Getting Variances as a Project Manager? Here’s What To Do.
You’ve crunched the numbers. You’ve read the reports. You understand the earned value management data. And it’s all showing you that your project performance is varying from what was expected.
Understanding variance is one thing, but what do you do to act on that information? That’s what we are covering in this article. We’ll share some tips to help make the right decisions when you uncover variances as a project manager in your earned value analysis.
EV for project control
First, it’s worth remembering why earned value management matters on projects at all. The earned value management approach to project control exists to provide guardrails and guidance on project performance. It blends schedule and cost data with actual and planned performance to give you a rounded, data-driven view of how the project is going.
We use it as it takes emotion out of understanding project progress. It’s also a lot more accurate and useful than other methods of tracking progress, such as only using percent complete.
What is variance?
One of the things that drops out of earned value analysis is variance. Variance is a way of talking about deviations from plan; the difference between what happened and what was expected. You can have a variance in pretty much anything related to project management and control: variance to staffing levels, quality expectations, customer satisfaction results and more. However, the most common and widely used variances in project management are:
- Cost
- Schedule
- Actual cost
- Estimate at Completion.
These highlight the gap between the project management baseline and actual performance across the budget and schedule.
So you’ve discovered a variance?
Let’s say you’ve got your latest EV report and variances are noted. That’s not necessarily something to be concerned about. Remember, most projects don’t go perfectly to plan and a little shift in cost and dates is often to be expected. Keep the variance in perspective.
The first thing to do is to review the underlying data and make sure you understand the cause of any variance. Schedule variance, for example, could be due to a lot of things including:
- Unplanned staff absence meant people were not available to complete the work on time
- Extra staff on the job meant the work was completed early
- The work turned out to be more complicated than expected and took longer
- The work was easier than expected and took less time
- The estimating assumptions and process were poor and didn’t reflect the actual effort involved.
When you understand why something happened, it’s easier to discuss the variance with the team to plan out your next steps.
Create a corrective action plan
The next step is creating a corrective action plan (CAP). This could be as simple as having a conversation with someone, or an in-depth detailed report with lots of tasks to be completed.
The action plan is most important if you have a negative variance on the project. In other words, if the work is running behind schedule or over cost. Stakeholders tend to be more forgiving of work coming in early or under budget, but depending on the situation those can be equally difficult for certain projects and industries.
The action plan should address the ‘why’ behind the variance. For example, if the issue is not having enough staff, the corrective action is to find some more people with the right skills to plug the resource holes. That sounds simple, but complex projects are a web of interrelated dependencies. Adding more staff costs more and that might create performance issues elsewhere, so dig into the root cause and consider all your options before deciding on a course of action. If you can address the underlying reason for the variance (and not the symptom) then it is less likely to happen again later in the project. As a result, the project has more chance of delivering on time and on budget, with fewer future issues with variance – at least, related to that topic.
Read more about variance analysis.
Report the variance
Never try to cover up a variance. It should be accurately reported in all the right places to all the relevant stakeholders. Report the cause, effect, impact on the project and the actions being taken to get back on track.
Not only is this good business ethics and project control, it also allows you to see if your corrective actions are working. Hopefully, once the action plan starts to take effect, you’ll see the gap between planned and actual performance close again, reversing the trend.
If you aren’t sure what to report or how to interpret the data, our one-day EVMS variance analysis training makes it simple.
Keep the historical records
One of the issues we see with live data dashboards is that the data only reflects the current moment in time. All the history of project performance is removed from the real-time dashboard and it’s a lot harder to track how a project is trending.
Make sure your system and reporting are set up to track historical performance and keep records that can be looked at in the future. This should be easy with a robust EVM system, as long as it is configured correctly.
There are a few cases where it is OK to change historical records, for example if there was a data error or it is part of planned changes. Take some advice from your PMO before going back and editing past performance in your tools, because that can affect the integrity of reports and you will want to keep accurate records about what was done.
Getting variances as a a project manager help the project team manage the work, control the project and make the right decisions. Variance reporting protects both the project and all the stakeholders from surprises and miscommunication, so it’s an essential part of delivering a project for your client.