project performance measurement for productivity … · · 2007-10-29cib2007-483 . project...

CIB2007-483

Project Performance Measurement for Productivity

Improvements Gyadu-Asiedu William, Fritz J. Scheublin, and Emilia L.C. Van

Egmond-De Wilde De Ligny ABSTRACT This paper seeks to underscore the need to relate the performance measurement theories, as practiced in the manufacturing and other industries, to construction projects. It opines that if construction project measurements are done in a similar fashion it will lead to improvements in project performance. The authors identify (also in Gyadu-Asiedu, 2006) the close similarities between the modern performance measurement as propounded by Kaplan and Norton (1992); Neely et al (2005) etc and the multi-dimensional concept of project measurement by Shenhar (1997); Atkinson, R (1999); Vandevelde et al (2002) and proposed that a unified performance measuring system would be useful for the construction industry.

The objective of this article is to propose a framework within which performance measurement could be used as means of productivity improvement in the construction industry. Keywords: Project, Performance, Productivity, Measurement, Improvement 1. INTRODUCTION “When you can measure what you are speaking about and express it in numbers, you know something about it…(otherwise) your knowledge is a meager and unsatisfactory kind; it may be the beginning of knowledge, but

2484 CIB World Building Congress 2007

you have scarcely in thought advanced to the stage of science” (Lord Kelvin, 1824-1907; Cited in Fisher, 1990, and Tangen, 2004)

The attempt to move away from the traditional system of measuring performance of a firm is linked to that of project success/failure measurement by the fact that they are all proposing multi-dimensional measures. The move away was necessitated by short comings of the traditional performance measurement systems. This has been criticized for several short comings. Ghalayini summarized the comparison as shown in Table 1. Table 1: Comparison between traditional and Non-Traditional Performance Measures (Ghalayini and Noble, 1996) Traditional Performance Measures Non-Traditional Performance

Measures Based on outdated traditional accounting system

Based on company strategy

Mainly financial measure Mainly non-financial measures Intended for middle and high managers Intended for all employees Lagging metrics (weekly or monthly) On-time metrics (hourly, or

daily) Difficult, confusing and misleading Simple, accurate and easy to

use Lead to employee frustration Leads to employee satisfaction Neglected at the shop floor Frequently used at the shop

floor Have a fixed format Have no fixed format (depends

on needs) Do not vary between locations Vary between locations Do not change over time Change over time as need

change Intended mainly for monitoring performance

Intended to improve performance

Not applicable for JIT, TQM, CIM, FMS, RPR, OPT, etc

Applicable

Hinders continuous improvement Help in achieving continuous improvement

This was a necessary reaction to the recent changes in the environment sparked by globalization (Rouse and Putterill, 2003). The similarities in the focus and dimensions for measuring performance (between the manufacturing and construction projects) were too striking to ignore as shown in table 2 below:

CIB World Building Congress 2007 2485

Table 2. Similarities between the focus of performance measurements Manufacturing sector dimensions

Project(Construction ) management dimensions

Customer Customer Financial Financial Internal business Internal business Innovation and learning Innovation and learning Competition Future business Quality Technical and quality Time Time Cost Cost Kaplan & Norton, 1992; Lynch & Cross, 1999; Keegan et al., 1989; Fitzgerald et al., 1991;

Hauschildt, 1991; Freeman & Baele, 1992; Griffin & Page, 1993; Shenhar, 1997; Vandevelde et al., 2002

Source: Gyadu-Asiedu, 2006 (modified) The table illustrates that despite the differences in the industrial set ups and most importantly, in the methods of operation, both industries have similarities in the focus and measures. What is more, one can clearly see a common orientation towards performance improvements. 2. PROJECT PERFORMANCE MEASURES. Researchers in project management have outlined different dimensions by which the performance of a project could be measured or assessed. Latest calls have been on using multidimensional, multi-criteria concepts (Cooper and Kleinschmidt, 1987; Freeman and Beale, 1992; Griffin and Page, 1993; Hauschildt, 1991; Lipovetsky et al, 1997; Atkinson, 1999; Shenhar et al, 1997, 2002; Vandevelde et al, 2002, Chan et al, 2004). The Balanced Scorecard by Kaplan and Norton (1992), though not directly related to project is also based on the multidimensional concepts. In all 21 Indicators (measures) could be summarised from their models: Time, cost, technical; knowledge creation; business success; innovation and learning; financial/ commercial success; market impact; future perspective; project execution efficiency; managerial; organizational; personal growth; completeness; manufacturability; customer perspective; programme; product delivery; meeting design goals; benefit to end user; benefit to national infrastructure; and overall success; environmental impact Assessment . This could be grouped under the following levels as shown in table3:


Table 3. Performance Dimensions levels Project Level Firm Level Sector Level National Level Time Knowledge

creation Market impact

Benefit to national infrastructure

Cost Innovativeness Customer perspective

Environmental impact assessment

Technical/ quality Business success

Project execution efficiency

Financial/ commercial outcome

Completeness Future perspective

Manufacturability Programme Product delivery Personal growth Organizational Customer

perspective

Managerial 3. PROJECT PERFORMANCE FACTORS. Others have looked at the performance factors since the late 1960s. Researchers have developed various frameworks for success factors, mostly highlighting project management in general (Avots, 1969; Sayeles and Chandler, 1971; Martin, 1976; Baker et al, 1983; Celand and King, 1983; Hughes, 1986; Morris and Hough, 1987; Pinto and Slevin, 1987; Belassi &Tukel, 1996, Pinto and Cabaña, 1995). Altogether, they have highlighted several factors. Overall, 31 factors are summarised from literature: Project manager; project team; project objective; control systems & responsibilities; scheduling; monitoring & feedback; continuous involvement; clear goals; selection of project organization; general management; top management support; adequate funding to completion; initial cost estimates; start-up difficulties; bureaucracy; operational concept; market intelligence; manpower and organization; information and communication channels; politics; community involvement; schedule duration; contract type, implementation; human relations; client consultation; external environment; continual ‘what if?’ approach. Belassi and Tukel (1996) provided a framework by which performance factors could be categorized into factor groups in order to


allow other factors to be included over time. Table 4 attempts to group the PFs within this framework. Table 4. Performance Factors groups Factors relating to the Project manager

Factors relating to the Project Team members

Factors relating to the Project

Factors relating to the organization (firm)

Factors relating to the external environment

Project manager

Project team Project type

The organisation

Politics

Information/ communi-ation

Initial cost estimates

Project objective

Top management support

Economic

Scheduling Scheduling

Clear goals

Adequate funding

Social / community

Monitoring/ feedback

Monitoring/ feedback

Contract type

Clear goals Start-up difficulties

Implementa-tion

Implementa-tion

Scheduled duration

Information/ communication

Bureaucracy

Human relation

Human relation

Start-up difficulties

Market intelligence


Start-up Difficulties

Manpower

Responsibil-ity

Continuous involvement

implementation

Client consultation


Bureaucracy Responsibility

Continuous involvement

Selection of project organization

Selection of project organisation

General management


4. FOCUSING ON CONSTRUCTION PROJECTS PRODUCTIVITY Neely et al (2005) identifies that “business strategists and organizational behaviourists, for example, have explored the rationale underlying the use of performance measures more fully than the production and operations management community”. A quick look at tables 3& 4 seems to support this fact.

The construction industry has its peculiarities which, at times, render the distinction between the firm and the project difficult, especially in the case of the small firms.

For example, a small firm with only one project on hand finds that its existence its hang the project and hence the project represents the business, and thus the firm. It is only in the big firms with several project sites to control where the distinction becomes clear. In any case, it is necessary to focus performance measurements on construction projects if the quest is about productivity or improvement in project delivery. Improvements in construction productivity have been on the industry research agenda for sometime. These have not been easy to achieve due to various forms of “bottlenecks” in the forms of “risks”, “institutional weaknesses”, “organisational fragmentation issues”, “supply chain problems”, “resource management problems”, project organisation problems” etc. throughout the project lifecycle ( Bissah et al, 2003; Kashiwati, 2002; Thevoendran, 2002; Dawson, 1997;Ofori, 2002) The issues blamed for lack of productivity in the construction industry are numerous, diverse, and rather complex. It appears that in pursuant to identify them has exacerbated the already fragmented industry. Yet, it is still necessary to work out improvement strategies.

The presented authors believe that improvements in project productivity requires a unified approach to dealing with the bottlenecks than has been the case hitherto –by doing what the manufacturing firms did: measure performance. 5. PERFORMANCE MEASUREMENTS AND PRODUCTIVITY IMPROVEMENT The common reasons for performance measurement revolves around planning, budgeting control, motivation, decision making, fiscal and shareholding reporting, regulating, scorekeeping, attention directing, problem solving, and staff performance evaluation (Bull, 1980; Horngren et al, 2002). Neely (1999) suggests seven reasons why BPM has dominated management agenda for the past decade or so:

1. the changing nature of work; 2. increasing competition; 3. specific improvement initiatives;


4. national and international awards; 5. changing organisational roles; 6. changing external demands, and 7. the power of information technology.

Kellen (2003) posit that chief among the reasons is “to improve control over firms in ways that traditional accounting systems have not allowed”.

Tangen (2004) thinks that the chief reason is that “they would help to improve productivity when used properly”. A productivity improvement is, thus, at the core of the performance measurement concepts. What is more, finding a way to improve productivity based on the actual measurement of prevailing circumstances by a pre-determined scheme offers a more scientific and hence a better approach to addressing it. In addition, the approach has the potential of bringing into a single focus all the problems confronting productivity in the construction industry. 6. PERFORMANCE MEASUREMENT FOR ALL TYPES OF CONSTRUCTION PROJECTS The construction industry has peculiarities that distinguish it from other industries, making every project unique. In general, some characteristics have been identified as distinguishing features. Some of the relevant ones are:

• the nature of the final product: massive and fixed in position • the method of price determination: does not rest only on the client • organization of the construction process: essentially by a tripartite

arrangement between the client, consultants and the contractor, then other remote but necessary stakeholders

• the fragmented nature of the industry: It could as well be called an industry of several other distinct parts, e.g. suppliers, contractors, quantity surveyors, civil and service engineers, building inspectors etc.

However, literature on project success/failure seems to agree on common factors influencing the cost, time, and quality and other dimensions of the project positively or negatively as listed above. The list is never exhaustive and different factors have different weight of influence in different countries (see also Makulwasawatudom et al, 2003; Bissah et al, 2003; Akindele, 2003; Faniran, 2003). Measuring project performance will involve selecting these factors and measures that are relevant to a particular project in a particular country.

The authors propose that project performance measurement should be considered as a system that takes into consideration the


perspective of the client, practitioners as well as the socio-economic set-up and the procurement type of the project as shown in fig 1.

Socio- Economic Set-up

Procurement type

Clients’ Perspective

Practitioners’ Perspective

. Fig.1. Performance measurement system Source: Gyadu-Asiedu, 2006 7. LINKING PRODUCTIVITY PROBLEMS AND PERFORMANCE FACTORS. It is possible, then, to link all the productivity problems up with performance factors. Looking at table 4 once again, one sees that all the problems, or factors identified to be affecting the productivity of construction projects could be categorised first under a factor group (i.e. related to project manger, team members, project, organisation, and the external environment); secondly, under a performance factor as listed within the groups e.g. Scheduling, Start-up difficulty, human relation, top management support, bureaucracy, politics etc. In addition, the criteria used to measure performance as would be identified to be relevant to a project could be used to measure productivity. Table 3 shows that these measures are multi-dimensional, in excess of the usual cost, time, and quality dimensions. Productivity improvements could be measured in the same levels as categorised i.e. project, firm, sector, and national levels. A situation that makes the improvement of productivity question to be addressed in a more comprehensive manner than hitherto considered. Similarly, the yardsticks by which productivity is measured would fit under the measures listed below the levels e.g. time, cost, quality, programme etc.

Thus, if the project performance measurement system is used effectively as a project management tool (for the essence of performance measurement is to identify specifically in which dimension things are likely


to go wrong based on the behaviour of which factors, so that decisions could be taken in time for corrective actions) project performance will be improved, so will productivity. This framework brings the whole productivity question into single focus knowing that the two are intertwined. This framework is shown in figure 2. Fig.2. Framework for linking performance improvement to productivity improvement 8. CONCLUSION It is possible to use project measurement approaches to improve productivity in the construction industry. These calls for a research agenda that brings to a common focus the philosophies of productivity improvements and performance measurement. In addition to bringing an order into the quest of productivity improvement, this approach will have the advantage of enhancing and broadening the scope of work hitherto considered and more importantly, moving it away from the traditional yardsticks, of cost, time and quality parameters referred to as the “iron triangle” (Atkinson, 1999); and thereby bringing it into the present paradigm of multi-dimensional concepts. 9. REFERENCE Atkinson, R. (1999), “Project management: Cost, time and quality, two best guesses and a phenomenon, its time to accept other success criteria”. International Journal of project Management Vol. 17. No.6 pp.337-342. Elsevier Science LTD and IPMA.

Performance factors Performance measures Improved

Performance

Productivity Improvem’t Yardsticks

Productivity factors

Improved

Productivity


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