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Key Performance Indicators (KPI)
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Key Performance Indicators (KPI) for the construction industry

Last Updated on August 3, 2022 by Admin

To measure and compare performance in terms of achieving both strategic and operational goals, many businesses utilize key performance indicators (KPIs). However, there isn’t a standard or method for measuring excellence in the construction sector as a whole. We will now go through what a KPI is and how it gauges a project’s success.

Key performance indicators, or KPIs, are a means to gauge how successful something is. KPIs assist you in determining the success of your project from a construction perspective. You can therefore apply this knowledge when beginning new or related tasks.

Companies use key performance indicators (KPIs) to assess and rank the performance of certain business operations, partners, clients, managers, and other business activities in an effort to achieve strategic and operational objectives. Companies also evaluate KPIs to ensure ongoing improvement, which boosts bottom-line earnings, pleases customers, and boosts productivity.

It is crucial that KPIs are mentioned in the tender papers and that the contract stipulates that the information needed to regularly analyze them must be provided. In cases when the performance of certain packages has to be tracked, this may call for the disclosure of subcontractor information. KPIs can also aid in a quick understanding of the present financial situation. KPIs summarize the comparison of data with budgeted values as well as public industry benchmarks derived from inter-firm comparison studies.




What is KPI?

A Key Performance Indicator (KPI) is a quantifiable statistic that shows how well a business is accomplishing its main goals. KPIs are used by organizations to assess their performance in achieving their goals. Depending on your industry and the area of the business you want to track, you must choose the appropriate KPIs.

Based on particular business goals and targets, each department will measure success using a different set of KPIs. Once you’ve decided on your primary performance indicators (KPIs), you should monitor them using a real-time reporting solution. Dashboard software can be used to track KPIs, providing your entire organization with information on how you are performing right now.

Measurements that show how a business is doing in respect to its business objectives are known as key performance indicators (KPIs). These goals may include getting paid, being profitable, and managing cash flow. Depending on what is most essential to them, each organization decides which KPIs they wish to monitor. There are some signs that may be referred to as “standard,” while the remainder are more specific to each organization and its needs.

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What are the types of KPI?

A KPI’s worth is based on the actions it motivates. Too frequently, businesses adopt industry-recognized KPIs heedlessly and then wonder why those KPIs don’t accurately reflect their operations and don’t result in any significant change.

  • A measure that can be represented quantitatively is a quantitative indicator.
  • Positive indicators include: unable to be quantified numerically
    • Leading indicators: measures that look forward to aid in forecasting future results
    • Lagging Indicators: Offer an after-the-fact technique
  • Measure the consumption of resources throughout project execution using input indicators.
    • Process Indicators: A tool for gauging general effectiveness
    • Output Indicators: Used to demonstrate the end or consequences of the process activities
    • Real-world indicators: connections to already-existing business procedures
    • Directional indicators show whether a project or organization is improving or not.
    • Those in charge of the organization are known as “actionable indicators.”
    • Monetary indicators are financial indicators.

The essential construction KPIs your projects need

Although your firm may track a variety of project-related metrics, efficient performance analysis necessitates identifying a small number of critical areas of interest in order to monitor the overall success of the project and the state of the business. These would include quantifiable financial and non-financial issues.

These are the kinds of data that these KPIs might examine:

Safety

Less danger and long-term costs are associated with safer sites. If problems do arise, they can cause your project to run over budget and schedule. In addition, safety-related mishaps may result in increased insurance costs. Knowing and comprehending your safety rating is essential to cutting expenses and maintaining employee productivity. Among the crucial KPIs for construction safety are:

  1. Rate of incidents and safety
  2. Number of meetings and messages about safety
  3. Accident rates by supplier

Quality

Rework and adjustments can be minimized by having a better awareness of the overall quality of your projects. So, monitoring quality indicators is a proven approach to stay under budget and time. Your team may maintain a high standard of quality by using the construction KPIs listed below:

  1. The quantity of defects
  2. The number of workmanship-related defects
  3. The right moment to fix defects
  4. The frequency of site inspections carried out
  5. The proportion of inspections that were successful to all inspections.
  6. Rework costs as a whole
  7. Customer contentment
  8. Internal customer contentment




Performance

The productivity of a project can be determined through performance measurements. Teams can adapt and assign more resources or tools to the areas that require them the most in order to meet project goals by measuring and understanding how time and effort are being used. Several KPIs for construction performance are listed below:

  1. Waste and recycling per work.
  2. The typical pay per hour of work
  3. Equipment downtime percentage
  4. Labor downtime as a percentage

Employees

Measuring your employees’ growth and satisfaction is just as important for success as tracking their performance, which is essential for any project. Long-term productivity and contribution to the bottom line will both increase for employees who feel appreciated and are content with their jobs. Not to mention that lowering staff turnover costs can save teams a ton of money. Employee retention in the construction industry depends on the following KPIs:

  1. Worker contentment
  2. Percentage of training completed
  3. Rate of Turnover




How do you use construction KPIs?

How do you use the metric data once you’ve gathered it all? Key performance indicators can assist you in growing your building company. They can be used as a yardstick to assess how you stack up against competing businesses in your sector. This in turn can help you with a variety of tasks, including retaining customers, hiring new employees, and more.

Your KPIs can indicate, for instance, that you have an exceptionally low accident rate and great employee satisfaction. As a result, you may utilize this to recruit new employees to your team, increasing the talent and caliber of your workforce. The same is true for customer retention: if you regularly provide high levels of client satisfaction and accomplish all of their objectives, there is a higher likelihood that they will continue to use you for their building needs.

KPIs can also help you prepare better for next initiatives. You can better understand how to create quotations for future projects once you’ve seen the numbers for all the prices and expenses on your KPI dashboard. You may estimate how much something will probably cost you based on the materials used, the number of people required, etc.

It also enables you to make more precise project plans for upcoming work. For instance, you might have discovered that it took far longer than you anticipated to finish a task. By using this information, you may construct a more precise plan and understand how to increase production. As a result, you avoid encountering circumstances when you commit to a deadline but are unable to meet it.




Top 7 Key Performance Indicators in the Construction Industry

The best KPIs for enhancing performance were determined through a poll of professionals and trade contractors by Dodge Data and Analytics. Among them were the following:

(Reference: https://www.construction.com/ )

  • Documentation – To continuously enhance operations and reduce risk, businesses must compare concerns in quotations, bids, and other papers from previous projects. Although many companies in the construction sector have access to data through their supplier chains, very few really capture the data and use it. According to the Dodge study, only 47% of respondents “compare errors, omissions, and constructability difficulties in construction papers to earlier projects,” whereas 54% of respondents noted faults and constructability problems in construction documentation.
  • Request for Information (RFI) – More than 73% of respondents record RFIs and responses for more than half of their projects, yet only 30% compare current projects to former ones to lower risks. It has been discovered that engaging closely with engineers on an RFI results in fewer modification orders after the project begins. “Using historical data to identify the root cause of the RFI and measuring time to receive a response can help contractors see where the potential breakdowns in communication are occurring between teams, aiding them in implementing more efficient practices on future projects,” the survey’s findings state.




  • Change Orders – assessing the impact of change orders on the job schedule, root cause analysis, and turnaround time. Companies can better identify the problems affecting their project delivery process by collecting this data.
  • Schedules – updating schedules, other relevant activities, and results on a regular basis, including information on how often project deadlines are missed. Changes to the schedule must be recorded as soon as possible; with wireless and mobile devices, managers may immediately inform workers on the jobsite of changes. When delivering products late, telematics systems on vehicles can notify dispatch, allowing management to discover alternate suppliers or reroute another truck carrying the required materials.
  • Safety and Inspections – According to the survey, 53% of major general contractors use software to oversee safety and inspections. Companies can provide historical references upon request by managing documentation of inspections and safety assessments.
  • Labor Productivity – The main causes of lower labor productivity, according to contractors, are concerns with project team member coordination and communication as well as poor contract document quality. It is possible to ensure that projects are well-coordinated and that everyone is on the same page by enabling all project stakeholders to connect, communicate, and interact via a collaborative network.
  • Quality and Close-Out – According to the poll, on 25% of their projects, 70% of contractors utilize software to manage punch list tasks. Things get completed on schedule and within budget when the close-out checklist is kept up to date.




KPI Examples for Construction

The key performance indicators in this list were especially picked for the construction sector. These examples of KPIs for several industries might be a wonderful place to start when managing the plan for your company.

  • Number of accidents
  • Number of accidents per supplier
  • Actual working days versus available working days
  • Cash balance – Actual versus baseline
  • Change orders – Clients
  • Change orders – Project manager
  • Client satisfaction – Client-specified criteria
  • Client satisfaction product – Standard criteria
  • Client satisfaction service – Standard criteria
  • Cost for construction
  • Cost predictability – Construction
  • Cost predictability – Construction (client change orders)
  • Cost predictability; Construction (project leader change orders)
  • Cost predictability – Design
  • Cost predictability – Design and construction cost to rectify defects
  • Customer satisfaction level
  • Day to day project completion ratio – Actual versus baseline
  • Fatalities




  • Interest cover (company)
  • Labor cost – Actual versus baseline
  • Labor cost over project timeline
  • Liability ratio (over asset) on current versus completion comparison
  • Number of defects
  • Outstanding money (project)
  • Percentage of equipment downtime
  • Percentage of labor downtime
  • Percentage of backlogs over project timeline
  • Percentage of unapproved change orders
  • Productivity (company)
  • Profit margin – Actual versus baseline profit margin over project timeline
  • Profit predictability (project)
  • Profitability (company)
  • Quality issues at available for use
  • Quality issues at end of defect rectification period
  • Ratio of value added (company)
  • Repeat business (company)
  • Reportable accidents (including fatalities)
  • Reportable accidents (non-fatal)
  • Return on capital employed (company)
  • Return on investment (client)
  • Return on value added (company)
  • Time for construction
  • Time predictability – Construction
  • Time predictability – Construction (client change orders)
  • Time predictability – Construction (project leader change orders)
  • Time predictability – Design
  • Time predictability – Design and construction
  • Time taken to reach final account (project)
  • Time to rectify defects

Conclusion

Concentrating on these seven KPIs ensures that project performance will improve. Utilize the numbers from the seven KPIs to pinpoint areas that need improvement and start developing best practices that will keep your company growing.

KPIs are essential in the construction sector, to sum up. They enable you to determine whether or not your project can be deemed successful in the first place. Did you fulfil the demands of the client? Were your staff members content? Have there been many safety incidents for you? Was the project successful? KPIs can be used to provide answers to the countless questions that need to be addressed. In turn, you can more accurately and confidently plan for upcoming initiatives. Use your KPIs to compare your company to others so you can evaluate where you stand in the market.




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