In the project management world, variance is a measurable change from a known standard or baseline. In other words, variance is the difference between what is expected and what is actually accomplished. This is a different definition of variance compared to statistics where variance is defined as the squared deviation from the mean! You need to understand what kind of variance is referred to since there is a huge difference between these two concepts of variance.
In project management, variance baseline is established by identifying the cost, schedule and scope. Scope defines all the work which needs to be done. The project management team creates a work-breakdown structure (WBS) which is a hierarchical view of all tasks to be accomplished. The cost and schedule is then identified according to the work-breakdown structure (WBS). The cost for each goal or task is estimated sometimes by using an average daily, hourly, monthly or yearly rate. The fixed costs are identified for each goal or task. In addition, the project management workers estimate how long in days or hours a goal or task is to be accomplished, Then they create a time-phased budget to quantify the performance cost.
After identifying the scope, schedule and cost, the project managers create a plan to manage variances from the triple constraints of scope, schedule and cost. A positive variance means the project is going on ahead of schedule or is under the cost. A negative variance means the project is late or over the cost.
Variance tracking is key to project management and needs a logical approach. The project mangers identify the variance thresholds and develop a plan in case it happens.