If you work in the construction industry, you might have heard of a concept called key performance indicators, or KPIs. Maybe you have heard the term before but have no idea what they actually are.
Maybe you already use traditional KPIs in your business but are interested in adding additional metrics in order to gain more knowledge about your company’s performance. In any case, this article will help explain every aspect of KPIs for beginners as well as go in depth into some of the more complex aspects for those who already have experience with using construction KPIs.
You can also download our guide to “KPIs for construction operations” including a KPI framework for your organization to leverage.
What are construction KPIs?
Construction KPIs can be a little bit confusing at first, so let’s start with the basics. What is a KPI? A KPI is an acronym for “key performance indicator.” These indicators function as signs that your company is functioning according to plan. It involves prioritized metrics that are “key” to your business and the way that it functions and operates both over time and on a day-to-day level as well, essentially the overall life cycle.
The indicator is usually in the form of quantitative data that is collected, analyzed, and presented in a snapshot form that makes it easy for you to understand the indicator and tell whether or not your company is performing favorably or unfavorably in each specific area.
If all of this sounds a bit too abstract, the good news is that you are probably already using KPIs in your business – you might just not know it! Most businesses are constantly keeping track of their financial performance through metrics like profit, costs, and revenue – well, these are actually examples of KPIs at work!
Most companies just leave it there and don’t expand their use of KPIs beyond the financial aspect. In doing this, they are essentially ignoring an entire realm of information that they could be obtaining about their business. In the world of instant data and information, we need to take advantage of this range and speed to expand how we measure our performance, profits, productivity, and future prospects.
Why are construction KPIs important?
Now that you have a better idea of what construction KPIs are and what the term actually means overall, you are probably wondering why you need to implement all of this into your business. After all, all that data and information sounds like it must be a pain to collect and use. However, this doesn’t have to be the case and it’s definitely possible for you to gain a whole lot of insight and information into your business without having to invest a lot of time, effort, and energy into doing so.
One of the biggest problems in the construction industry is that people are slow to implement technology that will help improve their performances. Overall, people are simply reacting to problems when they see them in real time instead of being able to predict them or tweak them throughout the process. Through KPIs, you can learn from what has happened in the past in order to better understand and predict your future, leading to improved company and project performance.
For example, only looking at your business’ profits, revenue, and costs would be like driving a car with only the rearview mirror. Without being able to see in front of you, or being able to see your blind spots through the side mirrors, you won’t be able to fully see the road ahead of you or plan how you are going to react to things that approach you on the road like other cars, pedestrians, stop lights, etc. KPIs allow you to see and understand the whole picture so that you can plan and adjust accordingly. For more information about resource management, check out our guide to construction resource management.
What are some examples of construction KPIs?
Even though you probably already use some traditional KPIs like profit, revenue, and costs, there are actually some other construction specific KPIs that are especially useful metrics in this industry. So, here are four examples of KPIs that are useful in the construction industry:
Prioritizing safety not only keeps people out of harm’s way, but it can actually save you money in the long run too. No one wants to be dealing with expensive medical bills or insurance payments after an incident. The best way to prevent this is to implement safety KPIs into your construction business and monitor things like incident rates, safety meetings, accidents per suppliers, so that you can keep your workers safe and productive.
There’s nothing worse than completing a task and then figuring out once it’s done that there’s something wrong with it and it needs to be fixed or done completely over again. Quality control is an important aspect of keeping your projects on time, on budget, and to maintain client satisfaction.
Noticing problems at the end instead of during a construction project can be really expensive to fix and failing inspection because of a problem that fell through the cracks will end up wasting time and money to get it up to code. Furthermore, general contractors obviously want to be known for doing quality work and definitely do not want a reputation for faulty products or results.
Implementing quality control KPIs to your construction business can help you maintain the highest level of quality in every construction project with the goal of increasing quality over time. Some examples of specific construction KPIs in this area include number of defects, time taken to fix defects, customer satisfaction, rework cost, number of jobsite inspections, and number of passed site inspections.
A business owner or manager is only as good as their workers, and this is especially true in the construction industry, so you definitely want to make sure that your workers are performing at the highest level. This all plays a part in construction resource management. You also want to make sure that you are utilizing your resources in the most productive ways possible instead of wasting money and time where you don’t need it.
Performance metrics like percentage of equipment downtime, percentage of labor downtime, labor productivity, average revenue per day/hour, and amount of waste per job can give you the information that you need to run a high performing and productive business.
Just because your workers are good doesn’t mean they are happy – and worker happiness is important to ensure that they keep up the good work! Plus no one likes having to spend all the time and money that is required to find new employees. So, tracking construction KPIs when it comes to areas like worker satisfaction, employee reviews, training completion percentage rates, and turnover rates can help you keep your employees happy, trained, and productive for years to come.
How do I use construction KPIs?
Talking about construction KPIs is one thing but actually implementing them into your business is another thing. You need to analyze your needs and priorities as a construction company in order to determine which KPIs you are going to adopt. Probably the best way to implement construction KPIs is to take it slowly and add a few at a time to make sure that you are doing it correctly and getting the information that you need.
You need to make sure that you have the support and understanding from all employees to be involved in the implementation process – this should probably involve training, support, and perhaps offer additional incentives as well. Overall, adopting construction KPIs into your business will take time, effort, and patience – but it will definitely pay off in terms of increased information and insight that you can then turn into increased productivity and profits.
Lauren Lake is the COO and co-founder at Bridgit. She holds a degree in Civil Structural Engineering and is well-versed in construction workforce management and resource planning processes. Lauren has been named to the Forbes Manufacturing & Industry 30 Under 30 and Best Of Canada Forbes Under 30 Innovators lists. Lauren has presented at industry events and conferences, including BuiltWorlds, Canadian Construction Association, Procore Groundbreak, and more. Follow Lauren on LinkedIn and Instagram.
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