The Goal of the Variance

The Goal of a Variance

Synonyms for the word variance are words like discrepancy, inconsistency, disagreement, dissent, variation and conflict.  So when someone asks you to explain the variance of two items they basically want to know what the difference between the two number sets are.  For instance a manager may want to know what the variance explanation is between the amounts of times the receptionist phone rings and how many times he/she answers it.  So let’s say it rang ten times and it was answered nine times. The variance would be one or 10%.  The variance explanation would not be this:

John called – phone was answered

Jane called – phone was answered

Pedro called – phone was not answered

Etc.

This is simply a listing of the activity of the phone. I don’t want to know this. I just want to know why it wasn’t answered every time. A good explanation may be something like this:

One call was missed due to a bathroom break

-Moving on –

Let’s say the reception answered nine out of ten calls today. But tomorrow the receptionist answered five out of ten calls.

I want to know what the variance explanation is for today versus tomorrow.  I would not say:

One call was missed today due to a bathroom break today

Five calls were missed tomorrow due to bathroom breaks

Each one of these explanations explains why the phone was not answered each of the days but does not explain why the two days were different.

A good variance explanation would have been:

There were an increased number of missed calls tomorrow because the receptionist was sick and went to the bathroom frequently.

This tells the manager information they can use.

This is generally a practice used in accounting. The purpose of the explanation has to do be something someone can use. There also needs to be a variance to have an explanation. If the variance is small, then there is no need to explain it.  This just provides congestion in understanding the differences.