Construction Benchmarking

Construction Benchmarking: Basic Fundamentals and the Five-Step Process

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The competitive setting in the construction industry is always getting heated. However, there’s still room for development and improvements. By observing competitors’ strategies or taking a critical look at the current performance, it will be easier to obtain insights for boosting productivity and profits. This process is commonly referred to as construction benchmarking.

Let’s begin understanding the concept and importance of construction benchmarking, including its fundamentals and its 6-step comprehensive process.

What is construction benchmarking?

Today, talking about the industry’s best practices has been consistent recently. It is a major hot topic. But how can someone from the industry knows what these best practices are? Clearly, this is what benchmarking is really all about – observing and learning how to progress and improve based upon the raging industry competition as well as the internal reviewing process.

Benchmarking is also all about continuous and seamless improvement. Improved productivity means increased cost savings, while enhanced completion rates mean the capacity to switch on to other projects easily. Besides, higher-quality performance means less reworking, fewer defects and certainly, higher price rates. Benchmarking is also enabling construction companies to keep pace competitively, whether they focus on specialty trade, heavy highway or another category.

Here are the two common categories of benchmarking:

1. Internal benchmarking

This type of analysis is inner-focused. Thus, it can show more valuableness compare to its external counterpart. Apparently, internal benchmarking involves a very cautious review of other past construction projects. Here, identifying if the projects were supervised very well is easy. Today, managing projects, particularly larger-scale, is efficient because of the deployment of builder trends software.

Analyzing the following questions below is what to expect in internal benchmarking:

· What did and didn’t work from the last projects?

· Was there a greater amount of changer orders and delays?

· Did delays have occurred due to improper work sequencing or poor scheduling?

· What could be possibly be improved?

2. External Benchmarking

This type of benchmarking can be conducted against neighboring competitors or the entire industry. Benchmarking data can be easily found in any published surveys that are usually performed by private firms. Nevertheless, competitive benchmarking is proven to be a bit trickier. That is why, the majority of the construction businesses today don’t prefer to release private information.

Some assumptions should be drawn, and benchmarking isn’t any comparison from one company to another. That is why, internal conducting is preferred. Other things that companies prefer now are the use of a crew schedule software for scheduling and monitoring purposes.

Getting Started with the Construction Benchmarking Process

The benchmarking process can help any construction firms when it comes to an understanding of what makes other competitors successful, including what factors can be optimized along the way. Determining these practices guarantees an opportunity to look beyond the bottom line. Project estimating and job costing aren’t the only factors affecting profit.

So what does it takes to implement a successful benchmarking? Basically, benchmarking requires a detailed set of requirements. Listed below is the comprehensive step-by-step process for successful benchmarking:

1. Determine problem areas

Identifying key performance indicators (KPIs) that need improvements is the first step in proper benchmarking. The more involved KPIs, the more change orders, productivity rates, project completion time, cost predictability, and profit margins in the construction industry.

The best way to save all gathered data like KPIs is through construction management software. Using the tool, inputting, editing, saving and accessing info and files are made faster and easier. Thus, any project leaders have an easy way of supervising everything.

2. Collecting of data

The most labor-intensive portion of the benchmarking process is collecting the data. Some of this might be generally simple, like overheard costs/subject or perhaps profit margins. Other factors are proven to be a little bit harder to quantify because they require some crunching and assessments. Schedule performance and productivity are some of the standard crunches. Additionally, for anyone who doesn’t have concrete numbers to study and analyze, such as customer satisfaction, using a scoring system is very helpful.

3. Analyze and Compare

Either conducting external or internal benchmarking, efficiently analyzing the numbers could help expose any deficiencies in the company’s performance. By doing so, determining both weaknesses and strengths of the operations is easier. Construction professionals must remind themselves that the right time to ship is once the financial gaps and performance are identified already.

Project leaders also need to be reminded about the importance of using a task scheduler software. This advanced tool focuses more on making the work easier. Thus, productivity within the team tends to increase.

4. Implement and Monitor Improvements

Collaborate with the laborers and employees to implement practical solutions. For instance, if external benchmarking is chosen to be used, identify the best way to adapt any effective methods. Once changes have been implemented, that is the time to monitor the results meticulously. Make sure to measure the process and evaluate the impact from the changes made.

Take note that the practices applied for the company might not function the same way to the others.

5. Repeat

Lastly, repeating this 5-step process while incorporating the lessons learned from the current and past implementations is necessary. If the company wanted to benefit from the benchmarking process and obtained the desired results, doing this process again is helpful.

Repetition isn’t only required to highlight lapses and mistakes but also to keep methods valid over time. For instance, if the organization’s priorities will change, it should be reflected on the KPIs. Repeating these processes is easier now that advanced software tools like builder software is deployed. Real-time collaboration and increased team productivity are best achieved using this tool.

6. Management Support 

At all costs, management has to support all benchmarking efforts and all of the required changes. It is vital to provide feedback regarding benchmarking activities. Doing so makes it easy to let the participants engage even better and maintain the team’s morale.

Management can start comparing companies to any best-in-class organizations as well. Profit margins and payroll are two of the essential management concerns for a construction company. The comparisons can possibly lead to questioning the other involved areas like costs of subcontracting and occupancy. But the real deal is how benchmarking can be very effective and useful.

The Benchmarking Fundamentals and What to Avoid

The fundamentals of construction benchmarking start by determining how long a particular process should take to complete by average. When it is finally identified, you can measure the method used against the expected time. Take a look below.

1. What is the most vital focus area for the stakeholders?

Do the baseline and process tracking even exist? Are there any inconsistencies in the construction business methods and processes, and if so, why? Are there rooms for improvement in every key process, whether that’s communication?

2. How can you possibly measure that?

The document, contract review and drawing are typically time-consuming. However, always consider using emerging advanced tools and technologies like fully-integrated construction scheduling software. Using this tool, tracking tasks, resources, and inefficiencies are more manageable and easier.

3. Where to start?

Ensure to evaluate first the company’s level of benchmarking maturity. “Do you have repeating processes? What trends do you consider if you’ve been gathering benchmarking data for analysis? How long are you collecting and measuring data? How many projects you’ve managed? Lastly, how do you compare your competitors and peers in the same industries?

For benchmarking to be very effective, the management must start rivaling other companies in their sectors, particularly those identified as best in class. Take note that high-performing companies commonly perform the following:

· Outperform their peers in a good number of key metrics like the return of equity and return of assets

· Show more clear and precise gross profit for each employee

· Carry lesser debt

· Obtain a much higher net income and gross profit margins before taxes

Listed also below are a few things to avoid whenever pursuing benchmarking strategies.

· Enjoy initial success and make sure to scale to various areas of the construction business right after.

· Limit the number of construction business elements and areas that are already being benchmarked.

· Define the boundaries that needed some improvements

· Be precise in what has been measured already and assure a rigor in the validation process and measurement.

· Assure that each benchmarking activity will improve the entire performance, particularly to business-critical areas, to maintain emphasis and focus.

· Be flexible because most company policies often change and the focus on targets and benchmark can change some areas.

Key Takeaways

While revenue, profits, and costs are considered the traditional measures of success in the industry, this alone isn’t enough. Besides, the improvement of performance and increasing efficiency are way more important. In any other way, gross profits are significant, yet benchmarking efforts can fill in any performance gaps. Following the benchmarking processes, the company can ensure that they are performing at their highest possible level.

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