How KPIs for Construction Bring “Par” to the Industry

For decades, the maxim in construction has been presented as a triangle with the words “good,“ “fast,” and “cheap,” followed by the caveat “Pick two.” This may sound like the punchline to a joke to people outside the industry, but insiders are all too familiar with the concept.

When a contractor starts a project, they know that cost will likely be the primary driver over efficiency with quality often coming in a distant third. While many successful firms are already using construction software and do have minimum standards of quality, those standards aren’t “standard” across the industry. Without actual KPIs for construction (key performance indicators), "standards" are only truly defined by regional regulations.

The Problem: Without KPIs for Construction, there is no "Par"

You’re probably familiar with the concept of par, as it relates to golf. Par is the number of strokes a player is expected to need to get the ball into the hole. The number is right there on the tee pad, as well as the score card, so everyone knows what it is and players know what to expect and how to play the hole. It makes it easy for competitive players to evaluate performance and, more importantly, to improve.

Par = a set standard. In golf, par is the number of strokes you are expected to take, under average conditions, to get the ball into the hole. 

Imagine a golfer who never kept track of how he played on a specific course, or under certain conditions. How would they possibly know if there was any improvement in their game? Professional golfers keep detailed records of their performance because they know how important it is to track the development (or decline) of their skills. It’s the same way with baseball, NASCAR and probably even Curling. Stats matter when you’re in competition and improvement is the difference between staying afloat or rising above.

In business, we already see a similar concept playing out in KPIs (Key Performance Indicators) which are commonly used as a kind of industry “benchmarks” for companies as well as individuals. Manufacturing also uses benchmarks (or KPIs) to track everything from cost, to time, as well as quality and safety. Manufacturing has become consistently more efficient, faster, and cheaper, year after year, because tracking these benchmarks has become the name of the game.

This isn’t happening in the construction industry yet, but it is only a matter of time. And with a new report about the KPIs for Construction, there’s a tremendous opportunity for many to develop far more concrete benchmarks for success. The learning curve for success and improvement used to be much longer, with many invisible speed bumps along the way, but digital tools are shortening the curve and smoothing the bumps.

A New Way to Measure Success

Developments in construction technology are causing seismic shifts in the industry, as they inevitably will, and new business practices will be changing the bidding game in a big way. There will be no looking back. Just as power tools completely altered the way most trades were done, digital and software tools are altering the landscape of how construction professionals do business.

Construction software is already leveling the playing field in many parts of the construction and pre-construction process. Now the opportunity is to take all of the information that these digital tools are creating and use it to better understand how your company is performing - both on a single project and across the company. Using information on past projects allows contractors to actually see how they performed, beyond the typical success metrics of margin, safety, and client satisfaction. This helps contractors answer the question "how and where do we improve?" It's all about using the information your digital tools are generating to set benchmarks within your company. Using information from previous projects will take the guesswork out of developing strategies for improvement. The companies who embrace this opportunity will not only benefit, but blaze a trail forward in the industry.

But Par is Coming and It’s Going to Change Everything

KPIs for construction are giving us new industry-wide standards

Until recently, there hasn’t been an efficient way to establish any kind of “par” for activities such as quality or efficiency, but the abundance of construction technology, connected to the cloud, is changing that. Technology is providing a lot of useful new data and as it becomes easier to aggregate, it will allow contractors to become more aware of their project performance on past projects, allowing them to set up internal operations and processes to optimize performance.

Digital tools are providing the opportunity and the capability to collect information across all aspects of a construction project where technology is being used to capture activities, such as change orders. Everything, from the specific details of a subcontractor’s performance and the daily cost of general conditions, to the overall efficiency and safety of a given project are now available at the fingertips of anyone involved in a construction project.

As this data continues to be aggregated, we will be able to establish a meaningful par for every project based on factors that used to be lost in the vagaries of the process. Industry leaders will have a clear cut benchmark, not only for safety, but also for cost, quality and performance.

Once par is established, everything changes. Setting par for quality, cost and schedule will mean that if you can’t meet par, you’ll quickly be out of the game. Of course it also means that if you can beat par, you’ll have a competitive advantage.

It’s important to acknowledge that aggregating this information and using it as a tool can be challenging for contractors. Many are likely using several different tools and technology that are generating information, but without a comprehensive plan for information management and analysis, it's difficult to extract it and use in a meaningful way. This is where we advise our clients to start small - focusing on something such as looking at the root causes of change orders across multiple projects. It's a somewhat manual process, but construction technology providers are working together to create integrations that allow contractors to more easily work with the tech they have and centralizing ALL project information in one place.

How Par Can Benefit You

Construction technology is simply the newest tool available to the industry. Like the first carpenters who saw the potential in electric circular saws, we all have a chance to reach for a new tool and adapt our process to its use. These tools will help refine our skills and create awareness around areas of improvement in individual firms and across the industry..

It’s a choice, but over time the choice becomes very clear. We can continue working the way we always have, but the trends in performance tracking in manufacturing are already showing us how working smarter pays off. As owners get more sophisticated, demanding more and more accountability and excellence, we’re going to have to adapt to stay competitive.

The winners will be the organizations who are evolving, learning to use technology to become more efficient, to track quality among their subs, and to establish their own handicap.