Variance Analysis in Project Management

Variance Analysis is a handy tool in data analysis, which can be used to measure the difference between actual performance and planned output in some of the project management processes, such as Key Performance Indicators (KPIs), Earned Value Management (EVM), and Program Evaluation and Review Technique (PERT). With Variance Analysis, you will be able to identify different factors that affect your results and how these factors affect your work, making it easier to adjust plans and improve your performance on the next projects.

What is Variance Analysis?

Are you having trouble meeting your project deadlines? Are you constantly going over budget? If so, you may want to consider using Variance Analysis in your project management processes. Variance Analysis is a data analysis technique that can help you measure the difference between actual performance and planned output, that is, the variance. 

By using Variance Analysis, you can more accurately identify where problems are occurring in your project so that you can make necessary adjustments. It's a good idea to run a Variance Analysis at least once during the life cycle of each project for a baseline comparison as well as when major changes have been made. It can also be used when you're looking for ways to improve efficiency or reduce costs.

Why Do We Need Variance Analysis?

We need Variance Analysis to help us understand how our actual performance compares to our planned output. By understanding the variance, we can make better decisions about how to adjust our processes. Additionally, Variance Analysis can help us identify areas where we need to make changes and improvements. For example, if there is a large variance in certain areas, it may be necessary to go back and review those processes. In other words, Variance Analysis can provide insight into what’s working well in our process as well as identify problem areas that need attention or adjustments. 

This technique works best when applied before any significant changes have been made so it can guide future decisions during times of uncertainty. Ultimately, the goal is to maximize output while minimizing input; but without knowing whether what we're doing is effective, even seemingly small things can become much bigger problems.

How to Do Variance Analysis?

To get started with Variance Analysis, the first step is to create a null hypothesis that would indicate an expected outcome for a particular process being analyzed. The second step is to gather data from each part of the process and use statistical analysis to find differences between them. 

Once the data has been collected, three statistical tests are performed: 

1) one-way Variance Analysis test (which allows for comparison among different categories), 

2) two-way Variance Analysis test (which allows for comparison among different variables), 

3) three-way Variance Analysis test (which allows for comparison among different variables). 

The results will then show whether there are significant differences between each category or variable. When the result shows significance, this indicates that there are variations between groups that could have an impact on product quality. Because Variance Analysis is a type of statistical test, it provides insights into what's working well in our process as well as identifying problem areas that need attention or adjustments. 

When Should We Use Variance Analysis?

There are many different data analysis techniques that can be used in project management processes, but analysis of variance (Variance Analysis) is particularly well suited for certain situations. Variance Analysis is likely to be used as a part of the measurement performance domain.

One way to take advantage of Variance Analysis is by using it as part of your project management process. After creating a plan and assembling a team, a project manager should ask questions like are my team members using their time effectively? Are they completing tasks at the right time? With Variance Analysis, you can assess these questions objectively. It's important to keep in mind that not all projects require the same level of detail. A quick assessment can reveal problems so that you don't waste resources going through unnecessary work. Alternatively, you might want to collect more detailed information and use Variance Analysis again later on in the project lifecycle. 

See also: Trend Analysis