Using key performance indicators in your construction business
When it comes to key performance indicators (KPIs), the construction industry clearly has its work cut out for it.
In August, a report sponsored by productivity software maker PlanGrid estimated construction professionals lose almost two full working days each week solving avoidable issues and searching for project information.
- Five and a half hours hunting down project data, such as revised drawings, material cut sheets and other information relevant to the job.
- Almost five hours on conflict resolution, including managing disagreements between the general contractor, owners, subcontractors and other stakeholders.
- Four hours managing the mistakes on a project that result in rework, assessing the associated costs and determining why the mistakes happened.
The report, which is based on a survey of 599 project managers, field supervisors, estimators and other construction professionals, estimated that half of all rework could be attributed to poor communication or poor project information. It also concluded that workers were not taking advantage of mobile apps and devices provided by their employers to improve their productivity.
While disappointing, the findings highlight the industry’s growing use of data, and specifically key performance indicators (KPIs), to improve productivity and profits in the construction industry.
Contractors have long relied on key performance indicators to track revenue, costs and profits against budget on individual projects. But relying too much on financial data can be akin to managing through the rearview mirror, according to this article published by the Construction Financial Management Association (CFMA).
KPIs are all about constantly monitoring signals so organizations can detect and adjust to events as they happen to improve outcomes or mitigate the cost of mistakes. In the construction trades, this might include tracking bid development, the buyout process, inventory levels and purchases or inspections and signoffs.
As their data capabilities improve, contractors should consider developing their own key performance indicators based on their strengths, weaknesses and experience. While this can be a time-consuming process, it can also be an effective way to create a performance-based culture.
The most effective KPIs are developed with input from the front-line managers and employees who determine a company’s performance. Soliciting their input can be a very effective way of getting rank-and-file employees to buy into the performance culture you are trying to create. You may also want to ask your accountant and most important customers what KPIs they use.
The data wrangling challenge
One of the first challenges contractors are likely to encounter in their KPI quest is data integration, according to the 2018 Construction and Technology Report from JB Knowledge.
The number of data apps and formats contractors use has exploded since JB Knowledge began tracking them in 2012, thanks in large part to smartphones. Of 2,800 building contractors surveyed for its 2018 report, 53.6 percent reported using daily reporting apps, 46.5 percent used time management apps, 37.8 percent used plan management apps and 17.4 percent used tool tracking apps.
“Unfortunately, contractors are still relying heavily on spreadsheet, email and document storage solutions to cobble together their client relationship management and bid management process,” the report states.
The advantages of being small
The good news for smaller contractors is that the challenge is more difficult the more employees you have. That means technology-savvy contractors may have an edge when it comes to harnessing data and KPIs to improve performance.
Cloud-based services like iDashboards, Smartsheet and Scoreboard, meanwhile, are putting powerful performance management tools in the hands of contractors and their employees.
Contractors can use Scoreboard to create dashboards to track dozens of metrics, including 50 KPIs specific to the construction industry, such as change orders per client, labor downtime, time to rectify defects and time taken to reach final account.
The value of such tools is their ability to display live data via charts and other highly intuitive visual formats. This can make them useful to large organizations that struggle to keep dozens, or even hundreds, of employees working toward common goals.
For solo contractors who happily spend most of their time on job sites, such services may not be worth the effort or monthly subscription fees, which start at around $100 and climb for each additional user. But if you feel like you or your employees are wasting two days a week chasing down missing data and overseeing rework, and you have plans to grow, you might want to sign up for a free trial, download a whitepaper and start boning up on KPIs.