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Earned Value Management Variance


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Earned Value Management Variance …

Earned Value Management Variance

Variance isn't a dirty word.

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  • 1. Earned Value Management Variance04/07/11by TheCobraGuyVariance isn’t a Dirty WordThere’s a lot of process and rigmarole involved in reportingvariance 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 asthey inevitably crop up on their accounts. Unfortunately,variance has a stigma seated in fear of failure. Sadly thatstigma could and should be eradicated and the people in thepilot’s seat – upper management – should be reassuring theirlieutenants that variance is actually a good thing.That sounds a little odd, but if you hand any Earned Value Management (EVM) professional aCPR that boasts no variance, that person will quickly conclude you’ve failed to execute anymeaningful earned value on your project. Variance should be added to the other two certaintiesin 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 tomeasure your project was only your best guess about how things would unfold. When didanything 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 putsthe ‘M’ in EVMS. So let’s start to change our minds about what a variance really means. What itmeans is, “I planned it this way, things changed, and the EVM system, if it was set up right, isgiving me a heads up while I can still do something about it.”We often see variance reports that, instead of giving facts and figures aboutwhat’s really happening on the control accounts, are filled with defensiverhetoric and platitudes. This can occur because of inexperience on themanager’s part or just a lack of understanding about the purpose of earnedvalue generally. This is common because most people have earned valuethrust upon them as part of a larger responsibility.MitigationYou can’t mitigate unforeseen events on your project, so variance reportingin that context is to be expected. You can and should however, be able to Ten Six Consulting LLC | T: (703) 910-2600 F: (866) 780-8996 | 576 N. Birdneck Rd, #626 Virginia Beach, VA 23451  
  • 2. mitigate unnecessary variance that occurs because you didn’t set up your EVMS correctly fromthe outset. Poorly chosen earned value techniques on your work packages can rob you ofperformance and have your team going blind working on avoidable variance paperwork ratherthan focusing on getting the project done. The common mistakes we see in the field are these: 1. Underestimating the scope of setting up a certifiable earned value management system. 2. 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. 3. Not investing in the earned value education of your management team. 4. Trying to insert an EVMS into a project that has already started. 5. Attempting to plan a project without any understanding of earned value techniques and processes. 6. Attempting to plan a project with only some understanding of earned value techniques. 7. Thinking that an EVM system is just software.Getting back to variance issues for a minute, the mistakes listed above are ones that will prettymuch guarantee a difficult, costly and unpopular implementation of earned value. Variancetypically starts to appear on or around the third reporting cycle of most projects. This will happenearlier and in greater numbers on a badly setup system. When a huge number of variancesappear, you’ll quickly have the CAMs rebelling as they disappear in a sea of unnecessary paperwork and frustration.Bottom line – start as early as possible, educate your team, call in the experts if necessary andbe 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 wordaround the water cooler. Ten Six Consulting LLC | T: (703) 910-2600 F: (866) 780-8996 | 576 N. Birdneck Rd, #626 Virginia Beach, VA 23451