Types of Variances: Favorable versus Unfavorable
In project management terms, a variance is the difference between the anticipated state of the project and the actual state at a particular point in time. At the beginning of the project, when the planned schedule, budget, scope, etc. have just been calculated, the actual state and the predicted state are exactly the same. There are no variances. This is the point at which the project should be baselined.
As time progresses, the execution of the project may not follow the plan exactly. For example, if a task starts later than it was scheduled to start, there is a difference between the baseline Start date and the actual Start date for the task. The actual Start date is later (greater) than the baseline Start and the difference between these two dates is a positive number – there is a positive variance. As you can imagine given this example, a positive variance is unfavorable. In this case, where a task is late to start, subsequent tasks may also be delayed, and the recalculated schedule may show a Finish delay.
All values captured as part of the project baseline information can be compared with the current schedule’s value. You may have variances for work, start, finish, duration and cost. In each case, a positive variance is unfavorable and means that the current schedule is greater than the baseline value. On the other hand, if tasks are completed earlier than scheduled, or with less effort or less money, the corresponding variance would be a negative number and would be regarded as favorable.
The most common work plan variances (work, cost, start, and finish) measure the difference between the current estimate and the original baseline estimate. If tasks are being completed late or in excess of their original work estimates, the project manager should look for trouble signs regularly to be sure that the plan is revised to adjust to the day-to-day realities of the project. If progress is not as expected, the project manager has to figure out how to revise the plan to extend the scheduled finish date, adjust resource assignments, or reduce scope.
The values in the current work, cost, start, finish, and duration fields are usually modified through the tracking process. As team members report unexpected changes in the plan, the current values will diverge from the original baseline values, causing variances. Our next post will summarize these different types of variances.