CONSTRUCTION PERFORMANCE AND

RESOURCE OPTIMIZATION
CHAPTER ONE
OVERVIEW OF CONSTRUCTION
PERFORMANCE MANAGEMENT
 Performance management…
What is Performance Management?
• Performance management is the process of ensuring individual and
team effort support the organisational objectives and to realise key
stakeholder expectations and wealth creation in all the identified
value drivers of the organisation.
• Performance management is a continuous process of identifying,
measuring and developing performance in organizations by linking
each individual’s performance and objectives to the organization’s
overall mission and goals. (Ms.B. Kaviya and, Ms.C.Hema,2015

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 Performance management…
Organizations are able to create and sustain a workplace
environment that:
Values continuous improvement
Adapts well to change
Strives to attain ambitious goals
Encourages creativity
Promotes learning and professional development
Is engaging and rewarding for employees

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 Performance management…
Performance measurement
• According to Neely et al. (1995) performance measurement is a
topic which is often discussed but rarely defined. These authors
state:
1. Performance measurement can be defined as the process of
quantifying the efficiency and effectiveness of action.
2. A performance measure can be defined as a metric (or indicator)
used to quantify the efficiency and/or effectiveness of an action.
3. A performance measurement system can be defined as the set
of metrics used to quantify both the efficiency and effectiveness
of actions.
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 Performance management…
Performance measurement
• Some of the major concerns of performance measurement
include “What to measure?”, “Which measures are used?”,
“How to measure?” and “How to interpret results?”
(Sandanayake and Oduoza, 2007).

• Performance measures are the numerical or quantitative

indicators that show how well each objective is being met (Sapri
& Pitt, 2005).

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Construction Performance management Basics

How does construction industry perform?

Industry’s clients are not satisfied
The supply team is not satisfied
Industry’s bad reputation
Low profitability
Lack of innovation and development

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Construction Performance management Basics
Industry’s clients are not satisfied
 Quality of construction is poor (repairs and reworks)
 Inefficiency of the construction team to respond to clients
complaints and inquiries
 Lack of innovation on behalf of the contractor and designer
 Disputes and claims
 Incomplete as build drawings and information about the building
and its requirements
 Construction Performance management Basics

Workers are not satisfied

 Bad health and safety record (too many
accidents)
Bad working conditions (weather, facilities)
Job security
Frequently changing location of work
Construction Performance management Basics
The supply team is not satisfied
• According to the Egan’s rethinking construction report, the health and
safety record of construction is the second worst of any industry.

DETR statistics shows that people working in the construction

industry...
are getting older
are likely to work for a small firm
are quite likely to be self-employed
are working longer hours than other industries
are more likely to be involved in an accident
are paid around the average for all industries and services
Construction Performance management Basics

Industry has bad reputation

Lack of performance
Lack of innovation and development
‘Cowboy’(unreliable) builders
Industry dominated by the old craft culture
Fragmented and adversarial
The competition for the best talent is very high (for example the
choice between becoming a doctor, lawyer or civil engineer).
 Construction Performance management Basics

Low profitability
(short cuts, bankruptcy, lack of investment in research and
development)
 High business failure (mainly SME’s)
 Profitability is low (across the board)
According to the Egan’s rethinking construction report, the
construction has a low and unreliable rate of profitability
 Construction Performance management Basics

Lack of innovation and development

Lack of high technology in design and construction
Lack of branding
Building products are behind in terms of value and
intelligence.
High reliance on site based and unskilled labour
Demand for buildings is largely client led
Construction Performance management Basics
Performance Planning and indicators
Performance Management is the process of:
1. Planning Performance (setting(Key Performance Areas)KPA’s,
objectives and standards that are linked to corporate strategy,
development plans).
2. Maintaining Performance (monitoring, feedback, coaching and
mentoring, regular interactions goal achievement)
3. Reviewing Performance (formal feedback and ratings –
evaluating performance)
4. Rewarding of performance (increases, bonuses, incentives, etc)
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 Construction Performance management Basics

Performance Planning covers 80% of the process and it includes:

Identifying Key Value Drivers of stakeholders
Defining Key Performance Areas (KPA’s)
Defining Objectives
Defining Targets
Development a training & development plan

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 Performance Measurement and monitoring
Purpose of PMe

• Position checking: to continually monitor progress and define current position.

• Position communicating: to inform employees and customers on at least an

annual/Monthly basis through performance reports in order to increase transparency and
encourage participation.

• Priorities confirmation: to identify the priorities of activities, performance information,

and data to be provided.

• Progress compulsion: to enable the organization to discover potential improvement areas

in order to improve performance.

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 Performance Measurement and monitoring

Or as per (Kim et al. 2007):

• Performance measurement is an on-going process, the purpose of which is to enhance
the improvement, and achievement of aims and objectives. It can be summarized in five
steps
1. Measuring performance phase, which includes establishing basic attributes of
performance management, performance objectives, success factors and targets.
2. Store phase, which is the recording of data and information, as well as defining the
way which they are demonstrated.
3. Analysis of phase.
4. Reporting performance phases.
5. Using data phase.

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Performance Measurement and monitoring

Models of Performance Measurement/Management

I. BSC
II. Pyramid
III. International key Quality Awards Models
IV. New generation models

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 Performance Measurement and monitoring

Balanced Scorecard /BSC

• The name Balanced Scorecard invokes two images: that of a balance and that
of a scorecard used to keep a record by making marks or notches on a card
or tally board.
• The Balanced Scorecard (BSC) is a performance management system which
incorporates four main measurement categories (perspectives) each of which
with a wide range of potential sub-measures.

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 Performance Measurement and monitoring

BSC
1. Financial Perspective
2. The Internal Business Process Perspective
3. The Customer Perspective
4. Innovation, learning and growth perspective(Recent Contributions)

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 Performance Measurement and monitoring

• The difference with traditional approaches to performance measurement is

that it includes a range of "leading and lagging" indicators - customer
perspective, internal/business processes, learning and growth, and
financial - to evaluate whether a business is moving toward its strategic
goals (Gentia Software 1998 p5).
• BSC recognizes that the financial measures are lagging indicators and
therefore the result of the other three leading indicators.

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Performance Measurement and monitoring

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Performance Measurement and monitoring

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Performance Measurement and monitoring

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Performance Measurement and monitoring

Wadugodapitiya, R. R. M. M.
K.and etal 25
 Performance Measurement and monitoring
International key Quality Awards Models
Malcolm Baldridge National Quality Award (MBNQA)
leadership,
information and analysis
 strategic planning
human resources development and management
process management
business results, and
customer focus and satisfaction

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Performance Measurement and monitoring
1. Leadership: How upper management leads the organization, and how the
organization leads within the community.
2. Strategy: How the organization establishes and plans to implement strategic
directions.
3. Customers: How the organization builds and maintains strong, lasting relationships
with customers.
4. Measurement, analysis, and knowledge management: How the organization uses
data to support key processes and manage performance.
5. Workforce: How the organization empowers and involves its workforce.
6. Operations: How the organization designs, manages and improves key processes.
7. Results: How the organization performs in terms of customer satisfaction, finances,
human resources, supplier and partner performance, operations, governance and
social responsibility, and how the organization compares to its competitors.
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Performance Measurement and monitoring

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 Performance Measurement and monitoring
The EFQM (European Foundation for Quality Management) excellence model)
A non-prescriptive framework based on nine criteria, can be used to assess an
organization's progress towards excellence.
The model recognizes that there are many approaches to achieving sustainable excellence
in all aspects of performance.

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Performance Measurement and monitoring

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Performance Measurement and monitoring

Performance pyramid
• The strategic measurement analysis and reporting technique (SMART) system
(also known as the performance pyramid) was developed as a result of dissatisfaction
with traditional performance measures such as utilization, efficiency, productivity and
other financial variances

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 Performance Measurement and monitoring
• Level 1: At the top of the organization is the corporate vision or Mission through
which the organization describes how it will achieve long-term success and
Competitive Advantage.
• Level 2: This focuses on the achievement of an organization's CSFs/ Critical success
factors and core competences/in terms of market-related measures and financial
measures. The Marketing and financial success of a proposal is the initial focus for
the achievement of corporate vision.
• Level 3: The marketing and financial strategies set at level 2 must be linked to the
achievement of customer satisfaction, increased flexibility and high productivity at
the next level. These are the guiding forces that drive the strategic objectives of the
organization.
• Level 4: The status of the level 3 driving forces can be monitored using the lower
level departmental indicators of quality, delivery, cycle time and waste.
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Performance Measurement and monitoring

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 Performance Measurement and monitoring
Enumeration:
STRONG POINTS •attempt to integrate corporate objectives with operational
performance indicators
• manage PM strategically

WEAK POINTS • does not provide any mechanism to identify key performance
indicators
• fails to specify the form of the measures
• does not explicitly integrate the concept of continuous
improvement

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 Performance Measurement and monitoring
Others
• The Performance Prism
• Kanji Business Excellence Measurement System (KBEMS)
• Theory of Constraints (TOC)
Key Performance indicators
What is KPI
 KPI‘ A set of quantifiable measures that a company or industry uses to gauge or
compare performance in terms of meeting their strategic and operational goals.
KPIs vary between companies and industries, depending on their priorities or
performance criteria. Also referred to as "key success indicators (KSI)".

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 Performance Measurement and Monitoring
Objectives of KPI
Improve personnel’s understanding of KPIs.
Improve personnel’s awareness of maintenance performance.
KPIs are directly linked to the overall goals of the company.
KPIs are measurements that define and track specific business goals
and objectives.
The larger or smaller organizational strategies require monitoring,
improvement, and evaluation.
Once an organization has analyzed its mission, identified all its
stakeholders, and defined its goals, it needs a way to measure
progress toward those goals.
KPIs are utilized to track or measure actual performance against key
success factors.
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 Performance Measurement and Monitoring
Key Success Factors (KSFs) only change if there is a fundamental shift in business
objectives.
• Key Performance Indicators (KPIs) change as objectives are met, or management focus
shifts.
Why do we Use KPI’s
Performance effectiveness.
For the accuracy,
actual reflection of the process
efficacy in delivering the outcome.
The effects of a change can be monitored reliably, repeatedly and accurately by KPI.

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 Performance Measurement and Monitoring
A KPI can be used to
 Closely monitor the results of actions
 Detect potential problems and it can drive improvement.
 It is reasonable to use the KPI as a tool to improve ongoing process performance.

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 Performance Measurement and Monitoring

Uses of KPI
A key performance indicator (KPI) or performance indicator is used to
measure the performance.
To make the decision making process easier.
Key Performance Indicators (KPIs) help organizations to understand how
well they are performing in relation to their strategic goals and objectives.
They are used by an organization to evaluate its success or the success of a
particular activity in the organization.
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 Performance Measurement and Monitoring

Uses of KPI (Cont’d)

To analyze the operational details of the organization.
 It helps to focus on the facts clearly.
Key performance. indicators are used periodically assess the performances of
organizations, business units, and their division, departments and employees.

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 Performance Measurement and Monitoring
How to design KPI’s
 KPIs should be clearly linked to the strategy, i.e. the things that matter the most.
 KPIs have to provide the answers to our most important questions.
 KPIs should be primarily designed to empower employees and provide them with the
relevant information to learn.
 Identifying the KPI’s Related to strategic aims.
 Identify what makes the organization success or failures.
 Controllable and accountable.
 Qualitative and quantitative.
 Long term and short term

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 Performance Measurement and Monitoring

How to design KPI’s (cont’d)

 Consider Stakeholder needs.
 Identify important aspects.
 Establish Company Goals and KPIs.
 Select Performance Indicators and Metrics.
 Set Targets and Track Performance.

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 Performance Measurement and Monitoring

How Are KPIs Evaluated

• A KPIs status and score are determined by comparing its actual value against the
thresholds that you define.
• The performance status of a KPI is represented by the status icon that you assign to
each range.

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 Performance Measurement and Monitoring

Advantages of KPIs
 Identifies everything that is easy to measure and count.
Visibility on performance and strategic goal
 Agility/Quickness in decision making
Efficient management
 A team work on the basis of shared and measurable objectives.
 KPI’s do not give answers, rather they raise questions and direct once attention

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 Performance Measurement and Monitoring

Advantages of KPIs
It helps to measure both the financial and operational goals of a company.
 Improve operations.
 Increase project flexibility.
Better job costing processes.
 KPIs focus employees attention on the tasks and processes.

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 Performance Measurement and Monitoring

Disadvantages KPIs
The KPI’s is intended to simply improve future results without reference to
external parties and benchmarks.
 In that case one must develop KPI’s which use existing data available to the
organization.
Frequency of Data Collection.
Should be measured frequently.
No connection with the external database.

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 Performance Measurement and Monitoring
Types of KPI
1. Process KPIs - measure the efficiency or productivity of a business process.
Examples - Days to deliver an order.
2. Input KPIs - measure assets and resources invested in or used to generate
business results. Examples – Amount/Dollars spent on research and
development, Funding for employee training, Quality of raw materials.
3. Output KPIs - measure the financial and nonfinancial results of business
activities. Examples - Revenues, Number of new customers acquired.
4. Leading KPI measure activities that have a significant effect on future
performance. Drive the performance of the outcome measure, being predictor of
success or failure.

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 Performance Measurement and Monitoring
5. Lagging KPI is a type of indicator that reflect the success or failure after an
event has been consumed. Such as most financial KPIs, measure the output of
past activity. Outcome KPI - Reflects overall results or impact of the business
activity in terms of generated benefits, as a quantification of performance.
Examples are customer retention, brand awareness.
6. Qualitative KPI - A descriptive characteristic, an opinion, a property or a trait.
Examples are employee satisfaction through surveys which gives a qualitative
report.
7. Quantitative KPI - A measurable characteristic, resulted by counting, adding,
or averaging numbers. Quantitative data is most common in measurement
and therefore forms the backbone of most KPIs. Examples are Units produced
per man-hour.

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 Performance Measurement and Monitoring

Characteristics of a good KPI

• KPI is always connected with the corporate goals.
• A KPI are decided by the management.
• They are the leading indicators of performance desired by the organization.
• Easy to understand
• A KPI need to be: Specific, Measurable, Achievable, Result-oriented or Relevant
and Time-bound

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 Performance Measurement and Monitoring

The main KPIs in Infrastructure sector

The main five KPI’s in Infrastructure sector are:
1. Client Satisfaction.
2. Construction Time & Cost.
3. Productivity.
4. Defects.
5. Profitability

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2.3 Performance Improvement principles and tools

 Productivity
 Lean concept
 Kaizen
 BSC
 BPR
 EVM
 TQM
 Concurrent Engineering
 Benchmarking

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 Productivity
Productivity in construction
Construction productivity, which is measured by output per unit of resource input, plays a
key role in the success of a construction project. High productivity leads to lower unit cost
to carry out a task or operation. It is highly related to cost and time performance of a
project
Factors affecting construction labor productivity:
1. Industry related factors
2. Project related factors
3. Labor related factors
4. Management related factors

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Productivity…
Industry related factors
Investment
Government
Research and development
Weather
Building code and specification
Project related factors
Project design
Design changes
Method of construction
Type of contract
Location
Type of project
Work type
Physical element
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 Productivity…

Labor related factors

Supply and demand
Unions rules
Crew composition
Crew size
Skills
Capabilities
Motive
Management related factors
Planning and scheduling
Control
Project organization
Supervision
Materials and tools availability
Lack of motivation of workers
Site layout
Work redoing over crowded areas and delays 54
 Productivity…
Causes and Effects of Management
Ineffectiveness
• The management ineffectiveness causes ….. delays which result in …..poor
productivity.

Planning and scheduling

Lack of project planning and scheduling is one of the important reasons
of low construction productivity.

Planning a project can reduce production costs by increasing

productivity of craftsman and optimizing utilization of available
resources.
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 Productivity…
Control
• Problems arise every day that could not have been foreseen.
Adverse weather
Material delivery delays
Labor disputes Can disrupt the original
Job accidents
plans

• Without time control, rescheduling could not accomplished and so productivity will
suffer due to lack of coordination and communication and resource shortage.

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 Productivity…
Project Organization
 The main task of any organization is to plan, direct and control.
 Poor organization result in poor productivity.
 Defining individual positions of authority and responsibility will lead to an effective
operating environment and good productivity.
Supervision
 Although unnecessary supervision will increase the cost of work, insufficient supervision will
result in confusion delays and decrease productivity.
 The labor productivity is increased by increasing the number of man hours per day that the
field supervisor spent in contact with the crew.
Material and tool availability
• Unavailability of material and tool had a significant adverse impact on the productivity of labor.
• Material unavailability loss between 6.4 and 8.4 man-hr/week
• Tool unavailability loss between 3.4 and 5.1 man-hr/week
• When formal material management programs are applied in any project, a minimum 6%
improvement in labor productivity should be achieved. 57
 Productivity…
Work redoing and delays
 Work redone maintained a position as one of three worst problems leading to poor
productivity.
The amount of times spent on rework was between 4.9 – 7.7 man-hr/week.
Causes of work redone were mainly due to engineering and management
inefficiencies.
Craftsmen spent an average of 14.3% of their time redoing work.
Lack of motivation
• The greater the worker motivation, the greater his expenditure of effort.
• Lack of material, frequent change orders, conflict of crews because of improper
scheduling, lack of equipment, etc. frustrate the worker and produce low productivity.

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 Productivity…
Site layout
Site layout of the project is a very important organization tasks.
The assigned location of different job components affects productivity,
safety, workers satisfaction, and communication.
Approximately, 7% of a day is nonproductive because of a non optimal
site layout.
Information and communication
• Lack of information, uncertainty regarding design factors, site conditions,
client wishes, and regulatory requirement result in design delay, redesign
and substantial loss of productivity.
• Approximately, 9% of a day is nonproductive because of poor or inadequate
communications at the job site.

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 Productivity…
Authority and decision making
 Group participation in decision making has been proven to be an
effective method of increasing productivity.
 Participation of work group in changing work methods increases
productivity by 14% compared to non participating groups.
Productivity VS Quality
Quality means; inspection, quality control, quality assurance, and total
quality management.
Low quality of construction will cause redoing work.
Redoing work affects the production rate and decrease the output.
When output decreases, productivity decreases.
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 Productivity…
Production rate increase
• Use shifts
• Use two or more shifts instead of one shifts
• Apply overtime
• Increase shift period to 10 hours instead of 8 hours
• Increase resources
• Use more resources to increase production rate

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 Productivity…
Methods to improve construction productivity
Step 1  Inspire Your Workers
Step 2  Improve Communications
Step 3  Lay Out A Productive Jobsite
Step 4  Schedule Your Work
Step 5  Analyze Project Reports
Step 6  Manage Equipment Productively
Step 7  Improve Safety
Step 8  Pay Attention To Quality

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