Variance & Trend Analysis: Tools & Techniques

Instructor: Jagina McIntyre

Jagina has conducted professional training in communications and analytics for 12 plus years, with a a degree from Kent State University in Journalism and Communications.

A great introduction to understanding how variance and trend analysis can help companies predict what is going to go right and what might go wrong with a project.

Understanding the Impact of Variance and Trends in a Business

Have you ever been looking at results from a current promotion and wondered if you could have done something better? Perhaps you have been having steady sales and then suddenly there is a drastic drop that appears to come out of nowhere and you wondered what caused the drop? Then understanding the importance of variance and trend analysis might be just for you.

Variance analysis is a quantitative review of the differences between what we thought would happen versus what actually happened. While trend analysis is a quantitive review of what happens over a period of time. In most cases, variance and trends go hand in hand and are reported at the same time for the same metrics. There are many types of metrics that are reviewed in a company to determine opportunities for improvement.

What Should We Investigate

A variance is an investigation of two comparable data points. There are three major types of variance reviews:

  1. estimated versus planned
  2. planned versus actual
  3. estimated versus actual.

An estimate is a quote, and can often come from an external source or partner. For example, you are in charge of planning your company holiday party and you are told by human resources there are 100 employees.

A plan is determined internally, based on the estimate. You select a location that can accommodate at least 200 people, accounting for each employee to bring a guest.

The actual is based on what happens. It turns out that 150 people were present at the party.

The estimated versus planned variance is the difference between the quote, which you find out included employees working remotely in other cities. The planner assumed all employees would bring a guest. This variance between estimated and planned is +100, while the variance between planned and actual is -50.

Different Types of Investigation

There are typically three types of variances within a project that should be investigated: schedule, resource and scope. A variance is reported for a schedule to try and predict where the schedule will slip. A resource variance review is to make sure we are meeting budget or employee requirements. The scope variance takes into account the impact on other projects.

The Best View in Town

A trend line visually plots a metric over a period of time. Trend lines allow you to quickly see sharp spikes and dips in the data. Trend lines also allow you to view a variance gap closing or expanding over time.

A variance compares two points at a specific time, while a trend compares a series of data points over a time period.

For example, you are asked to plan the summer picnic for your company You have learned a lot from the holiday party. This time you contact the prior project manager to determine how many employees have attended in the past. You are able to get the numbers of attendees for the past five years of planned versus actual.

At the main office, the company has had approximately the same number of employees in the last ten years. However, several small remote offices have opened in different cities, but employees from out of town rarely attend. You notice that the first year of the company picnic the planned attendees were 200 and actual were 100. By year ten, the planned attendees were 150 and the actual attendees were 140. You realize that the variance gap of planned to actual attendees has steadily gotten smaller over the years, starting at -100 and shrinking to -10.

What Could Go Wrong

Foresight: Impact analysis is the process of identifying what can go wrong before it occurs. It is best to conduct this brainstorming exercise with key representatives from each area impacted.

Hindsight: There are a number of issues that should be investigated as part of reporting a variance or trend:

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