The purpose of KPIs is to show how a company's performance compares with the average achieved by the industry – shown by the 50% circle in the "radar charts". But it is not just economic factors such as profitability that are being measured. Even design quality will soon have its own set of benchmarks, which will rate the more subjective aspects of a completed building such as "impact" and "functionality". Design quality indicators set by the Construction Industry Council are due any day now.
Most people in the industry agree that benchmarking is a good thing – the problem is that with so many KPIs to choose from, companies are not discriminating enough in their choice of what to benchmark. Certainly, some are concerned that companies are wasting time and money on indiscriminate benchmarking.
"The biggest problem is that there are too many KPIs," says Andy Garbutt, director of consulting at project and facilities managers Citex. "People are measuring more then they need to – it's a mini-industry in itself."
Garbutt is not alone. NHS Estates has expressed concerns about the extent of benchmarking in today's industry. A spokesperson says the organisation is committed to benchmarking to help drive continuous improvement, but questions "too much inappropriate benchmarking".
It is a sentiment echoed by some main contractors. "There is a balance between the effort needed to benchmark and the achievement gained from doing so," says David Robertson, business improvement manager at Mowlem's building division.
How it all began
Like many construction initiatives, the craze for KPIs can be attributed to one man:
Sir John Egan. Although progressive companies were dabbling in benchmarking back in 1998, it was Egan's Rethinking Construction that triggered the deluge. When Egan said the industry should continuously improve its service to clients, and clients should move away from lowest-price tendering, KPIs were the tools for the job.
By pooling data from dozens of projects, the Construction Best Practice Programme was able to draw graphs showing how the industry performed in 10 areas of performance, including safety, profitability, client satisfaction and defects. Firms could then use these graphs to rank their perfomance against others in the industry.
So, a company can find out whether it has a good safety record by calculating the number of reportable accidents per 100,000 people employed and plotting the results on the safety benchmark graph. If the company scores, say, 45%, then 55% of other firms have a better record (see the example).
It is the K that’s crucial. Five or six business-critical KPIs are the maximum
Andy Garbutt, Citex
However, those 10 indicators were never going to be enough for an industry as diverse as construction – designers, manufacturers and contractors all do different things and so each has its own benchmarks – hence the mushrooming of KPIs.
Making sense of KPIs
Robert Packham, at the DTI's Construction Market Intelligence Division, is concerned with the big picture. He talks of a "family tree" of KPIs under the broad banner of construction's sustainability agenda: economic, social and environmental. At the top of the tree are what Packham terms government measures. These consist of the 10 economic KPIs, measuring construction cost and time, and 10 social KPIs (under the Respect for People scheme), which benchmark areas such as staff turnover and working hours. There are also six environmental performance indicators, produced by the Construction Best Practice Programme.
Below these headline indicators are the industry sector measurements. These include KPIs for consultants produced by organisations such as the RIBA and the RICS; KPIs for material producers produced by the Construction Products Association, and the mechanical and electrical contractors' KPIs, produced by the Building Services Research and Innovation Association.
Added to these are an increasing number of company-specific measures that have been developed in-house by some firms. Citex, for example, has developed its own assessment tools for benchmarking its facilities management arm. That tool allows clients to gauge space management, maintenance and information management and lets Citex assess the impact of any changes it has introduced in the course of a project.
In addition to these construction process measures, there are two other benchmarking schemes, which Packham refers to as "product performance measures". These are the housing quality KPIs – produced by the DTLR and the Housing Corporation – and the as yet unpublished design quality KPIs, which are being piloted by the Construction Industry Council. Both schemes have been developed to measure the quality of the finished product, as opposed to the efficiency of the process used to produce the product.
A user's guide
With so many KPIs available, it is that important construction firms limit themselves to the most appropriate. "It is the K that is crucial," emphasises Citex's Garbutt.
"Firms need to keep things key. Five or six business-critical KPIs should be the maximum for most firms otherwise you fall into a measuring scenario not a managing scenario."
Companies should bear in mind that although it is rare for clients to compare companies' performances using benchmarks, many are keen to employ firms that benchmark for continuous improvement. Mowlem's Robertson reports that the Ministry of Defence and larger local authorities are asking at prequalification stage for assurance that a company is benchmarking.
For companies in framework agreements, benchmarking is a fundamental part of the process. In return for guaranteed work, companies must demonstrate performance improvements by benchmarking. This also gives clients the opportunity to see how these companies perform relative to each other. "Mowlem and six others work with Tesco, who ask us to benchmark to compare our performance," says Robertson.
KPIs in practice: Mace plots progress at Cannons health club, WarwickIt might look like a spider’s web, but the diagram on the left is actually a snapshot of Mace’s performance in the construction of a health club in Warwick. Using the Construction Best Practice Programme’s key performance indicators, Mace has plotted its score out of 100 against the industry average of 50 for similar jobs in each of 10 categories. And it can be pretty pleased with itself: it beats the average in each category. The diagram will come in useful next time Mace bids for a health club. To arrive at the diagram – called a “radar chart” in KPI parlance – Mace measured its performance according to criteria set out by the best practice programme. Some measurements are simple: the health and safety benchmark, for example, is achieved by counting the number of number of reportable accidents per 100,000 employees. On this particular job there were none, so Mace achieves a perfect score of 100. Other benchmarks are more complicated to calculate. The construction time axis is designed to show how much faster a contractor is at putting up a given building type compared with how much faster the rest of the industry is becoming. However, since no two jobs are the same, the firm has to execute a complicated calculation to “normalise” the result.
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