If you work in the construction industry, you might have heard of a concept called key performance indicators. You may have heard the term before, as key performance indicators are a set of prioritized metrics that measure success, and are essential in maintaining labor productivity and client satisfaction.
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 this concept for beginners as well as go in depth into some of the more complex aspects for those who already have experience with using construction specific metrics.
You can also download our guide to “KPIs for construction operations” including a 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. As mentioned earlier, a KPI is an acronym for “key performance indicator.” These indicators function as a starting point and a measure of whether 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, client satisfaction, and revenue – well, these are actually examples of KPIs at work!
Most construction companies just leave it there and don’t expand their use of KPIs beyond the financial cost 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 key performance indicators in the construction industry 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, as important as the correlation is between quality metrics and client satisfaction, 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; it’s definitely possible for you to gain a whole lot of insight and information into your business and project management setup without having to invest a lot of time, effort, and cost 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. This leads to unnecessary increases in labor downtime percentage and costs with similar decreases in your profit margin and employee satisfaction. Through KPIs, you can learn from what has happened in the past in order to better understand and predict your future, leading to improved project success and performance.
For example, only looking at your business’ profits, revenue, and cost factors would be like driving a car with only the rearview mirror. Without utilizing key performance indicators to assess performance during business development meetings, it’s impossible to properly understand which of the numerous tasks taking place on the job site are being handled non-optimally.KPIs allow you to see and grasp a better understanding of 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 overall labor cost, there are actually some other construction specific ones that are especially useful metrics in this industry. So, here are four examples of KPIs that are useful in the construction industry:
SAFETY WITHIN THE WORKPLACE
Prioritizing safety not only works towards zeroing out the number of accidents per project, but it can actually save you money in the long run too. No one wants to be dealing with the cost of 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 supplier, so that you can keep your workers safe and productive while ironing out any safety problems.
QUALITY OF WORK BEING PERFORMED
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. All project managers value quality control as 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 within 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 metrics 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.
PERFORMANCE MANAGEMENT AND PRODUCTIVITY MEASURES
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. Construction companies want to make sure they are utilizing their resources in the most productive ways possible instead of wasting money and time where it isn’t necessary.
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.
EMPLOYEES AND THEIR RELATED DATA
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 employee satisfaction, employee reviews, training completion percentage rates, and turnover rates can serve as leading indicators that you’re keeping 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 use actionable insights and analyze your needs and priorities as a construction company in order to determine which ones 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 during future projects.