Project Management Strategic Issues

D31PS

Unit 5 Performance Measurement and Benchmarking

Topics for this morning

Four main areas for consideration:-

• Why measure performance?

• How do we measure performance?

• The role of Benchmarking.

• Types of Benchmarking in Construction

Measuring Performance

Discussion Questions.

• Do we measure performance in Construction (companies or

projects)?

• How is performance measured in Construction?

• What is the value of measuring performance in Construction.

• How do we assess whether our project or company is performing

well?

Measuring Construction Performance

A brief video clip from a different ‘business’ where performance is everything…

Measuring Construction Performance

Discussion of Performance Measurement and

continuous improvement within the Formula 1

‘Constructors’ Championship…

Measuring Performance in Construction

Performance has obviously been measured in Construction Projects and Construction companies for many decades.

Traditional performance measures would involve financial assessments, for example the

profit levels achieved by construction companies.

For many years construction companies have been ranked in terms of the “TOP 25 Contractors” and these rankings might be based on a variety of data including turnover, profitability, value of new contracts won, value of work in progress, numbers of employees etc.

Construction Project Performance has also been measured for decades and we might argue that Project Management as a discipline owes its existence, at least in part, to the need to monitor actual progress against planned progress, using a variety of techniques and tools. The project manager then exercises CONTROL based on that data.

The problems with these traditional approaches to performance measurement is that they :-

Lag behind the current situation (referred to as lagging metrics)

Result in reactive management instead of predictive or learned management.

Measuring Construction Performance An additional problem with traditional performance measurement techniques is that

they do not give an organisation (or those managing a project) any information about how the performance of their organisation (or project) compares with other organisations (or projects) in the same industry sector.

Even if a project were performing well against its own targets that does not mean that that project is a well performing project. All other projects (in the company or in the industry) could well be performing in excess of your project.

Again, the key goal of measuring project, company and industry performance is to achieve CONTINUOUS IMPROVEMENT, of the type suggested by Latham and EGAN.

We therefore need to measure performance for a number of reasons:-

To assess how a project is performing against its targets and to capture performance data that can be used to immediately improve the project’s processes for the remainder of that project and for subsequent projects.

To assess how well a project is performing in relation to other projects (is it performing better or worse than the average).

To assess how well a company is performing in relation to competitor companies.

To assess how well an industry (or an industry sector) is performing.

Measuring Construction Performance

The problem for us is how do we do this?

What do we need to measure?

How do we obtain data on what others are doing?

How do we measure what might be called ‘best practice’ and

how do we assess whether we are there or not (if not, what do

we need to do to get there?)

How do we know that what we call ‘best practice’ is in fact Best

Practice?

Measuring Construction Performance

Some of the main topical performance measurement

approaches:

Benchmarking

Key Performance Indicators (KPI’s)

Measuring Construction Performance

Benchmarking

Internal Benchmarking

Project Benchmarking

External Benchmarking

Measuring Construction Performance

Headline Key Performance Indicators (UK)

Promoted by UK Government Sector and quickly adopted by private

sector clients and construction industry in general.

Headline KPI’s include:-

Client Satisfaction (Product)

Client Satisfaction (Service)

Defects

Predictability (Cost)

Predictability (Time)

Profitability

Productivity

Safety

Construction Cost

Construction Time

Measuring Construction Performance

UK Construction Industry

KPI Data is published

annually

Measuring Construction Performance

Sample 2009 KPI data

Measuring Construction Performance

Use of KPI data

Measuring Construction Performance

• KPI’s have provided the UK Construction industry with a powerful tool that can

be used to assess the performance of a company or a project in relation to the

performance of peers.

• However, the data that is produced will not necessarily achieve continuous

improvement.

• A key aspect in the use of leading indicator performance data in securing

project/ industry best practice and continuous improvement is ‘feedback’.

• The feedback mechanisms are multiple and may be complex.

• Feedback is the essential component that provides information and data on

how a company or a project that is presently performing at X level can actually

become a company or a project that is performing at or above national or

international performance levels.

Measuring Construction Performance

• Some further thoughts:-

• Companies or organisations that are assessed as World Class or as leading

international examples using various different Benchmarking or KPI

techniques, may or may not represent ‘Best Practice’ – Very few KPI’s or

industry benchmarks are capable of achieving absolute values.

• Are the KPI’s presently used in construction measuring the data

necessary to actually improve construction industry and project

performance in line with Egans continuous performance improvement

targets?

• Where is the feedback in the benchmarking process; how is it

documented and disseminated?

Measuring Construction Performance

• As a Project Manager, what performance data do you need to

assess whether your project is performing at or above industry

average levels and what feedback mechanisms do you require to

determine what you need to do to improve the performance of

your current project or your next project?

Measuring Construction Performance

Summary

• Continuous ‘dynamic’ performance monitoring in construction is

essential in order to monitor a projects performance against best

practice and in order to engender a culture of continuous

performance improvement.

• The relatively recent introduction of Key Performance Indicators as a

benchmarking tool for the industry is a major step forward and

provides powerful data that was previously missing.

• There is still much that needs to be accomplished to achieve best

practice and continuous improvement in the construction sector

when compared to other industry sectors (external benchmarking).

• In particular we must focus on what it is that makes projects perform

better than the benchmark averages.