Most contractors tend to focus on one clear measure of success: profiting on each project. Though making money is indeed the end game, business experts explain that by concentrating more on KPIs like quality control, productivity and safety, we’ll build more wins–and more sustainable businesses too.
Pointing out that less than half of construction firms focus on organizational resilience, Lets Build suggests honing in on critical KPIs by “examining your most and least successful projects: What worked and what didn’t? What was unique about the successful ones? What mistakes were made on the less profitable jobs?” Often, reviewing the track record reminds contractors of an essential truth about building: quality control is key to success. As experts remind us:
Investing in quality means you have to make fewer changes during the project—it saves time, it saves money, it saves headaches. No one wants a project full of change orders and rework.One of the main construction KPIs to monitor for every project is your passed-to-total inspection ratio; it gives you an overview of the project’s overall quality.
It’s also a good idea to keep an eye on the project’s:
- Number of defects
- Time to fix defects
- Rework rate and cost
- Punch list completion rate
In tandem with focusing on quality control, contractors can build increased organizational resilience by focusing on KPIs related to workers, including both their safety and their levels of satisfaction and engagement. Lets Build points out that the rewards of prioritizing the wellbeing of workers are many: “Investing in health and safety lowers the frequency of unexpected costs, like expensive insurance payments and lost time. Putting a focus on safety increases staff productivity—they know they’re safe while they work. It also helps keep incident-related costs low.” To zoom in on some specific KPIs related to health and safety, consider focusing on: near-miss reporting; incident rates; safety inspections completed/passed/failed; and, the number of safety communications. When it comes to worker satisfaction and engagement, remember:
Employees who are invested in the work they do are more efficient and less likely to leave the job; reducing worker turnover can save you a significant amount on any project. Plus, happy employees show up on time, have better attitudes on and off site, and contribute more to your bottom line.Watch labour-related KPIs like:
- Turnover rates
- Worker satisfaction
- Engagement rates
- Training completion rates
Cash or Cash Flow?
Although “cash is king” is an often reiterated mantra in business, in reality, for contractors, cash flow is king: “The entire industry knows the pain of extended payment cycles, especially when profit margins are always tight. Managing and tracking your cash flow across the board allows you to find financial problems early in the project and address them before they become major issues.” Lets Build advises:
If you can negotiate payment terms or adjust payment schedules by tracking KPIs, you can keep your profit on track….The most important cash flow construction KPIs include:
- Days sales outstanding
- Operating cash flow
- Gross margin/net income
- Project costs
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Successful contractors set and monitor KPIs related to quality, worker safety and engagement, cash flow–and, of course, performance. The right performance metrics make it easy to assess productivity and progress on projects, and experts advise:
If you can analyze the performance of everyone on the jobsite, you can make changes on the fly to keep your project on time, on budget, and within scope. Try prioritizing project goals and tracking related construction KPIs to better understand your project and measure its success more accurately.Start tracking performance metrics like:
- Labour waste
- Revenue per hour
- Material waste
- Equipment downtime
As you strengthen the resilience and success of your business, don’t forget to leverage The Partnership Account® for Contractors. Position your company for ever more success, starting now:
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