Successful project management starts with a simple realization:

No single estimate of cost, schedule, or technical performance can be credible without understanding the variance of that number.

Here’s a simple story to illustrate the point…

Take a guess at the most likely temperature in Trinidad Tobago? The measurement on the thermometer that appears most often over the course of a year? That number is 78° (more or less).

The “most likely” is not the average. It is the number that appears “most often.” Like the duration of a task in the schedule. Like the number of days of duration placed in the DURATION field of a schedule. That number is considered the “planned” duration, but in fact it is a statistical number. The number that would appear most often if the task was repeated. 

Now take a guess at what the temperature is in Cody Wyoming that appears most often over the course of a year? Yep, you’re right - something around 78°. 

But there is a significant different between these two numbers: the VARIANCE. 

In probability theory andstatistics    , the variance of a random variable or distribution     is the expected, or mean, value of the square of the deviation of that variable from its expected value or mean. Thus the variance is a measure of the amount of variation within the values of that variable, taking into account all possible values and their probabilities or weightings (not just the extremes which give the range).

The temperatures in Tobago and Wyoming are random variables. And so are the variables used in your project for cost, schedule, and technical performance.p>

If you don’t know the variance on the variables in the project, you don’t know how the project will perform in the presence of the uncertainties that drive these variances. In a word you don’t know how your project will perform - period. You’re guessing. And guessing is not a desirable attribute of the project manager.

That’s why risk management is an important tool for controlling the project… It’s about knowing instead of guessing and about managing the risks instead of hoping they don’t happen.

Know the statistics of the variables. In the next article, we’ll see how to put this new found information to work to increase the probability of success for your project.

This article is part 4 of a series by Glen on risk management. See Glen's bio on the Meet the Experts page. He can be reached at Lewis & Fowler or at his blog, Herding Cats.

Filed under Risk Management