by Gregg M. Schoppman, FMI

Hearing the words “data driven” causes a certain cringe factor. Whether it is the way internet-based companies always seem to know about that snazzy suit you had an eye on or even how they seem to know about the vacation you were seemingly going to book before you booked it, there are countless stories of firms capturing customer data, buying proclivities, likes, etc. From the transparent e-commerce site that matches your favorite authors with new authors you might like to the downright subversive businesses that capture your “clicks,” businesses are continuing to mine the treasure trove of data to help further their strategic aims. Now consider the mid-level construction organization—what are they measuring? Profitability, safety statistics, collections. Is that enough in today’s world? Do organizations need to up their game and follow their peers across the myriad of industries?

Many firms lament about connecting their vision or desired state which is usually some abstract, yet forward reaching, picture with how they are currently structured and operating. For instance, a firm might have a vision or mission such as: “We desire to be the leading specialty contractor in the New England marketplace.”

No one can argue that this hits all of the major bullets relating to text book visions/missions. However, visions/missions often die on the vine when they lack the right objectives or KPIs to drive them further. “Leading,” “superior contractor” or “best contractor” are outstanding adjectives and superlatives to define performance, but they do lack a certain specificity. Does leading define market share, productivity, profitability, customer service, strongest team, etc.? All of them may be correct. In some cases, firms use their core values to supply stronger connective tissue to the goals. However, without objectives or key performance indicators, firms will often languish like a team with a scoreboard. Ultimately, how does the team know if they are winning?

Defining the Vision

Visions by their very nature may be nebulous or ambiguous. For instance, “To be the contractor of choice,” might be vague to allow the reader the interpretation of this choice as employer, general contractor, or service provider. In the end, there has to be some series of metrics to help define success. This is not to say that a firm is locked into only one definition, but clarity around the vision establishes a series of bogeys for the firm to target. Below are several examples:

By providing a little clarity around the definition of “Contractor of Choice” or “Leading,” a firm can now implement processes, tools, etc., to drive these metrics. It is important to not get fixated on one metric or KPI. Think of it like a health panel screening—weight, cholesterol, body mass index (BMI), blood pressure, LDL, HDL, sugars, etc., are all health KPI’s that define a healthy lifestyle. You may have great blood pressure, but a BMI that is severely out of sync. A firm must look across several parameters to define success.

Connecting the Dots from Firm to Individual

The next lynch pin for firms is translating this down to the individual associates of the firm to drive their behaviors. A firm may have objectives and KPIs, but how do those cascade through business units (i.e. offices, markets, niches/segments) and to the individual? The key word is alignment. For instance, it would be naïve to think that a firm that solely compensates its associates based on project profitability to live out a vision that espouses customer service, integrity, and team orientation. While there are plenty of altruistic individuals that can do both, the vast majority will maximize personal gain at the expense of the organization leading to a misalignment. More importantly, the organization will struggle with credibility and image. How often have we seen a firm talk about the right things in the boardroom or only a fancy vision statement poster only to have individuals run amok like renegades on a pirate ship.

There must be connective tissue to link each piece of an organization. In Fig. 1, a matrix illustrates potential KPIs that would run through the goals of a firm’s strategic plan:

Fig. 1

VISION: To be the leading contractor in the southern United States:

To illustrate the flow, consider the “Operations Goal.” The firm is focused on overall efficiency. As a self-performing, labor-intensive contractor, this should be easy to measure. However, the firm is looking at the major heading of “Efficiency.” Within the business unit, they are focused on an element of efficiency, perhaps “Prefabrication for their Commercial HVAC Business Unit.” Lastly, the individual project manager or superintendent is tasked with measuring, tracking and adhering to the tenets of productivity through all direct labor on his/her project. All of this when rolled up would subscribe to this contractor achieving its moniker of “Leading contractor (for productivity in the commercial HVAC sector) in the Southern United States.”

Upstream/Downstream

KPIs are also multi-dimensional. For instance, the main problem with measuring safety and profitability is that they are often snap shots in time or more importantly a “history lesson.” Last month, there were two lost time incidents and the project spent $30,000. KPIs must measure the upstream and the downstream. The same principles apply in the previous health example. Examine the illustration in Fig. 2:

Fig. 2

Stepping on the scale every week is the equivalent of looking at the financial statements at the end of the month. It is very important to study a firm’s financials, but isn’t it more important to drive the behaviors that influence a project or firm’s performance? So rather than stepping on the scale, it is equally as important to measure one’s diet or exercise/activities. The same could be said for the firm. Measure the processes that drive the vision. Fig. 3 illustrates several examples of upstream and downstream KPIs:

Fig. 3

Behavioral Modification

There was a famous management guru that once said, “To manage something, you must measure it.” Striving to become the “leading contractor” is an empty intangible target without something to make it tangible. One of the great vision statements from the last 30 to 40 years was Nike—“Crush Adidas.” While there are not too many examples of contractors publicly trolling their competition, this visualization was magnificent. It also worked well in light of the market (athletic shoes). Now consider your team—how do you motivate them to light up the scoreboard and achieve their individual and corporate goals? How often do they see the scoreboard? How often are the data updated—put another way, is the team seeing a stale version of the scorecard or live, up-to-the-minute results? Ultimately, there needs to be a mechanism that will guide the team’s behavior and also demonstrate success. Consider broadcasting the score at corporate meetings, via corporate bulletins, or even with live feeds on televisions throughout an office. There is no single recipe that works for every firm. The only inalienable truths are transparency of the data, the frequency of the data and the relevancy of the data.

There has always been some mysticism about KPIs and what they mean to organizations. Some people worry that being a data-driven organization will require countless new overhead resources focused less on building and more on bytes. No one wants “Brand X Construction” to look like Skynet, but smart organizations, or “leading” organization, use the data afforded to them to provide context and more importantly provide direction.

As a principal with FMI, Tampa, Fla., Gregg Schoppman specializes in the areas of productivity and project management. He also leads FMI’s project management consulting practice. Prior to joining FMI, Schoppman served as a senior project manager for a general contracting firm in central Florida. He has completed complex and sophisticated construction projects in the medical, pharmaceutical, office, heavy civil, industrial, manufacturing, and multi-family markets. He has also worked as a construction manager and managed direct labor. Furthermore, Schoppman has expertise in numerous contract delivery methods as well as knowledge of many geographical markets. He can be reached at (813) 636-1259 or gschoppman@fminet.com.