Construction Business KPI

Measuring Success in Construction Business: Top 6 Key Performance Indicators (KPIs)

pcs-logo-N-whiteBG-caption-01.png

Be part of our exclusive Construction Professional list and get exclusive discounts and monthly executive summary

* indicates required
Subscription to Newsletter *

Subscribe

* indicates required
Subscription to Newsletter *
* indicates required
Subscription to Newletter *
Share this article in Social Media
Share on facebook
Facebook
Share on twitter
Twitter
Share on linkedin
LinkedIn
Share on pinterest
Pinterest

So in what way can you measure the success and growth of your construction business? Is it through only profits? With the present volatility in the industry, company owners must be knowledgeable about their construction business’s financial standing, the profitability of their sales, quality of performance, and so on. With the proper use of Key Performance Indicators, measuring the business’s success is easy. You are given deeper insights that can turn the company into a streamlined, functional, and elite construction machine.

There are various KPIs that a construction company might want to consider. But for now, let’s first focus on the few KPIs that are extremely helpful for contractors, project leaders, and construction business owners.

KPIs for Construction: A Breakdown

 

KPI is short for Key Performance Indicators. Those who are not familiar with the term are a comprehensive way of measuring how accomplished or successful something is. From the construction viewpoint, KPIs help understands how better and successful construction projects have been. Also, the information that comes from KPIs can be used when new projects are on their way. 

Interpreting and tracking an array of KPIs help a construction company in building longstanding resilience while meeting short-term financial goals at the same time. A very effective way of monitoring KPIs can be executed using project management software. This software application is embodied with project management features that help leaders to track and monitor every project detail.

Construction KPIs aim to support and help any company owners discern how various organizations perform within a specific construction project. Below are the three key areas to further consider:

· Construction project manager

· Construction supervisor

· The general assistant and quantity surveyor

Each of the areas stated above will be looked at and observed to see how they can contribute to the project’s success. Also, there is a whole project goal that has to be kept in mind. These people are expected to help and contribute to accomplishing the product goal and retaining clients in the construction industry.

Why Should Construction Companies Give Importance to KPIs?

 

First and foremost, KPIs are used by sureties and banks when assessing whether a construction company is a better credit risk. The companies would like to know that the business is undoubtedly making sufficient profit to pay all the bills. In short, it should have a solid financial footing.

However, there are other valid reasons why KPIs are crucial for the construction company. They keep ownership to be informed of the company’s current status. Reliable KPIs and a project management app help construction business owners and CFOs manage projects and make necessary changes. Moreover, KPIs comprise the most critical performance goals in all significant aspects of a project, especially in team involvement. Therefore, useful KPIs must be:

· A basis for major decision-making during the entire project development

· Cost-effective and realistic and must be tailored to the company’s time frame, culture, and other constraints.

· Unified with the company efforts

· Aligned with the company’s objectives

· Reflective of the company’s major success factors

· Agreed upon all the parties involved before the project even begin

· Regularly measured and specific to the company’s guidelines

· Direct toward the benefits and success the project seeks to deliver 

· Quantifiably measured to be analyzed and shared across organizational divisions. 

Six Basic and Important Construction KPIs to Consider

 

Apparently, there are various KPIs used and considered in the construction industry. But, here are the few basic yet essential KPIs that are commonly used in measuring success.

1. Labor Productivity

Let’s begin first by identifying how productive the labor force is? The productivity of the laborers is a key indicator of how good and successful the performance is. Preferably, labor productivity is needed to be high in terms of rate. Why? It is because numerous tasks are necessary to be completed every working day. The less productive the team is, the longer it takes before the project is completed. As a result, it can increase the overall costs. 

That is why it is crucial to understand and measure how efforts and time are being spent on-site. Doing so will make it easier for the team to allocate and adjust additional tools and other resources to the most needed areas. Here are four common KPIs under labor productivity:

· Average revenue for every working hour

· Percentage of equipment downtime

· Waste/recycling as per the job

· Percentage of labor downtime

2. Quality

Having a much better understanding when it comes to the overall quality of the projects will help minimize rework and changes. Hence, keeping an observant look at quality metrics keeps a schedule on time and within budget. Below are common KPIs that will help any team in maintaining a higher level of quality:

· Number of defects to workmanship

· Number of site inspections being conducted

· Time to rectify defects

· The total cost of reworks

· The ratio of the number of inspections 

· Internal customer satisfaction

· Customer satisfaction

3. Safety

A much safer site gains lesser risks and long-term costs. If any problems do occur, setting projects back in time is the first thing to do. Moreover, safety accidents might mean much higher insurance payments. Hence, understanding and knowing the workplace’s current safety rating is a primary key in reducing costs and keeping the crew productive. Here are some of the most common construction safety KPIs:

· Number of safety communications/meetings

· Number of accidents for every supplier

· Safety/incident rate

4. Client Satisfaction

Asking clients directly is one of the best ways to determine how impressive the overall performance is. If ever the satisfaction rate is high, then it shows that you are doing great from the client-perspective. Furthermore, you can feel safe and secure with the knowledge that you are meeting their expectations and accomplished the goals you have set for them. Nevertheless, it doesn’t necessarily mean that the project is already a success because other factors can come into play.

5. Time and Cost

The duration and costs of construction are vital factors. You are already guaranteed that clients are already satisfied, but how much did everything really cost? Add up all of the total expenses to determine what it cost to obtain these goals. Also, you might want the cost of construction to be lesser than the payment you give. You just made yourself a profit out of it.

Otherwise, you might establish something without getting a reward out of it. The time spent on construction projects ties into this factor as it often goes hand in hand with the expenses. As being mentioned before, the longer a project will be completed, the more costly it is.

6. Employees

Besides tracking labor productivity, measuring the employees’ satisfaction and development is also crucial to the project’s success. The staff and crew who are fully invested in, acknowledged, and appreciated will be able to work and perform more efficiently. They can contribute more to the bottom line and will stay for the longer-term. The following listed below are construction KPIs that crucial to the retention of employees:

· Training completion and percentage rate

· Turnover rate

· Worker satisfaction

KPIs in Managing Construction Projects

 

While the terms and scope of the company’s KPIs might differ from projects to projects, several types of data can still help any company. Top benchmarking measures for better project management include productivity, cycle time, schedule performance, cost performance, and return of investment (ROI).

Some of the common KPIs for project management include current development backlog, updated resource allocation, project schedule, estimations for project completion, labor costs per month, and deployment of technologies like crew schedule software. Below are the four particular topic areas included in project management, where KPIs are best applied:

1. Deviation of Planned Budget – knowing where, why, and how a project budget deviated is crucial in tracking down inefficiency and waste. It is also beneficial in planning better for projects and determining unforeseen challenges that are most likely inherent to most projects.

2. Cost Variance – keeping precise and detailed records associated with costing variance can deliver an accurate profile of which processes and teams are most likely efficient and better. It can help the companies in deciding whether a particular project is worth an investment. Assisting managers in determining whether to proceed or initiate similar projects can also be easier because of cost variance.

3. Percentage of Misused Milestones – projects usually shift over the five phases of the project. Hence, achieving goals and determining milestones are essential in maintaining the project momentum. When too many milestones are not obtained or shifted, the participating crew might feel more frustrating. Hence, it is crucial when missed milestones are identified because it can help mitigate similar drawbacks in the future and help the project started again. 

4. Deviation of planned work hours – Knowing what tasks and activities took lesser and more time can help allocate training and consulting time. Additionally, determining which crew had to go beyond and above can establish valuable reward and incentive programs. Thus, planning for time allocation is overall improved. Also, implementing construction crew management can create a much more collaborative and at pace environment for all participating construction workers. It is another essential thing to focus on.

Key Takeaways

 

While keeping an eye towards financial aspects is vital, adding new construction KPIs related to quality, safety, crew, overall performance is a primary key in understanding the project’s entire scope. Over time, it allows for better control of schedules and costs as it increases the company’s bottom line.

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top