A quantitative investigation of the differences between planned and actual results, examining the causes and significance of deviations from budgets, forecasts, or standards. It helps identify performance gaps and their underlying drivers for corrective action.
Combines 'variance' from Latin 'variare' (to vary, change) with 'analysis' from Greek 'analyein' (to break up). The technique originated in cost accounting and manufacturing in the early 1900s, then expanded to general management as businesses sought systematic ways to understand performance deviations.
Variance analysis is detective work for numbers - it's not just about what happened, but why it happened! The most valuable insights often come from small variances that reveal systematic issues, not the big obvious ones. Smart analysts look for patterns across multiple periods and categories to spot trends that single-point comparisons miss.
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