Variance

August 26, 2025
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What is Variance?

Variance is a project management metric used to measure the difference between planned and actual performance. It helps project teams understand how closely a project is adhering to its baseline in terms of cost, schedule, or scope. When a project does not go as planned, variance shows how far off the results are and in which direction. A positive or negative variance can indicate whether the project is ahead, behind, under, or over expectations. This insight allows managers to take corrective actions early, preventing minor issues from turning into major setbacks.

In earned value management (EVM), project managers commonly use cost and schedule variance as key performance indicators.  These values support performance evaluations and forecasting throughout the project lifecycle.

Key Points

  • It measures the difference between planned and actual project results.
  • Project managers use it to assess performance in areas such as cost, time, and scope.
  • Positive variance may indicate the project is under budget or ahead of schedule.
  • Negative variance may show overruns or delays that need investigation.
  • It supports decision-making and helps identify trends that may require action.

Related Terms

  • Cost variance represents the difference between the budgeted cost of work performed and the actual cost, enabling the assessment of financial performance.
  • Schedule variance compares the planned progress to the actual progress, highlighting timing differences.
  • Baseline refers to the original project plan used as a reference point for measuring deviations.
  • Earned value is used to calculate variance by assigning value to completed work.
  • Performance measurement baseline is a combination of scope, time, and cost plans that form the basis for variance analysis.

Variance: Example

A project team planned to complete a phase in four weeks with a budget of $40,000. After four weeks, the phase is only 75% complete and has already incurred $45,000 in costs. The schedule variance indicates that the project is behind schedule, while the cost variance reveals an overrun. These indicators enable the team to evaluate the situation and adjust resources or timelines accordingly.

Variance: Best Practices

  • Set clear baselines before beginning project execution.
  • Regularly measure and review deviations to detect early warning signs.
  • Use reliable project management tools for accurate tracking.
  • Promptly communicate findings about deviations to stakeholders.
  • Investigate root causes to address and reduce future deviations.

Additional Resources

Variance - The Standard for Earned Value Management     Variance - A Guide to the Project Management Body of Knowledge (PMBOK Guide)

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