There’s always room for improvement in the construction industry. By taking a critical look at the company’s performance, or by looking to competitors, it’s easy to gather insight for boosting profits and productivity. This process is referred to as construction benchmarking.
What is construction benchmarking?
We talk about “industry best practices” a lot. But how does anyone know what these best practices are? That’s what benchmarking is all about – learning how to improve based on the competition or reviewing processes internally.
This goes well beyond simply tightening budgets and streamlining schedules – it’s about continuous improvement. Better productivity means increased cost savings. Improved completion rates mean the ability to move on to other projects. Higher quality performance means fewer defects, less reworking, and eventually, higher prices.
External benchmarking
This can be conducted against direct competitors or the industry as a whole. Industry-wide benchmarking data can be found in published surveys conducted by private firms. However, competitive benchmarking can prove a bit trickier. Most construction businesses don’t want to release any private information. Therefore, some assumptions will need to be drawn. But benchmarking isn’t just comparing one company against another, it can also be conducted internally.
Internal benchmarking
This form of analysis is inward focused, and can often prove more valuable than its external counterpart. Internal benchmarking involves a careful review of past projects. What did and didn’t work on the last project? What could be improved? Was there an excessive amount of change orders? Did delays occur due to poor scheduling or improper work sequencing? Analyzing these issues can be a valuable guide to any weaknesses or missed opportunities.
The construction benchmarking process
The benchmarking process can help construction firms better understand what makes other companies successful and what factors can be optimized. Identifying these best practices provide an opportunity to look beyond the bottom line. Job costing and project estimating aren’t the only factors that can affect profits.
Identify problem areas
The first step to proper benchmarking is identifying which key performance indicators (KPIs) need improvement. In the construction industry, the more common KPIs include the number of change orders, cost predictability, productivity rates, profit margins, project completion time, etc.
For a full list of construction KPIs:
Data collection
Collecting the data is the most labor-intensive portion of the benchmarking process. Some of this will be relatively simple such as overhead costs per project or profit margins. Others are a bit more difficult to quantify, requiring some number crunching – such as productivity and schedule performance. Also, for those which don’t have concrete numbers to analyze like customer satisfaction, a scoring system can be useful.
Compare and analyze
Whether conducting internal or external benchmarking, effectively analyzing the numbers can help expose and deficiencies in a construction company’s performance. It will identify the strengths and weaknesses of the operations that need to be shored up. Once performance and financial gaps have been identified, its time to right the ship.
Implement and monitor improvements
Collaborate with employees and laborers to implement solutions. If using external benchmarking, determine the best way to adapt these successful processes. Once a change has been implemented, carefully monitor the results. Measure its process and evaluate the impact of the changes. Practices that work for one company may not function the same in another.
Benchmarking ensures continuous improvement
While profits, revenue, and costs are the traditional measures of success, these alone are not enough. The importance of performance improvements and increased efficiency can’t be overstated. Gross profits are great, but benchmarking efforts fill in performance gaps to ensure the company is performing at its highest possible level.
Additional resources
- Earned Value Analysis in Construction | Tracking Cash Flow and Project Progress
- Managing a Construction Project Requires Collaboration and Transparency
