Performance Variances: Integrated Analysis for Corrective Action

PMBOK v8 Definition

Variance analysis is a technique for determining the cause and degree of difference between the baseline and actual performance. The technique uses mathematical models to forecast future outcomes based on historical results. Variance analysis reviews the differences (or variances) between planned and actual performance, including duration estimates, cost estimates, resource utilization, resource rates, technical performance, and other metrics—all from an integrated perspective considering cost, time, technical, and resource variances in relation to one another.

Why It Matters for the Exam

Variance analysis appears frequently in PMI exam questions testing your ability to interpret performance data and determine appropriate corrective actions. Expect scenario-based questions where you must identify which variance type is being described, recognize when thresholds require action, or select the correct technique for analyzing performance deviations.

Key Points to Remember (for the exam)

• Core Purpose: Determines the cause and degree of difference between baseline and actual performance
• Key Inputs: Work performance data (actual results) compared against the project management plan (baseline)
• Integrated Approach: Reviews cost, time, technical, and resource variances together—never in isolation
• Mathematical Models: Uses historical results to forecast future outcomes
• Threshold Trigger: Variance thresholds in the project management plan determine if preventive or corrective action is required
• Metrics Analyzed: Duration estimates, cost estimates, resource utilization, resource rates, technical performance
• Key Output: Identification of appropriate preventive or corrective actions

Typical PMI Exam Example

A project manager reviews work performance data showing actual costs are 15% over budget. The project management plan defines a 10% variance threshold for cost. The project manager compares actual performance to the baseline, analyzes the cause using variance analysis, and determines corrective action is required. The integrated review also reveals schedule variance and resource utilization issues that contributed to the cost overrun.

PMI Exam Traps

• Trap: Treating variance analysis as only a cost or schedule tool

• Reality: Variance analysis is an integrated technique considering cost, time, technical, and resource variances together

• Trap: Confusing work performance data with work performance reports

• Reality: Work performance data is raw measurements; work performance reports are compiled information that generates decisions

• Trap: Thinking variance analysis only identifies problems, not solutions

• Reality: Variance analysis initiates appropriate preventive or corrective actions

• Trap: Assuming all variances automatically require corrective action

• Reality: Only variances exceeding defined thresholds in the project management plan trigger action

Important PMI Connections

Quick Review Questions

1. A project manager notices actual costs exceed planned costs by 8%. The variance threshold in the project management plan is 10%. What should the project manager do?

2. What four types of variances must be considered together in an integrated variance analysis?

3. What determines whether a variance requires preventive or corrective action?

4. How does variance analysis use mathematical models to forecast future outcomes?

5. What is the difference between work performance data and work performance reports in the context of variance analysis?

PMBOK v8 Reference

Section 4.6 - Monitoring and Controlling Process Group: Variance Analysis