The most important construction KPIs to improve profits and productivity

Written by LetsBuild

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What do your construction KPIs look like? If they all revolve around your financials, you might be shrinking your own profit margins.

Your construction KPIs should do more than measure a project’s health—they should show you where profit and productivity are dropping, why they’re dropping, and how to fix the issue.

But capturing all that data at scale is hard to do. So we’ll explore how to choose the right KPIs and how you can gain a full view of your projects to gather the information you need to improve your organisation’s profits and productivity.

Free eBook: Quick guide to Lean practices for construction professionals

The importance of construction KPIs: Choosing the right ones for your project

It’s easy to focus on financial KPIs – the goal is to profit on every project, right? However, there’s a more important metric: Organisational resilience, something that less than half of construction firms prioritise over financial goals.

You can’t have financial success by solely looking at the money side of each project. The most important construction KPIs indirectly relate to profit by looking at things like labour productivity, worker safety, and quality control.

While we’ll discuss examples of construction KPIs that fit this definition below, it’s also important to develop unique ones for your organisation and each project; one-size-fits-all doesn’t work for KPIs.

At LetsBuild, we recommend 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?

Reflecting on the past is the key to setting the right predictive KPIs for the future.

Top construction KPIs to improve profits and productivity

Understanding the following five categories of construction KPIs will help you determine which ones will be the most effective for each of your projects:

1. Quality control

We know quality control is important, but why? 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

More to read: Construction quality management 101: Everything you should know

2. Health and safety

Prioritising on-site safety brings both short- and long-term benefits to the jobsite. 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.

Some important health and safety construction KPIs include:

  • Near-miss reporting
  • Incident rates
  • Safety inspections completed/passed/failed
  • Number of safety communications

Further reading: Invest in Health and Safety Inspections to Improve Your Safety Performance

Why preconstruction is important3. Performance

Measuring performance metrics makes measuring worker productivity and project progress easy. If you can analyse 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.

So try prioritising 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

4. Cash flow

Cash isn’t king – cash flow is. 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. 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

5. Labour

No, we’re not talking about measuring labour productivity and performance with this construction KPI—tracking worker satisfaction and engagement are also key to a successful project.

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

Track and hit your construction KPIs with the right software

We’re not saying that financial KPIs aren’t important, but they shouldn’t be the only way you evaluate your projects.

The key to construction KPIs is to take a holistic look at each project—you can get useful insights by looking at each step that led to your final profit margin.

Here at LetsBuild, we specialise in helping construction companies gain a 360-degree view of everything from their organisation to each individual project. This allows everyone from project managers and key stakeholders to GCs and subs to understand how successful a project was, why it was successful, and identify ways to improve productivity and increase profits.

We help the top construction firms hit their KPI goals; see how we can help yours.