Categories
Tips & Advice

KPIs Project Managers Should Be Tracking

Everyone wants to be successful, but how do you know what success looks like to your company? Many companies use KPIs—that is, Key Performance Indicators—to outline expectations and define what they consider measures of success.

So, what exactly is a KPI? According to Construction Financial Management Association (CFMA), KPIs are “vital signals that help indicate if your business is functioning according to plan” and can be further understood by breaking down each word in the acronym:

  • Key: An important or vital aspect. It means you have to prioritize. However, it doesn’t mean you can leave everything on the list and just shift the order of priorities. Everything you measure can’t be considered a key metric. Start with a manageable number. We typically see organizations effectively use 3-7 KPIs. (CFMA)
  • Performance: The manner in which something operates, functions, or behaves. Just like an engine’s performance can be measured by more than its miles per gallon, a company’s performance needs to look beyond profit metrics. (CFMA)
  • Indicator: A sign that gives information about and draws attention to a condition. This is usually a number, percent, or color code that quickly conveys favorable or non-favorable status. (CFMA)

From a construction standpoint, KPIs help gauge the success of a project and to assess performance against strategic and operational goals. KPIs are typically established and agreed upon at the beginning of a project in order to solidify responsibilities and to ensure everyone understands what’s expected of them. Factual data is essential in order to build value and achieve sustainable growth.

To effectively analyze project performance, it’s necessary to prioritize which KPIs will be weighted most heavily, as well as which will most accurately reflect the status and health of a project. While many of us are quick to rely on financials as the leading indicators of success, it’s important to understand that success can’t always be measured strictly within a quantitative framework and there are other essential construction KPIs that need to be considered as well.

Hard numbers and facts are often what precipitate and drive change. Without relevant and timely data, it is difficult to gauge how companies are faring.

So which KPIs should project managers be tracking? Below are five critical categories to consider when developing your construction project KPIs:

1. Safety

People working in construction site. Young men at work in new house inside apartment building. Latino manual worker helping injured co-worker after accident on duty

Arguably now more than ever, worker safety needs to be a top priority for construction companies. Safety incidents can lead to costly project delays, increased insurance premiums, or other unexpected costs—and, therefore, investing in worker safety will save you money in both the short- and long-term.

Safety KPIs may include:

  • Safety/incident rate
  • Number of safety meetings/communications
  • Number of accidents per supplier
  • Number of time-loss claims
  • Number of serious injury claims

2. Quality, Reliability & Environment

Keeping a pulse on these is critical to ensuring a project stays on-track and within budget as it reduces the likelihood for changes, rework and holds businesses accountable to the environment. Quality KPIs will also help you evaluate how the project has progressed if it’s passing required inspections, if the work is being done to satisfaction and if you can rely on this performance for the long-term.

Quality KPIs may include:

  • Number of errors/defects & callbacks
  • Time to rectify defects
  • Incident reports
  • Total cost of rework
  • Number of total site inspections
  • Number of passed site inspections
  • Community complaints
  • Corporate social responsibility policy
  • Consultant-contractor construction coordination
  • The quality and performance of the building at substantial completion
  • The quality and performance of the building at the end of the 1- year warranty
  • Reliability – Percentage of projects (by number and value) that are “on budget” and “on schedule” at substantial completion.
  • Building energy use
  • Construction waste diverted

3. Performance

Performance metrics help measure worker, equipment and economic productivity and how the project and business are developing. By paying attention to how much time and effort is required to complete each portion of the project, teams can reallocate resources to the areas that need them most to keep the project on time and within scope.

Performance KPIs may include:

  • Average revenue per hour worked
  • Percent of wasted time (equipment and labor)
  • Amount of waste/recycling per job
  • Economic performance
  • Characteristics of businesses
  • Productivity measured in terms of GDP contributed per worker
  • Business Size & Formation

4. People/Employees

Two male engineer looking commercial building structure, blur image

In addition to tracking employee performance, it’s important to also measure their development and satisfaction. Happy workers are more likely to perform better, and to stay with the company longer. Not only does employee satisfaction lead to improved quality of work, it reduces the likelihood of churn and therefore also saves on hiring and training costs.

Employee KPIs may include:

  • Turnover rate
  • Worker satisfaction
  • Training completion rate
  • Workforce
  • Education
  • Youth/Gender/Diversity
  • Wages
  • Unionization
  • Qualification

5. Budget & Forecast

Knowing how and where a project’s budget is being spent is one of the most important roles of a project manager. It’s also crucial for them to be able to identify and understand any deviation from the budget in order to improve future planning and job costing, in addition to limiting waste and reducing inefficiencies.

Budget KPIs may include:

  • Budget variance
  • Cost Performance Index
  • Line items in budget
  • Project Pipeline – Total value of proposed projects
  • Total Number of Building Permits Available
  • Capital expenditures
  • Cost to build
  • Interest rates
  • Product price
  • R&D spending
  • Total NUMBER of projects within +/- 5% of the tender price: • Total VALUE of projects within +/- 5% of the tender price
  • Total NUMBER & VALUE of projects that were completed on or before the predicted date:

How to Choose the Right KPIs for Your Project

Measuring, reporting and tracking KPIs can be a complex endeavor. KPIs need to be introduced deliberately and in small steps. Ensure the set of KPIs provide tangible data that can help construction businesses understand their company, industry and the market better. While action not data drives improvement, KPIs cannot tell businesses what the “right” thing to do might be but they can help illuminate and uncover new or poorly understood factors that can help inform decisions.

Because every project and business is different, KPIs should be developed on a project-by-project basis. When developing future KPIs, a good place to start is by examining past projects to reflect upon successes and failures. As the saying goes, “hindsight is 20/20” and evaluating past mistakes gives you the opportunity to plan better for the future.

Manage construction projects with the job dashboard in Premier

Remember that while financial KPIs are most commonly used to measure success, there are other critical KPI categories that also need to be considered to fully understand your project and to provide you with the information needed to improve operational efficiency.

Conclusion

Every construction project has a number of moving parts and KPIs that need to be monitored closely, and we’re here to help you keep track of the information that matters. Today, technology and the practices that exploit them are becoming a greater factor in competitiveness and profitability. The degree to which businesses invest in R&D is an indicator of how ready they are to adopt new technologies and how resilient thy might be to unforeseen events.

To learn how our all-in-one, cloud-based construction management software can ensure your project’s processes are clearly defined and optimized through automation, click here.

 

Author Biography:

Kathryn Dressler is a content strategist with more than 10 years of experience across the spectrum of marketing services, including blogging, social media, public relations, copywriting and editorial services.

Categories
Tips & Advice

4 Ways to Improve your Budget Forecasting Process

Budget forecasting is a strategic and integral task within project management and control. At a high level, forecasting can be used to answer key questions like, “When will this project be complete, and how much will it cost?” This type of information is critical because without a well-calculated estimate of costs, a business may find itself without the cash necessary to complete a project or to pay workers.

 

Forecasting is also important for determining anticipated revenue because companies will want to know how much they stand to make before taking on a project. Additionally, an accurate forecast will provide insight into future cash flow, which is especially important in an industry where the funding for a new project may likely come from the revenue of a previous one. 

 

Creating a budget and financial forecast is no easy feat when there are always a number of variables that may impact a project—for example, weather conditions, change orders, or even a global pandemic causing shutdowns like we experienced this year.

 

So, what can you do to improve your budget forecasting? Consider these four tips:

1. Review Regularly & Update Accordingly

Anyone in the construction business will likely agree with the saying “the best laid plans often go awry” because no matter how carefully a project is planned, things can change and challenges may arise. It’s important to keep a pulse on a project’s status by revisiting forecasts regularly to determine whether or not the project is on-track. 

 

It’s also important to keep track of the initial forecasts and use them as a baseline for comparison, otherwise you won’t be able to effectively gauge project success and make the necessary updates to mitigate future losses.

 

When you create a budget forecast, it’s wise to set dates and calendar reminders to review the forecast and adjust the resource and budget allocations as necessary. Not only will this help gauge current status, it will help you create more precise future forecasts and reduce the likelihood of under- or overstating rates for future projects.

2. Factor in Direct & Indirect Costs

Project managers reviewing construction project plans

When you’re creating your budget forecast, it’s imperative to include both direct and indirect costs. Investopedia defines direct costs as “costs related to producing a good or service. A direct cost includes raw materials, labor, and expense or distribution costs associated with producing a product. The cost can easily be traced to a product, department, or project”, whereas indirect costs “are expenses unrelated to producing a good or service. An indirect cost cannot be easily traced to a product, department, activity, or project.”

 

Three common types of indirect costs are overhead costs (e.g., office equipment and supplies, insurance, salaries), equipment costs (e.g., depreciation, repairs and maintenance) and labor burdens (e.g., FICA taxes, Workers Compensation). Indirect costs can be difficult to calculate, but they need to be accounted for in a budget otherwise your forecasts will be inaccurate.

3. Use Hindsight of Historical Data 

As the saying goes, “hindsight is 20/20.” Use your company’s historical data to your advantage and to feed the precision of foresight. Reviewing historical data will help you identify previous pitfalls and to predict trends that are likely to happen again, all of which will help you plan better for the future to create more accurate budgets and forecasts. 

4.Utilize an All-in-One Software Solution

With so many factors and moving parts dependent on one another, it can be easy for project details to slip through the cracks. Adding to this, many construction companies are using multiple disjointed systems for their project management and accounting needs. Not only does this create bottlenecks in processes and waste valuable time, a disconnect between accounting and job costing means the data is unreliable and can’t be used to accurately gauge success or view up-to-date financial information. 

 

One of the easiest and most successful ways to improve your forecasting is to utilize an all-in-one cloud-based solution that allows you to access the information you need, wherever and whenever you need it. Premier Construction Software offers the most powerful construction software solution on the market to ensure you can effectively monitor and manage two of the most important functions—job costing and accounting. 

 

Our software brings the key business data together into a single platform, with seamless integration between all modules, and a single source of truth for reporting. Up-to-date financial reports are ready to go at any time, and can be tailored to your requirements. Premier also offers the ability to lock-in forecasts to ensure project managers are held accountable for their monthly forecasting. 

Final Thoughts

The power and usefulness of a forecast hinges on its accuracy—forecasting in and of itself isn’t enough to guide critical business decisions. Investing the time and resources required to improve your forecasting will contribute to more exact budgets which, in turn, will optimize cash flow and boost revenue. 

 

To learn more about Premier Construction Software’s forecasting capabilities, click here to schedule a personalized product tour.

 

 

Author Biography:

Kathryn Dressler is a content strategist with more than 10 years of experience across the spectrum of marketing services, including blogging, social media, public relations, copywriting and editorial services.