UoG

CONSTRUCTION TECHNOLOGY AND MANAGEMENT

PROGRAM

PERFORMANCE MANAGEMENT

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 Chapter one
Focus areas:-
 Performance management
 Performance indicators
 Performance management /measurement in construction
industry
Performance measurement techniques

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 [Link] to Performance Management

Performance is understood as an integral part of Construction project

management system that:
 works for a reasonable balance among its three major purposes:
Accountability; Trend or Progress Assessment; and Learning: This is related
to the two contending performance demands: Success and/or Failure, or Poor
and/or Good Performances;
 Sets baseline for progress monitoring during Project Definition: That is, the
Performance Criteria;
 Uses objective and subjective measurement & evaluation techniques during
Project implementation and after completion:
 It deals with Performance Measurement, Monitoring and Evaluation;
 considers process - result orientations within the result - outcome interface limits of
the project: and hence Uncertainties Changes and Risk Management
became a vital contribution, and
 Consider both the Critical Failure and Success Factors.
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 cont’d…..

 Performance management is seen as a closed loop control system

which deploys policy and strategy, and obtains feedback from various
levels in order to manage the performance of the system”
 performance management is the collection and analysis of
performance measures, updating of past performance goals,
implementation of improvements, and communication of shared
vision.

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 Contd……
 Performance management is simply a term used to
describe a set of activities that assess whether goals or
objectives are being [Link] activities include
 defining work,
 setting goals,
providing feedback and
encouraging development

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 The performance management/measurement
process

Vision Performance Business

Input

Output
Process
Strategy management performa
nce

Performance
measurement

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 Contd…
Importance:
 As such, performance management is intended to determine the
appropriate tool and method that will enhance the efficiency and
effectiveness of an operation or a company
 A performance management system is to strive for constant
improvements in reducing wastage in the future.

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 1.2 Performance Criteria (indicators) and measurement

 Performance measurement system “… is the information system

which is at the heart of the performance management process and it is
of critical importance to the effective and efficient functioning of the
performance management system.”
 Therefore, performance measurement is the process of “…
determining how successful organizations or individuals have been in
attaining their objectives.

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 Contd…
 To achieve this, the outputs of organizational strategic and
operational processes are measured in a quantifiable form to
monitor the vital signs of an organization.
 The relationship between performance management and
measurement can be seen in its wider context from a process view
i.e. input-process-output

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 Contd….
 Performance measurement perspectives

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 Performance Indicators
 Performance Indicators are quantifiable measurements that
reflect the critical success factors of an organization
 Traditional performance indicators (cost, time and quality):
Their implementation is usually apparent at the end of the project,
and they can be classified as <<lagging indicators>>.
 Recent contributions of performance indicators: indicators tended
to concentrate on productivity and to achieve continuous
improvement is called leading indicators.

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 Contd…
 they are parameters of change or of results,
indicating to what extent the project objectives have
been achieved.
 Indicators help to create transparency conveying to
others what the project intends to do
 They clarify the characteristics of the different levels
of objectives of a project.

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 Contd…
 When formulating indicators we should pay attention
that the indicators are:
 objectively verifiable
 Independent
 Plausible
 Specific
 measurable

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 Indicators
 Specify targets on the basis of the indicators:
 Quantity How much?
 Quality What?
 Target group Who?
 Time/Period Starting when and for
how long?
 Place Where?

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 Key performance indicators in construction
 Client satisfaction – product
 Client satisfaction – service
 Defects
 Profitability
 Productivity
 Safety
 Construction cost
 Construction time

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 1.3 Performance management/ Measurement in the
Construction Industry

The construction industry's core business is undertaking projects in

generating new buildings or refurbishing existing ones for a variety
of clients
 Traditionally performance measurement in construction is
approached in two ways:
 a) in relation to the product as a facility
 b) in relation to the creation of the product
 the latter of the two has been the prime performance assessment
(in terms of success or failure) of construction projects

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 Contd…
 when assessing the success/failure of construction projects “a
common approach is to evaluate performance on the extent to
which client objectives like cost, time and quality were achieved”

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 Contd…
 Importance of performance measurement:-
 Feedback as a learning tool
 to make operations and results transparent aimed at improving
both performances and accountability

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 Contd…
 Balanced Scorecard
 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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 Contd…
 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.
 BSC recognizes that the financial measures are lagging indicators
and therefore the result of the other three leading indicators.

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 Performance factors
Focus areas..
 Project resources
 Project stakeholders
 Project processes
 Project productivity

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 Contd…

2.1 RESOURCES
 For any construction Industry to be efficiently operating and be
successful the elements or the resources should be well known, planned
and made available.
 For most of the construction projects, the resources to look into are the
following;
 Human Resources / Labor or Workmen
 Financial Resources / Fund
 Information Resources
 Physical Resources such as Materials, Equipment and Other Assets
 Services and Management.

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 2.1.1 Human Resources / Workmen/ Labor
 All works involved, including the operation of
equipment cannot be executed without human labor.
 All other resources are coordinated and generally the
work itself is executed by labor. Therefore careful
planning, organizing and monitoring of workmen are
mandatory.
 Human resources include professional, skilled, semi
skilled and unskilled laborers.

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 Contd…

 Human resources can be understood in two values:

Capacity and Capability.
 Human resources need to be attracted, selected, developed,
motivated and retained if an organization needs to
successfully accomplish project objectives.

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 Contd….

 Human resources need the following skills:

 Communication – Inter - personal, group interaction - skills
 Problem solving / Conflict resolution / Negotiation Skills
 Facilitating / Decision – making Skills
 Writing skills for Proposals / Reports / ToRs / ; and
 Hard Skills – Planning, Implementing, Leading and monitoring
tools.

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 2.1.2 Financial Resources / Fund
 One of the basic resources in the construction industry is
Fund, which should be arranged before starting any
project.
 The project to be conceived shall be within the fund
available for it.
 Usually funds are available from among Governmental
institution, Private institutions and Donors in the form
of loan or assistance.

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 Financial resources…

 The objective and goal of the project is achieved

successfully if and only if the fund is sufficiently flowing to
carry out the project as planned.
 Therefore, it is necessary to ensure financial planning
for smooth cash inflow and outflow to avoid delays in
project activities.

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 2.1.3 Information Resources

 Information can be understood in two terms: data whether

processed or not; and its technology.
 Contextual information, data useful for estimating duration and
costs; etc are some of informational resources used in projects.
 Information technology both the hard and soft wares have brought
the processing and management of such information becomes
important and helpful in facilitating the comparison of several
alternatives.
 This helps in optimization or maximization of uses of project
resources.

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 2.1.4 Physical Resources

 Materials: The large portion of a project cost is gone to material

cost.
 proper consideration shall be given in the planning stage to
design with easily available material without compromising
the quality for the intended purpose and for proper flow and
storage of materials.

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 Contd….
EQUIPMENT:
 Provision of equipment replace the hard work that can be
made by human labor taking much time within reasonable
period of time.
 It increases efficiency and economy.
 Depending on the types and nature of construction,
machinery at site includes batching plant, mixers, trucks,
tractors, excavators, dampers, cranes, vibrators, pumps
etc.

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 Resources …

 OTHER ASSETS :
 Physical Infrastructures and Owned Land are assets which can be
collaterals for capital base enhancement and credit facilities .

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 2.1.5 Services and Management
 SERVICES: Services such as acquisition of land, provisions of water
supply, electric power, communication systems, etc., are very much
necessary in the construction industry.
 MANAGEMENT:
 To coordinate these resources and achieve the required goal, a
system shall be devised to plan, organize, execute, and control the
project.
 Such system which helps to achieve the necessary goal is called
Construction Management, without which it will be a
catastrophe both in cost and completion time to the project.

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 2.2. Stakeholders
 Stakeholders can be defined as either individuals or units or the
organization itself for which they claim a stake in the project such
that they get benefit from or affected by the whole processes of the
project and its deliverables.
 They can generally be classified under Direct and Indirect
stakeholders.

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 Contd…
Stakeholders’ relationships management is meant that
attitudes, objectives and self serving interests of individuals,
groups or organizations who have stakes in the project are
reflected in their relationships to affect the success of the
project.
As a result, projects need to manage such
relationships in order to ensure their successful
completions.

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 Contd…
 The following … steps are useful for successful Project
stakeholder management:
Stakeholders’ Identification
Stakeholders’ Information gathering on recurrent
attitudes, strategy (Vision, Mission, Objectives, etc) and
self-serving interests
Stakeholders’ SWOT Analysis
Stakeholders’ predicted / expected Behavior, and
Stakeholders’ Relationships Management Strategy.

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 [Link]
 “any activity or group of activities that takes an input, adds
value to it and provides output to an internal or external
customer.
 Processes use an organization's resources to provide definitive
results.”
 Therefore, a performance process framework will take strategy
as an input deploy the strategy so that it can derive a number of
measures which are effectively activities; add value to the
strategy by examining its validity and implementation; and
deliver the performance results to the organization or its
shareholders and customers.

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 Contd…
 the construction process as all processes which guides towards or
is a presupposition for the planned construction works.
 This means that the construction process as a concept covers sub
processes having different characteristics. These sub processes can
be grouped under three major classifications: Core processes,
Administrative processes and Public regulatory processes.
These processes are termed Project Processes

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 Contd…
Core Processes Concept Definition Design of buildings, Maintenance Period
/Concept Roads, etc & and
Development Physical Defect Remedies
construction works

Administrative Concept Evaluation Monitoring, Acceptance, Hand

Processes Project Approval Procurement and Over and
Budget Allocation Other Processes

Public Regulatory Right-of-way (if Tender award Final Approval,

Processes necessary) and and
and Changes and User Permit
Regulatory Permits Variation

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 2.4. Productivity

Labor Productivity
 Productivity in construction is often broadly defined as
output per labor hour.
 labor productivity is a measure of the overall effectiveness of an
operating system in utilizing labor, equipment and capital to
convert labor efforts into useful output, and is not a measure
of the capabilities of labor alone.

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Contd…
 Construction output may be expressed in terms of
functional units or constant dollars.
 In the functional units, labor productivity is associated with
units of product per labor hour, such as cubic meters of
concrete placed per hour or Kilometers of highway paved per
hour.

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 Factors Affecting Job-Site Productivity
 Job-site productivity is influenced by many factors which can
be characterized either as:
 labor characteristics,
 project work conditions
 Non-productive activities.

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 labor characteristics
 The labor characteristics include:
 Age, skill and experience of workforce
 leadership and motivation of workforce
 Performance analysis is a common tool for assessing worker
quality and contribution. Factors that might be evaluated
include:
 Quality of Work - caliber of work produced or accomplished.
 Quantity of Work - volume of acceptable work
 Job Knowledge
 Safety Consciousness etc.

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 project work conditions
 The project work conditions include among other factors:
 Job size and complexity.
 Job site accessibility.
 Labor availability.
 Equipment utilization.
 Contractual agreements.
 Local climate.
 Local cultural characteristics, particularly in foreign operations.

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 Contd…

 A base labor productivity may be defined for a set of

work conditions specified by the owner or contractor who
wishes to observe and measure the labor performance over
a period of time under such conditions.
 A labor productivity index may then be defined as the
ratio of the job-site labor productivity under a different set
of work conditions to the base labor productivity
 It is a measure of the relative labor efficiency of a project
under this new set of work conditions.

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 Non-productive activities
 The non-productive activities include among other factors:
Rework for correcting unsatisfactory work
 Temporary work stoppage due to inclement weather
or material shortage
 Time off for union activities
 Absente time, including late start and early quits
 Non-working holidays
 strikes

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 cont’d….
 The non-productive activities associated with a project should also be
examined in order to examine the productive labor yield.
 productive labor yield is defined as the ratio of direct labor hours
devoted to the completion of a project to the potential labor hours.
 The labor hours spent on rework to correct unsatisfactory original
work (and other indirect labor hrs) represent extra time taken away
from potential labor hours.
 The labor hours related to such activities must be deducted from the
potential labor hours in order to obtain the actual productive labor
yield.

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 Example1 : Effects of job size on productivity

 A contractor has established that under a set of "standard" work conditions for
building construction, a job requiring 500,000 labor hours is considered
standard in determining the base labor productivity. All other factors being the
same, the labor productivity index will increase to 1.1 or 110% for a job
requiring only 400,000 labor-hours. Assuming that a linear relation exists for
the range between jobs requiring 300,000 to 700,000 labor hours as shown
in Figure 1, determine the labor productivity index for a new job requiring
650,000 labor hours under otherwise the same set of work conditions.

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 Figure 1: Illustrative Relationship between Productivity
Index and Job Size

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 solution

 The labor productivity index I for the new job can be obtained by linear
interpolation of the available data as follows:

 This implies that labor is 15% less productive on the large job than on the
standard project.

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 Example 2: Productive labor yield;

 In the construction of an off-shore oil drilling platform, the potential

labor hours were found to be L = 7.5 million hours. Of this total, the
non-productive activities expressed in thousand labor hours were as
follows:
 A = 417 for holidays and strikes
 B = 1,415 for absentees (i.e. vacation, sick time, etc.)
 C = 1,141 for temporary stoppage (i.e. weather, waiting, union
activities, etc.)
 D = 1,431 for indirect labor (i.e. building temporary facilities, cleaning
up the site, rework to correct errors, etc.)
 Determine the productive labor yield after the above factors are taken
into consideration.

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 Solution: The percentages of time allocated to various non-
productive activities, A, B, C and D are:

The total percentage of time X for all non-productive activities is:

The productive labor yield,Y, when the given factors for A, B, C and D are considered, is as
follows:

As a result, only 41% of the budgeted labor time was devoted directly to work on the facility.
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Question???