What Is KPI In Project Management?

What is a KPI and Why Does It Matter in Construction?

Key Performance Indicators (KPIs) are signals that tell you whether your project is on track or if adjustments are needed. They are critical to construction project management because they help measure success and guide decision making. But it’s essential to understand that a KPI is not just a report or dashboard it’s a tool that provides insight into the health of your project and can point out potential problems before they become costly issues.

For construction projects, KPIs should be aligned with the overall system to ensure that all aspects of the project are functioning well. For instance, if you focus too heavily on budget KPIs related to indirect costs (like general conditions), you might inadvertently overlook crucial components like training, prep time, or subcontractor costs, which could lead to larger failures in the system. KPIs should help you maintain balance and alignment across all areas of the project.

Leading vs Lagging Indicators: Which One Matters More?

There are two primary types of KPIs: leading indicators and lagging indicators. The key difference is when they provide value.

• Leading Indicators: These are proactive and signal potential issues before they arise. By measuring processes that affect future performance, leading indicators help prevent problems before they occur. For example, tracking the percentage of workers with pre task safety plans or how quickly roadblocks are removed is a leading indicator that helps prevent delays and ensures a smooth flow of work.
• Lagging Indicators: These reflect past performance. They tell you how well things have gone, but after the fact. Common examples of lagging indicators in construction include the number of injuries or incidents that have already occurred on site. While valuable for assessing what went wrong, lagging indicators can’t prevent future problems.

In construction, leading indicators are more useful because they provide real time data that helps prevent issues before they escalate.

Common Safety KPIs and Their Effectiveness

Safety is a top priority on any construction site, and KPIs play a crucial role in ensuring a safe environment. However, many safety KPIs are lagging indicators, such as tracking the number of injuries or first aid incidents. While these metrics are essential for understanding past incidents, they don’t help prevent accidents from happening.

To improve safety, leading indicators should be the focus:

• Percentage of workers with pre task plans
• Percentage of work with proper safety planning in place
• Percentage of workers trained on safety practices

These proactive KPIs help ensure that the necessary safety measures are in place before work begins, reducing the likelihood of incidents on site.

Flow Based KPIs: Tracking Performance and Removing Roadblocks

In construction, flow is critical. It refers to the smooth, uninterrupted movement of work from one stage to the next. KPIs that track flow focus on maintaining this rhythm by identifying and eliminating obstacles that could slow progress.

Some examples of flow based KPIs include:

• Perfect handoff percentage: This KPI tracks how well work is handed off from one team or stage to the next. A high percentage indicates that work is transitioning smoothly without rework or delays.
• Roadblock removal average: This measures how quickly roadblocks are identified and removed. By addressing roadblocks before they impact the schedule, teams can maintain a steady flow of work.

These KPIs focus on ensuring that work is progressing without unnecessary interruptions, helping to prevent delays and keeping the project on track.

The Power of Percent Plan Complete (PPC) and Perfect Handoffs

Percent Plan Complete (PPC) is a valuable KPI in the Last Planner System because it tracks how many planned tasks were completed as promised. While useful, PPC is a lagging indicator because it reflects performance after the fact.

A more powerful KPI is perfect handoffs, which track how well work is passed between teams or stages. Perfect handoff percentage measures the effectiveness of communication and coordination between teams, ensuring that tasks are completed correctly before they are handed off to the next crew. High perfect handoff percentages reduce rework and delays, making it a more proactive KPI than PPC.

Measuring Team Health: A New Metric for Project Success

An often overlooked but essential KPI is the team health score, which measures the overall well being and effectiveness of the team. A low team health score indicates that there may be issues with morale, communication, or resource allocation, which could affect productivity.

Tracking this KPI regularly helps ensure that teams are working well together and that any issues are addressed before they affect project performance. When teams are healthy, collaboration improves, and the project runs more smoothly.

Essential Financial KPIs for Project Managers

In addition to operational KPIs, financial metrics are also critical for managing a construction project effectively. Some key financial KPIs include:

• Gross profit margin: This KPI measures how profitable the project is, helping you identify if you’re staying within budget.
• Contingency buckets: This tracks how contingency funds are being used, ensuring that unexpected costs don’t throw the project off track.

These financial KPIs ensure that the project remains within budget while still achieving its objectives.

How to Use KPIs to Improve Project Flow and Performance

KPIs are not just numbers to track they should be used as tools to improve performance and maintain flow. The key is to focus on leading indicators that help identify potential problems before they occur. By tracking the right KPIs, you can make informed decisions that keep the project on track and prevent delays.

Some steps for effectively using KPIs include:

• Identifying potential roadblocks early on
• Removing obstacles proactively
• Ensuring teams are prepared and equipped before starting work
• Monitoring progress regularly to catch any issues before they cause delays

Actionable KPIs: How to Measure Success Without Overcomplicating

With so many KPIs to choose from, it’s easy to get overwhelmed. The key is to keep it simple. Focus on KPIs that are directly actionable and truly help you improve performance. Too many KPIs can create confusion and divert attention from what really matters.

It’s important to prioritize KPIs that support the overall project objectives and drive the project forward without overcomplicating things.

FAQ

What is the difference between leading and lagging KPIs?
Leading KPIs provide real time data that helps prevent issues before they arise, while lagging KPIs measure past performance after the fact.

How can I use KPIs to improve safety on site?
Focusing on leading safety KPIs, like pre task plans and worker training, helps prevent accidents before they happen, rather than simply tracking incidents after the fact.

What’s the benefit of measuring team health?
A healthy team is more productive and collaborative. Measuring team health ensures that any underlying issues are addressed early, helping the project run smoothly.

How do flow based KPIs help in construction?
Flow based KPIs like perfect handoff percentages and roadblock removal averages ensure that work progresses without interruptions, reducing delays and keeping the project on schedule.

Can I use financial KPIs to track project performance?
Yes, financial KPIs like gross profit margin and contingency tracking ensure that the project stays on budget and remains financially viable throughout its duration.