November 2018

by Gregg M. Schoppman, FMI

Firms wade through reams of data daily. In fact, leaders continually hear about transforming their organization into a data-driven business. Construction firms are hardly exempt. From finance to safety to estimating, there are countless figures that a firm can use to create awareness and further their team members, projects, and strategic goals. However, leaders are constantly trying to extract data from disparate systems. In the end, so many firms end up looking at a small handful of figures—net profit, gross profit, cash, mod rate—and work feverishly to make connective links to correlate their performance with the right information.

Key performance indicators will vary for every firm. Additionally, the gradations within the key performance indicators will vary. For instance, a financial metric such as net billings will be extremely customized for any firm. The most important consideration should be measuring those items that directly correlate to the vision and core values of the firm. A vehicle such as the Strategy Spider—drawn from its eerie similarity to a spider web—allows for easy visualization and compartmentalized metrics for every aspect of the business.

Compartmentalization

As stated earlier, the KPIs are specific to an individual firm. At a minimum you would expect some semblance of the following main headings:

• Operations Quadrant—The processes that will drive superior performance (i.e. planning, prefabrication, etc.)
• Execution Quadrant—The downstream measure of a firm’s ability to perform (i.e. utilization, productivity, etc.)
• Finance Quadrant—The financial metric that combines several aspects other than profitability (i.e. billings, collections, etc.)
• People Quadrant—Internal and external “people” satisfaction (i.e. employee development, retention, customer satisfaction, etc.)

There is no shortage of upstream and downstream metrics that a firm could choose from. However, the key is to identify metrics that holistically describe the firm. For instance, when a firm only looks at profitability, it loses perspective on other aspects of its health. Just like a patient seeing a doctor, one’s weight might be in line but health metrics such as cholesterol, sugar, triglycerides, blood pressure, pulse, etc. might tell another story.

Normalization

One aspect of analyzing data comes in the form of comparing apples and oranges. For instance, “Employee Satisfaction” is a very subject score while “Collection Rate” is a defined financial formula that is universally recognized. One aspect of the Strategy Spider is it creates some level of normalization. For instance, Table 1 examines four specific areas of the Spider:

Table 1—Scoring Criteria Explained

Process compliance—or a firm’s ability to follow its processes religiously—is somewhat simple to measure. For instance, if a firm started five projects this month, they should have had five preconstruction planning meetings. On the other hand, it is more complicated to connect a score relative to training and development (“Employee Development”). The scores shown are defined by the firm. In this case, if the firm states it ideally expects its associates’ time to be spent in training and development at least 10 percent of their billable time, the correlated score is 100 percent. The key here is this—THE FIRM DEFINES WHAT IS THE RIGHT SCORE. Another great example is collections. A firm that does work for a government or municipal client might expect a lower collection time whereas a private client might have a higher collection time. The firm thus defines the scoring web criteria that are applicable to its client base, assuming these are also stretch goals and drive higher performance and not accepting mediocrity.

Visualization

The scoreboard is the penultimate piece of this entire equation. Senior management and ownership has the ability to look at financial statements and the like to gauge performance, but what about the rest of the team? There is always some trepidation of “over-sharing”—by normalizing the scores, there should be less fear of this information “falling in the hands of the enemy.” A score of 80 percent or landing in the yellow area of the web is less damning than a profit number of $6,540,800.

While the web is one visualization, a heat map has a similar effect. (See Table 2)

Table 2—Heat Map

This map technique simply allows the reader to hone in on specific “hot areas.” Similarly, the webbing on the Spider gives the same depiction. If the firm hovers in the green ring, they are performing at a high level. However, as is often the case, the firm can target specific problem areas. For instance, using the Spider shown, the firm is not performing well in the following areas:

• Firm Exit Strategy—This is a measure of the firm’s compliance to conducting routine close-out meetings to ensure successful project completion.
• Warranty Call Backs—The firm has a high level of call backs associated with warranty issues or defects.
• Customer Satisfaction—Customer feedback is negative and not within the tolerances the leadership would like.

Most importantly, a firm can look at the big picture in one visualization to determine correlation. Is our customer feedback low because we are not complying with our processes? Does this also relate to poor product performance and the subsequent call backs? Once again, a firm shouldn’t be shocked to learn that their incident rate is higher when they are not following the safety protocol. This would be similar to someone being shocked to learn they are gaining weight yet they eat a box of Oreos every night.

The aim of the Strategy Spider is not to recreate the wheel relative to KPIs or replace financial statements. Firms need to measure and share this data internally, so the entire team can see how these elements correspond to one another and the overarching strategy. A firm can convey this messaging in many ways, but best-in-class firms provide the target and regularly provide feedback on the bullseye (or the green web if you prefer).

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.

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