with its objectives.