www.e-builder.

net

You Can’t
Manage What
You Don’t Measure

Use KPIs to leverage existing project data to

benchmark and improve capital project
delivery capabilities

White Paper May 2007

Contents

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2

Why You Should Care About Key Performance Indicators . . . . . . . . . . . . . . .2

Benchmarking Key to Process Improvement . . . . . . . . . . . . . . . . . . . . . . . . . .4

Ignoring KPIs Can Hurt Your Bottom Line . . . . . . . . . . . . . . . . . . . . . . . . . . .4

Why Do So Many Companies Ignore KPIs . . . . . . . . . . . . . . . . . . . . . . . . . . .4

The Use of Information Systems as One Solution . . . . . . . . . . . . . . . . . . . . .5

Technology as an Enabler . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

What to Look for in a Technology Platform . . . . . . . . . . . . . . . . . . . . . . . . . .5

Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Executive Summary
Companies managing capital project portfolios are dependent on good information management practices for
successful performance tracking and measurement. This performance tracking, or benchmarking, is essential to
ensure that an organization’s projects perform well enough to be delivered on time, on budget, free from defects,
efficiently, right the first time, safely, and profitably.Tracking Key Performance Indicators (KPI) also creates a system
that helps improve accountability, whereby people are held accountable for measurable results. Once organizations
agree on a set of KPI’s, they then need a way to easily track this data to use as a management tool. Otherwise the
act of managing this information becomes an arduous task that makes it less likely that it will be done well and
continuously.

This document will discuss KPI’s as they relate to owner-organizations managing multiple capital projects, provide a
list of these indicators based on current industry research, and elucidate the challenges some organizations face in
capturing this information in a timely manner. It will also provide some insights into paths that organizations can
pursue to efficiently acquire project data for benchmarking purposes.

Why You Should Care About Key Performance Indicators (KPIs)

Key Performance Indicators are quantifiable measurements that reflect the critical success factors of a project, and to a
larger scale, an organization. Based on predefined measures, they can reveal both a high-level snapshot of a project’s
performance during the project and after completion. It should be noted that depending on the type of KPI’s and their
intended goal, the speed with which data is collected and analyzed plays a key role in the proper use of the KPI. For
example, CURT (The Construction Users Roundtable) lists two types of measures in their 2005 Publication “Construction
Measures: Key Performance Indicators” – Results measures, which track outcomes after-the-fact, and In-process measures,
which track leading indicators and anticipate potential problems before they happen.

In-process measures provide the most value as a management tool during project execution.These measures require that
a mechanism be in place to efficiently collate and analyze the information used to track KPI’s, and enable its presentation
in a way that can be easily understood to aid in decision making.

The application of Key Performance Indicators provides business and project executives with a high-level, real-time view
of the progress of their capital projects across the program. The way in which this data is presented may consist of any
combination of reports, spreadsheets and charts. KPIs may be based on global or regional data, trends over time, supply
chain information or any other long-term consideration which may be essential in gauging the health of the project, and
also of the organization.These indicators also provide a benchmark that executives can use to measure whether they are
on track to achieve industry best practices (based on industry standards), and where they are in relation to their own
organizational goals. Some organizational goals may include trying to reduce project costs or project delivery times.

Additionally, using KPI’s, owner companies can evaluate potential project teams (e.g., designers, construction managers,
contractors, etc) by assessing their performance against other teams or against industry standards. Owners can set
standards for potential suppliers and see how potential suppliers compare with existing suppliers or the rest of the
industry in a number of different areas.

A great deal of research has been performed on the topic of capital project KPI’s, and based our experience confirms the
findings of organizations like CURT and others. CURT lists the following as the typical areas where KPIs are measured:
1. Cost
2. Schedule
3. Change Management
4. Safety
5. Quality
6. Productivity
7. Reliability
8. Customer Satisfaction1.

1. Construction Measures: Key Performance Indicators, September 2005 (document UP-101)

2. KPI Report for The Minister for Construction,The KPI Working Group, 2000.

2
The following table provides other examples of KPI Groups and associated indicators* as provided by the KPI Working
Group2. Within these groups, a range of indicators has been developed to analyze either project or company
performance, or both:

Group Indicators Level

Time 1. Time for construction Headline
2. Time predictability – design Headline
3. Time predictability – construction Headline
4. Time predictability – design and construction Operational
5. Time predictability – design and construction (client change orders) Diagnostic
6. Time predictability – construction (project leader change orders) Diagnostic
7. Time to rectify defects Operational

Cost 1. Cost for construction Headline

2. Cost predictability – design Headline
3. Cost predictability – construction Headline
4. Cost predictability – design and construction Operational
5. Cost predictability – construction (client change orders) Diagnostic
6. Cost predictability – construction (project leader change orders) Diagnostic
7. Cost of rectifying defects Operational
8. Cost in use Operational

Quality 1. Defects Headline

2. Quality issues at available for use Operational
3. Quality issues at end of defect rectification period Operational

Client 1. Client satisfaction product – standard criteria Headline

Satisfaction 2. Client satisfaction service – standard criteria Headline
3. Client satisfaction – client-specified criteria Operational

Change 1. Change orders – client Diagnostic

Orders 2. Change orders – project manager Diagnostic

Business 1. Profitability (company) Headline

Performance 2. Productivity (company) Headline
3. Return on capital employed (company) Operational
4. Return on value added (company) Operational
5. Interest cover (company) Operational
6. Return on investment (client) Operational
7. Profit predictability (project) Operational
8. Ratio of value added (company) Diagnostic
9. Repeat business (company) Diagnostic
10. Outstanding money (project) Diagnostic
11. Time taken to reach final account (project) Diagnostic

Health and 1. Reportable accidents (including fatalities) Headline

Safety 2. Reportable accidents (non-fatal) Operational
3. Lost time accidents Operational
4. Fatalities Operational

* Indicators
Headline Indicators – provide a measure of the overall health of a firm.

Operational Indicators – bear on specific aspects of a firm’s activities and should enable management to identify and focus
on specific areas for improvement.

Diagnostic Indicators – provide information on why certain changes may have occurred in the headline or operational
indicators and are useful in analyzing areas for improvement in more detail.

The indicators are identified as applicable at project and/or company levels. In some cases the company indicator is the
average value of that company’s project indicators.The indicators are identified as appropriate to the various members of
the supply chain to which they could be applied.

3
Benchmarking as a Stepping Stone to Process Improvement
The importance of having these measures in place is irrefutable, and the benefits tangible. Having metrics in place allows
organizations to benchmark performance – performance of internal teams (e.g., project managers, executives, etc.),
performance of outsourced teams (e.g., designers, construction companies, etc.), and ultimately, the performance of the
unit as a whole.This benchmark capability in turn allows the company to search for ways in which to improve performance
and realize savings by way of improved project delivery, meeting go-to-market forecasts, improved competitive advantage
(we do it better), and reduced costs resulting from reduction or elimination of failed projects (over budget and over
schedule).

Tracking KPIs Essential to Process Improvement

KPIs are one of the most effective ways to measure and improve performance across an organization’s project delivery
capabilities.After these have been identified and defined, they can be used as a performance management tool.This in turn
creates visibility into problem areas (In-Process measures) where corrective action should be taken before there is an
issue, and the corrective actions can then provide additional data to measure their effectiveness if they’re caught after the
fact (Result measures).

KPI tracking also helps increase accountability because of the realization by project teams that performance is being
measured in real terms (construction change management). Project executives can now have insight into how a specific
division, region, team, or group is performing, creating both opportunities for reward for top performers and corrective
action to improve poor performance.

Ignoring KPIs Can Hurt Your Bottom Line

Those companies that do not have a set of KPI’s in place risk losing money (e.g., costs associated with corrective actions,
inefficient processes) and time (productivity, delays) on projects. Without a performance tracking mechanism, a company
has no way of knowing if the project is veering off course until it is too late.While project data is being collected and kept
somewhere, the absence of KPI’s renders this data as irrelevant. When used correctly, this data can elucidate areas that
require improvement and are potentially costing the company money in lost productivity or delays unnecessarily.

Last but not least, not having access to this information in a manageable way (where analysis is possible) ultimately
represents lost competitive advantage vs. those companies that not only have defined KPIs in place, but are also leveraging
this data to become more efficient and profitable.

Why do so Many Companies Ignore KPIs

For a Key Performance Indicator to be of any value there must be a way to quickly and accurately measure it.
Understandably, while companies may have a good set of predefined KPI’s in place, compiling the data for analysis and
reporting is often a painful and inefficient process. For many owners managing capital programs, the spreadsheet continues
to be, at many levels, the standard by which they track project information. A 2006 article in Information Week discussed
how a large homebuilder doing $14.7 billion a year in business “ran on spreadsheets and paper-based processes” before
deploying a new information system to manage “market planning, land acquisition, sales force automation, e-commerce,
financial planning and forecasting, purchasing, construction, and warranty service.” This organization then developed and
deployed an advanced information management system because it recognized the benefits that could be achieved were
both real and measurable.

A company that keeps this information in multiple ‘monster’ spreadsheets makes the process of creating and analyzing
reports more difficult than it has to be, especially when each team in the organization manages information slightly
differently. By the time information from the project teams is consolidated and analyzed, chances are this information is
already outdated.The lack of standard information tracking and reporting also increases the possibility of misinterpreting
the results.This type of information management tends to muddle the benefits in the process of collection.

Other organizations use disparate systems to track key information (e.g., cost and schedule, project issues, etc), and then
have to incur the additional time and investment to collate this data and then ‘connect the dots’ to make sense of the
information. Cost, schedule and other data is difficult and time consuming to aggregate when it is managed in separate
systems.When something is difficult, in this case, data acquisition, collation, and analysis, then it is not likely to be done well,
or done at all.

4
The Use of Information Systems as One Solution
As previously mentioned in the magazine article example, companies that already have a sense of the KPIs that they should
be tracking to measure performance are taking the initiative to make an investment in deploying information systems that
1) efficiently collect and track data, and 2) help leverage the vast amounts of information generated by their projects to
improve performance.

Because improvements in performance can represent millions of dollars, even though the investments are considerable the
payoffs and ROI make this effort worthwhile. Given the advances in capital project management technology, companies
have several available options including: (1) developing a system in-house; (2) purchasing systems and integrating them; or
(3) or subscribing to an online software-as-a-service (i.e., SaaS or ASP) provider.

Technology as an Enabler
Extensive research has been conducted around capital project KPI’s, including work by organizations like CURT (The
Construction Users Roundtable) and FMI Management Consulting. Using this information to define and implement
performance management processes is the first step and organization should take. The second step is involving your key
team members and stakeholders in evaluating and selecting the KPI’s that are most important for you based on your
project and organizational goals.

Once you have established the KPI’s, you should investigate the various technologies that are available to collect, analyze,
and report this information. Using the right technology can be an enabler to manage these processes more efficiently, as
they provide easy access to data, immediacy (vs. outdated) and reporting capabilities to reflect the predefined KPI’s. This
technology can also help organizations develop a ‘performance culture’, one that is not afraid of measuring results.

Once performance measures have been defined, a technology platform will ease the process of gathering and analyzing the
data. A good technology platform will also function as a project knowledge base providing you with the capability to mine
information about completed projects which can be used to improve future projects. In short, this platform will help
manage large quantities of valuable project data while providing rapid access to it to generate performance improvement
analysis.

What to Look for in a Technology Platform

Whether you choose to build a platform,
purchase software, or subscribe to an online
service, here are five capabilities that you
should consider in your decision process.

Integrated – Look for a system where all of

the data you want to analyze is maintained in
one central location. For example, many capital
project managers track cost, schedule, project
documents, and communications. This will
greatly simplify the reporting of information, for
example, when you need project cost and
schedule data in one consolidated report. If you
must use different systems, explore the cost of
technically integrating them. Disparate systems
can be connected together to work in an
integrated fashion so that you can analyze
consolidated information. However, be advised,
although the initial integration may be costly it
is the ongoing maintenance expense as each
application goes through its own upgrade cycle
that represents the larger cost over time.
Example of a Milestone Report generated with just a couple of mouse clicks, based on project
schedule data that is stored in the system. This screen shows 2 active projects and the finish
variances compared to original timeframes.

5
Easy to use – A system that is difficult to use will not be used. Too many choices in the product can lead to a failed
implementation or lack of adoption. Ultimately your KPI’s will not be measured or managed. Look for a system that
accomplishes your tracking and reporting goals but that is also easy to learn, use and understand. Also look for systems
that have sample reports already defined so that you can easily visualize how you can use the system.

Automated – Once data is entered into a system, a series of automated processes should analyze the data and create
reports with minimal effort from the user.Advanced systems will provide the capability to collect data and distribute it to
the various stakeholders with minimal or effort.You should also look for a system that creates “exception reports” – these
are automated alerts when a key indicator shows a potential issue.

Easy to deploy – Any system you choose must be easy to deploy. If you’ve never implemented technology it is suggested
that you identify one or two key indicators and implement the software to track only those. As you gain traction you can
implement other KPI’s.This ‘baby step’ or phased approach will improve adoption and the overall probability of a successful
implementation.Also if you decide on an in house software solution or a ‘home grown’ application be sure to consider the
costs for hardware, support, on going application maintenance, and data back up and compliance costs. Finally, you should
clearly identify and document the amount of configuration and customization that is required before you begin the
implementation process.

Industry specific – Given the unique challenges that owners of capital projects face, having a system that incorporates
industry specific best practices and is designed for capital project management is critical. Any solution that has been used
in the industry will have incorporated features specifically designed for the industry.The deployment teams can also offer
expertise to help you define what information to track based on industry standards, so that you do not become mired in
tracking too much information that may not be relevant to helping you reach your goals. This expertise also makes the
process of defining the KPIs easier in that the solution will include features and reporting capabilities that are also based
on industry best practices, and have been defined over the years by other users in the industry. However, keep in mind the
system must also be flexible so that it still can be tailored to the specific needs of your organization.

Summary
Technology is not the panacea for improved performance for companies managing capital project portfolios. An
organization should first define its vision and goals, and the resulting KPIs that it will use to promote progress towards
achieving those goals.There is significant research on the subject of KPIs, including information that is specific to the capital
project industry. There are also organizations that provide additional insight into helping you to define, manage, and
measure these indicators.

It is likely that your organization is already collecting data and measuring progress in some form. Technology can enable
this process and improve measurement and analysis. Once your organization has defined its vision, goals, and the KPI’s it
will use to track progress, technology can support your goals be helping you analyze information in an accurate, complete,
and timely manner.Technology advances over the last 3-5 years make data management and measurement a much simpler
process enabling you to leverage the valuable information you are already collecting to help you improve performance and
profitability. An integrated system will ensure that the process of leveraging this information is faster, and provides more
visibility across a macro as well as a micro level.

6
About e-Builder
e-Builder is a leading provider of capital project management and collaboration software.The company’s flagship
product, e-Builder Enterprise, provides owners of large capital development projects with visibility into key performance
indicators across their entire portfolio to ensure timely, on-budget project completion. e-Builder combines cutting edge
technology and industry knowledge to provide thousands of owners, architects, engineers, contractors and suppliers
with solutions that enhance development and construction processes.The company is headquartered in Fort Lauderdale,
Florida. For more information, visit www.e-Builder.net.

e-Builder, Inc.
www.e-builder.net

1800 NW 69th Avenue

Suite 201
Plantation, FL 33313
800-580-9322
info@e-builder.net