How can you effectively communicate variance analysis results to your team?

1 Explain the purpose and scope

The first step to communicate variance analysis results is to explain the purpose and scope of the analysis, and how it relates to the overall goals and strategies of the organization. You should clarify what kind of variances you are looking at, such as sales, costs, profits, or cash flows, and what time period, level, or segment you are covering. You should also highlight the main objectives and benefits of the analysis, such as improving performance, efficiency, accountability, or decision making.

2 Use simple and consistent formats

The second step is to use simple and consistent formats to present and visualize the variance analysis results, such as tables, charts, graphs, or dashboards. You should avoid using too many numbers, jargon, or technical terms, and instead focus on the key messages and insights. You should also use the same units, scales, colors, and symbols throughout the report, and provide clear labels, titles, and legends. You should also include a summary or executive overview that highlights the main findings and recommendations.

3 Break down the variances

The third step is to break down the variances into their components and drivers, and explain how they affect the performance and outcomes. You should use the common methods of variance analysis, such as price-volume-mix, flexible budgeting, or standard costing, to identify the sources and reasons of the variances, such as changes in prices, volumes, mix, costs, efficiency, or quality. You should also quantify the impact of each variance on the revenues, expenses, or profits, and compare them with the budgeted or expected values.

4 Provide context and benchmarks

The fourth step is to provide context and benchmarks to help your team understand the significance and relevance of the variance analysis results. You should compare the actual performance with the historical performance, industry standards, best practices, or competitors' performance, and explain any trends, patterns, or anomalies. You should also consider the external and internal factors that may have influenced the performance, such as market conditions, customer behavior, operational issues, or strategic initiatives.

5 Highlight the achievements and gaps

The fifth step is to highlight the achievements and gaps that emerge from the variance analysis results, and recognize the strengths and weaknesses of your team. You should praise and reward the areas where your team performed well or exceeded the expectations, and provide constructive feedback and suggestions for the areas where your team performed poorly or missed the targets. You should also emphasize the opportunities and threats that arise from the variances, and how they affect the future plans and prospects.

6 Recommend actions and follow-ups

The final step is to recommend actions and follow-ups based on the variance analysis results, and engage your team in the problem-solving and improvement process. You should propose specific, measurable, achievable, realistic, and timely (SMART) actions that address the root causes and effects of the variances, and assign roles and responsibilities to your team members. You should also set deadlines and milestones, and monitor and evaluate the progress and results of the actions. You should also solicit feedback and input from your team, and encourage them to ask questions and share ideas.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?