Variance isn’t a Dirty Word
There’s a lot of process and rigmarole involved in reporting variance as part of an Earned Value Management System (EVMS). We’ve witnessed many Control Account Managers (CAMs) trying to duck and weave around variance issues as they inevitably crop up on their accounts. Unfortunately, variance has a stigma seated in fear of failure. Sadly that stigma could and should be eradicated and the people in the pilot’s seat – upper management – should be reassuring their lieutenants that variance is actually a good thing.
That sounds a little odd, but if you hand any Earned Value Management (EVM) professional a CPR that boasts no variance, that person will quickly conclude you’ve failed to execute any meaningful earned value on your project. Variance should be added to the other two certainties in life – death and taxes. You are going to have variance.
Your job as the Control Account Manager is to catch it early and figure out how to mitigate it. After all, the Performance Measurement Baseline (PMB) against which you are attempting to measure your project was only your best guess about how things would unfold. When did anything ever go exactly according to plan?
Management isn’t about getting everything right – management is about fixing what goes wrong. That’s why the word ‘management’ appears as part of the earned value method’s name; it puts the ‘M’ in EVMS. So let’s start to change our minds about what a variance really means. What it means is, “I planned it this way, things changed, and the EVM system, if it was set up right, is giving me a heads up while I can still do something about it.”
We often see variance reports that, instead of giving facts and figures about what’s really happening on the control accounts, are filled with defensive rhetoric and platitudes. This can occur because of inexperience on the manager’s part or just a lack of understanding about the purpose of earned value generally. This is common because most people have earned value thrust upon them as part of a larger responsibility.
You can’t mitigate unforeseen events on your project, so variance reporting in that context is to be expected. You can and should however, be able to mitigate unnecessary variance that occurs because you didn’t set up your EVMS correctly from the outset. Poorly chosen earned value techniques on your work packages can rob you of performance and have your team going blind working on avoidable variance paperwork rather than focusing on getting the project done. The common mistakes we see in the field are these:
- Underestimating the scope of setting up a certifiable earned value management system.
- Assigning your control accounts too far down the work breakdown structure. If control accounts are too low down, too detailed, your CAMs will spend their lives explaining every little hiccup.
- Not investing in the earned value education of your management team.
- Trying to insert an EVMS into a project that has already started.
- Attempting to plan a project without any understanding of earned value techniques and processes.
- Attempting to plan a project with only some understanding of earned value techniques.
- Thinking that an EVM system is just software.
Getting back to variance issues for a minute, the mistakes listed above are ones that will pretty much guarantee a difficult, costly and unpopular implementation of earned value. Variance typically starts to appear on or around the third reporting cycle of most projects. This will happen earlier and in greater numbers on a badly setup system. When a huge number of variances appear, you’ll quickly have the CAMs rebelling as they disappear in a sea of unnecessary paper work and frustration.
Bottom line – start as early as possible, educate your team, call in the experts if necessary and be ready to accept change in your management culture. If you get it right from the outset, variance reports will become just another tool in your arsenal for success, not a swear word around the water cooler.