Compute The Variance Of Each Activity

Computing the Variance of Each Activity: A Comprehensive Guide

This article provides a comprehensive guide on how to compute the variance of each activity within a project or process. Understanding variance is crucial for effective project management, risk assessment, and process improvement. It allows you to identify activities with high variability, which might require closer monitoring or adjustments to mitigate potential delays or cost overruns. This guide will break down the process step-by-step, providing clear examples along the way.

What is Variance?

In statistics, variance measures the spread or dispersion of a dataset around its mean (average). A high variance indicates that the data points are widely scattered, while a low variance signifies that the data points are clustered closely around the mean. In the context of project activities, variance helps us understand the variability in the time or cost it takes to complete an activity.

Calculating Variance: The Steps

To calculate the variance of an activity, you need a dataset representing the time or cost taken to complete that activity across multiple instances or trials. Let's assume we're tracking the time taken to complete a specific task: "Develop Marketing Materials."

1. Collect Data: Gather data on the time taken to complete the activity. For example:

   • Trial 1: 5 days
   • Trial 2: 6 days
   • Trial 3: 4 days
   • Trial 4: 7 days
   • Trial 5: 5 days

2. Calculate the Mean (Average): Sum all the values and divide by the number of data points.

   • (5 + 6 + 4 + 7 + 5) / 5 = 5.4 days

3. Calculate the Deviations: Subtract the mean from each data point.

   • Trial 1: 5 - 5.4 = -0.4
   • Trial 2: 6 - 5.4 = 0.6
   • Trial 3: 4 - 5.4 = -1.4
   • Trial 4: 7 - 5.4 = 1.6
   • Trial 5: 5 - 5.4 = -0.4

4. Square the Deviations: Square each deviation to eliminate negative values.

   • Trial 1: (-0.4)² = 0.16
   • Trial 2: (0.6)² = 0.36
   • Trial 3: (-1.4)² = 1.96
   • Trial 4: (1.6)² = 2.56
   • Trial 5: (-0.4)² = 0.16

5. Calculate the Sum of Squared Deviations: Add up all the squared deviations.

   • 0.16 + 0.36 + 1.96 + 2.56 + 0.16 = 5.2

6. Calculate the Variance: Divide the sum of squared deviations by the number of data points minus 1 (this is called the sample variance; using N-1 provides an unbiased estimate of the population variance).

   • 5.2 / (5 - 1) = 1.3

Therefore, the variance of the "Develop Marketing Materials" activity is 1.3 days². This means that the time taken to complete this activity varies considerably.

Interpreting the Variance

A higher variance indicates greater uncertainty and risk associated with the activity. In our example, a variance of 1.3 suggests a relatively high degree of variability in the time taken to complete the task. This might prompt a project manager to investigate the reasons for this variability and implement strategies to improve consistency and predictability. For instance, more detailed task breakdowns, improved resource allocation, or better training might be considered.

Applying Variance to Project Management

Understanding activity variances is essential for:

• Risk Management: High variance activities present higher risk and require closer monitoring.
• Resource Allocation: Resources can be allocated more efficiently based on the variance of different activities.
• Scheduling: Accurate project schedules require considering the variability inherent in individual activities.
• Process Improvement: Identifying activities with high variance can pinpoint areas for process optimization.

By consistently calculating and analyzing activity variances, project managers can make more informed decisions, mitigate risks, and improve overall project performance. Remember to always consider the context and units when interpreting the variance. This data, combined with other project metrics, provides a holistic view for better project management and strategic decision making.