It feels good when you know how your project is doing. Your clients will have faith in you, and that's what everyone ultimately wants. On the flip side, if you are not fully aware of where the project is and if everyone is doing the right thing, you may be at a severe disadvantage.
According to the Project Management Institute, earned value management - or Schedule Variance specifically - will help you identify and control problems before it is too late. Making all the necessary calculations, you can compare the predicted expenditure with how much you have spent on the project so far. So what is schedule variance and how do you calculate it? Let's dive right into it.
Schedule Variance, also known as SV, is a metric that indicates whether a project's schedule is on track or not. It is wise to note at the outset that Schedule Variance only shows a project's progress in monetary terms, without drilling down to the quality. Below is the formula for Schedule Variance calculation:
The Schedule Variance of a project is calculated by subtracting the budgeted cost of work performed from the cost of work scheduled. That is,
SV = EV (Earned Value)– PV (Planned Value)
EV stands for Earned Value, which indicates how much work has been completed at that point in the project. PV stands for Planned Value, which indicates how much work was planned to be completed at that point in the project.
Sometimes you will find the formula as SV = BCWP – BCWS, which means the same. Here BCWP is the Budgeted Cost of Work Performed, and BCWS is the Budgeted Cost of Work Scheduled.
When a project starts out, the planned value (PV) and earned value (EV) are both zero. This means that at the start of the task, the Schedule Variance (SV) is also zero.
As time passes and work has been done, however, both the planned value and the earned value will be greater than zero. If the project progress is on track, the planned value and earned value will be the same, so the SV will be zero. If the project team get ahead of schedule, the SV will be positive. If a project delays occur, the SV will be negative.
For example, imagine you have a project running for 30 days, with a budget of $30,000. The PV at the end of day 10 is $10,000 - this is how much you expect to have spent at that point in the project. In reality, at the end of day 10, your team have spent $12,000. This is the EV.
SV = EV - PV, so SV = $12,000 - $10,000 = $2,000
To convert this to a Schedule Variance percentage, we use the following formula:
SV% = SV / PV, so SV% = $2,000 / $10,000 = 20%
The positive SV value tells us that the project is ahead of schedule, and the percentage helps us quantify that they are 20% ahead at this point.
Sometimes you need to measure the projects from the first project to the most recent one. You may need to calculate the projects in terms of time frame, for example from the 5th to 10th period of a project. You will use cumulative Schedule Variance to measure this.
This is the difference between earned and planned value over several consecutive periods. If you want to know cumulative CVs, you will sum up the Estimate Value (EV) for each period.
That is: EV for period 1 + EV for period 2 + EV for period 3. You will then subtract the total sum of Planned Value (PV) i.e PV for period 1 + PV of period 2+ PV for period 3. The result is the cumulative SV.
Although Schedule Variance is expressed in monetary terms, it's different from cost variance. Cost variance looks at the difference between the amount of money you are expected to pay against the actual amount you paid. For example, if your budget calls for $3,000 in purchasing office equipment, but you pay $8,000, that's a cost variance.
Schedule Variance is the difference between the time it's taking you to get things done and what you expected.
From a practical perspective, cost variances can be computed by examining the project's actual costs to date and comparing them to the budgeted amount for the tasks completed. This is done on a task-by-task basis, using the work breakdown structure as a guide for the planned values. The results can then be rolled up into a project cost variance.
If the Schedule Variance is positive, it usually indicates that the project is ahead of schedule, while a negative schedule variance indicates that the project is behind schedule. If the schedule variance is zero, you're right on track.
Unfortunately, things aren't always that straightforward. Here are some real-world Schedule Variance calculation tips:
Some people suggest there should be a "time based" earned schedule to make it easier to interpret Schedule Variance. This is because SV is only expressed in monetary value (dollars, pounds, euro etc.) making it difficult to measure in terms of units like months.
Calculating Schedule Variance is essential to help you anticipate any changes to the project's planned timeline. Project managers need to track it to keep the projects on the agreed-upon schedule.
If you don't track the Schedule Variance, the project may not meet its deadlines. Often, this means additional resources are needed, costs rise rapidly, and the project's budget goes out of the window.
When you track a project's Schedule Variance, you can communicate with stakeholders and discuss any changes to the project timeline. Being able to offer hard numbers helps you accurately predict when the project will be complete and manage the expectations of the other people involved in the project. This puts you in a better position to negotiate for a better project timeline and cost allocation.
Schedule Variance calculations are also important for team morale. A team that knows their project is behind schedule will work hard to get it back on track as the project progresses. They will then get a morale boost when their efforts pay off.
Project planning software can help ease the load of the project planning process and help with regular performance variance analyses. Most software offers two performance indices that are of great use to project management professional: the Schedule Performance Index (SPI) and Cost Performance Index (CPI).
SPI is calculated in the same way as SV, by dividing the earned value at any one point by the planned value at that same point. A value under 1 shows the project is behind schedule, while a value over 1 shows the project is ahead of schedule.
CPI, on the other hand, looks at the money: it measures the value of the work completed to the actual costs the project incurred. A value under 1 shows that the project has gone over budget, while a value over 1 means the costs have been lower than were predicted in the project plan.
Project planning software will also help in assessing the project Schedule Variance and tracking scheduling conflicts. You will better identify any project blockers so you can address them immediately.
Calculating Schedule Variance in project accounting is simple in theory, but it can become tedious when you do it manually. This is because you have to calculate every time you are evaluating the project: it changes from day-to-day. If you are overseeing a large project, calculating these numbers manually can become a near-impossible task.
If you are a tech-savvy project manager, you can use project dashboards that help you manage the projects. Runn is a highly effective project dashboard that helps you calculate the Schedule Variance accurately, giving you ample time to oversee several projects.
Using Runn project management software will help you track your project by calculating actual progress compared to expected progress so you can deliver successful results.
As well as the SPI, Runn will help you calculate project efficiency rating using TSPI (To complete Schedule Performance Indicator). This will help you know how the remaining time should be allocated. It looks back at how the project resources were used and ahead on how you should plan the remaining resources.
You can calculate TSPI from the EV, PV, and total approved budget, using the following formula:
TSPI = ( Total Budget – EV ) divided by ( Total Budget – PV )
The project efficiency rating is expressed as a ratio. If the rating is greater than 1, you are ahead of schedule and can be lenient with the remaining project time. A rating of less than 1 means the project is falling behind and you need your resources to work more efficiently if you are to complete the project on time and within budget.
Effective communication will help you know how the team members are fairing on with the project. this also means that you need to let the stakeholders know the project's progress. You will also set clear expectations that will help the team members to work with.
If you are planning the project for the first time communicating with the team members will help you align the project with the team.
Meet up with each team member and the entire team to know how they are doing as far as the project is concerned. This will help you know if they are stuck somewhere and need your help and you will also get to know what stage the project is at and the progress.
Team members will also feel free to approach you as they see you are interested in them and the project as a whole.
If you do not want to compromise the quality of the project, you need to set a reasonable deadline. This is crucial in ensuring your employees don't suffer from burnout.
You will also ensure the project doesn't take several months yet they could take lesser time. long deadlines will make your team to not have the needed push to work on it which could hurt the project's budget.
Whether you are embarking on a construction project which is of a bigger scope or overseeing a smaller project, you need to ensure the project delivery is within budget. It is important to regularly calculate the Schedule Variance to know the project's "health." This will help you address any setbacks or threats. Still, you should not always be alarmed if a negative Schedule Variance is recorded as this could mean that your employees needed the extra time to ensure they achieve give a quality project.
Project management software like Runn will help you run your project effectively, monitor the project, and see whether you need to provide more time or resources for great project delivery. You will also be better positioned and sound more professional when you give investors and stakeholders answers and updates.
Explore how Runn can give you an oversight of the Schedule Variance in your projects! Book a demo today!
Having a resource calendar will help you better understand the availability of your resources, plan ahead for upcoming projects, and prevent overloads.