To stay competitive in today’s construction industry, general contractors must constantly find ways to improve over time. That’s where KPIs come in.

KPIs (or key performance indicators) are a common kind of benchmark that many companies use to help gauge the performance of their employees, along with their own success at meeting operational goals. These metrics can also be applied in comparison with the competition.

By selecting and agreeing to KPIs during the preconstruction phase, an organization can track and compare performance throughout the entire project lifecycle and determine where they need to improve to increase margins, efficiency, and outcomes.

Categorizing and choosing your organization’s KPIs

Construction KPIs can be broken down in many ways, but they often fall into these basic categories:

  1. Cost
  2. Time
  3. Quality
  4. Efficiency
  5. Safety
  6. Client satisfaction
  7. Employees

When choosing KPIs, ask yourself: in each area, what’s going to move the needle forward for your organization? When you look back at recent projects, there are probably a few areas you already know could use improvement. There are also probably some that you may be doing ok in, but that would make a significant business impact if you could find ways to further optimize them. These KPIs are what you should be measuring and looking to improve upon over time.

Here’s a breakdown of the basic categories, plus some examples of common KPIs many construction companies choose to track within each one.

     1. Cost

Are you sticking to the budget set by the client, save for anticipated contingencies? Are you consistently spending more than planned on a certain category, like labor? Consider every element that may impact the profitability of your projects.

Examples of common KPIs:

• Cash balance – actual versus baseline
• Cost for construction
• Cost predictability – construction
• Cost predictability – construction (client change orders)
• Cost predictability – construction (project leader change orders)
• Cost predictability – design
• Cost predictability – design and construction cost to rectify defects
• Labor cost – actual versus baseline
• Labor cost over project timeline
• Profit margin – actual versus baseline profit margin over project timeline
• Profit predictability – project
• Profitability – company
• Return on capital employed – company
• Return on investment – client
• Return on value added – company

      2. Time

With construction projects typically taking 20% longer to finish than scheduled, time is a commodity. The closer you can stick to the schedule determined during preconstruction planning, the better your project outcomes will be.

Examples of common KPIs:

• Time for construction
• Time predictability – construction
• Time predictability – construction (client change orders
• Time predictability – construction (project leader change orders)
• Time predictability – design
• Time predictability – design and construction
• Time taken to reach final account
• Time to rectify defects

     3. Quality

Quality affects both budget and time: If you do the job right in the first place, you’ll spend less time and money on costly rework. Tracking this crucial area may begin to reveal common sources of quality issues across projects that you can develop mitigation plans to solve.

Examples of common KPIs

• Number of defects
• Number of defects due to workmanship
• Time to rectify defects
• Number of site inspections conducted
• Ratio of the number of inspection passed to total number of inspection
• Total cost of rework
• Quality issues at available for use
• Quality issues at end of defect rectification period

     4. Efficiency

Analyzing data from change orders can help general contractors assess the performance of trade contractors. What was the root cause of the change order? How long did it take them to turn it around? This information can help general contractors select the best specialty contractor for ever project.

Examples of common KPIs:

• Change orders – clients
• Change orders – project manager
• Actual working days versus available working days
• Day to day project completion ratio – actual versus baseline
• Waste/recycling per job
• Average revenue per hour worked
• Percentage of equipment downtime
• Percentage of labor downtime
• Percentage of equipment downtime
• Percentage of labor downtime
• Percentage of backlogs over project timeline
• Percentage of unapproved change orders

     5. Client Satisfaction

While you may be satisfied with the results of a build, it’s important that your client feels that way, too. After all, it costs 5x more to acquire a new customer than to keep a current one, and a five percent increase in customer retention can increase a company’s profitability by 75 percent.

Examples of common KPIs:

• Client perception vs. contractor perception
• Client satisfaction with service
• Client satisfaction with the product
• Repeat business
• NPS (net promoter score)

     6. Safety

Jobsite safety is a hot topic these days, and for good reason: with increasingly complex projects allowing more room for error, it’s critical to protect your workers from harm and your organization from costly litigation.

Examples of common KPIs:

• Number of safety meetings/communications
• Number of accidents
• Number of accidents per supplier
• Reportable accidents (including fatalities)
• Reportable accidents (non-fatal)
• Interest cover (company)
• Liability ratio (over asset) on current versus completion comparison

7. Employees

With skilled labor more difficult than ever to find, measuring your workers’ development and satisfaction is critical for success. Not to mention, employee turnover is a major expense, and reducing this cost can save teams enormously. Looking at this data can help you see what your organization can do better to keep workers around for the long haul.

Examples of common KPIs:

• Worker satisfaction
• Training completion percentage rate
• Turnover rate

Setting the right goals for your organization

After you select KPIs, your leadership and project teams should agree on goals for each one.

While you may be tempted to be conservative in your goals, the top construction companies typically set and achieve highly challenging performance levels for their KPIs. Remember: the goal of tracking these data points is to focus on improvement opportunities over time, so set your KPI goals with the aim of getting where you aspire to be, not maintaining where you already are.

At the end of the day, action — not data — drives these changes. If you don’t measure performance, you have no basis to plan improvement. The only constraint is the organization’s capacity to handle the actions that stem from the KPI results.

Wrap-up

By determining your organization’s KPIs during preconstruction, general contractors can begin to benchmark their performance over time and glean the sort of insights needed to begin acting on them. This process is crucial to continually improve as an organization and staying competitive in the years to come.

Does your precon team practice these 5 habits? See them now.