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Abstract: Performance measurement has been subject to a considerable amount of research and attention over the past 15 years. The
inadequacy of traditional financially based performance measurement systems and the introduction of nonfinancial measures have been
the triggers for much of this research. The purpose of this paper is to review the main performance measurement frameworks and their
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application by U.K. construction firms and to identify gaps in knowledge and practice that suggest future research. The contemporary
performance measurement frameworks are reviewed, including the Balanced Scorecard and the European Foundation for Quality Man-
agement Excellence Model. The status of performance in the U.K. construction industry is discussed, in addition to project/operational-
level performance measurement and the linkage between performance measurement and strategic management. Gaps in knowledge and
practice are overviewed both in general and for the construction industry in specific, thus suggesting future research.
DOI: 10.1061/共ASCE兲0742-597X共2004兲20:2共42兲
CE Database subject headings: Performance evaluation; Construction industry; Strategic planning; United Kingdom.
Balanced Scorecard
The Balanced Scorecard has been described as one of the most
influential business ideas of the past 75 years by the Harvard
Business Review and is estimated to be used by 40% of the For-
tune 1,000 companies at the end of 2001 共Marr 2001兲. The score-
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Fig. 2. The Balanced Scorecard Reprinted by permission of Harvard Business Review, From ‘‘The Balanced Scorecard—Measures That Drive
Performance,’’ by Robert S. Kaplan and David P. Norton, January–February, 1992. Copyright © 1992 by the Harvard Business School Publishing
Corporation, all rights reserved.
1994; Przasnyski and Lawrence 1999; Macleod and Baxter 2001; 5. Little consideration for existing performance systems and
NIST 2002兲. The third criticism of quality models relates to their their interaction with the model/framework.
limitations as excellence models. The EFQM criteria have been
described as vague and underrated in the areas of improvement,
Gaps in Knowledge and Practice
innovation, and supplier partnership strategies 共Azhashemi and
Ho 1999兲. Garvin 共1991兲, a previous member of the MBNQA Many performance measurement frameworks and performance
board of overseers, said ‘‘Baldrige is in no way a complete award improvement initiatives/methods exist 关e.g., Balanced Scorecard,
for corporate excellence,’’ criticizing its lack of important areas, EFQM, just-in-time 共JIT兲, benchmarking, and activity-based man-
such as innovation, marketing savvy, strategic positioning, and agement兲. Each is different in the way it measures performance,
organization design. A good overview of the business excellence yet they can coexist simultaneously. How is that possible? Is any
models’ limitations can be found in Leonard and McAdam one better or more valid than the others? They all are valid but
共2002兲.
Although originally intended as business excellence models,
the EFQM and Baldrige models have been used as performance
measurement frameworks. They both contain criteria that require
measuring of results, and their criteria can be used to identify
dimensions of performance measurement. Fig. 3 shows the crite-
ria of the EFQM Excellence Model.
A general critique of the deficiencies of the overviewed per-
formance measurement frameworks and excellence models indi-
cates that they have one or more of the following limitations:
1. Limited/noncomprehensive performance criteria/
perspectives;
2. No relations among criteria, or if relations exist, they are
simple and do not simulate actual complexities;
3. No measure development or design process;
4. Lack of implementation guidelines and long-term mainte-
Fig. 3. The EFQM Excellence Model—2002 © EFQM. The EFQM
nance of the framework to adapt to the changing environ-
Excellence Model is a registered trademark.
ment; and
alterations of their existing company measurement systems, the occurrence of relevant external and internal changes. These
which might follow a certain performance measurement issues have been discussed by a number of authors 共Ghalayani
framework or a bespoke method, or even be unrelated perfor- et al. 1997; Neely et al. 1997; Bititci and Turner 2000兲. Cur-
mance indicators used by management. On the other hand, rent knowledge and techniques are sufficiently mature in this
Eccles 共1991兲 advocates that performance measurement sys- area, but many performance measurement systems are still
tem design should start from scratch. Barsky and Bremser static 共Bititci and Turner 2000兲. The need remains for research
共1999兲, however, showed how budgeting can be used in a Bal- to further address the dynamism and flexibility of performance
anced Scorecard environment. Research needs to identify how measurement systems.
contemporary performance measurement frameworks should • Performance measurement systems have no use if not used as
interact with existing company measurement systems. For ex- guidance to management decisions. The feedback loop and
ample, surveys of existing systems can be conducted in differ- consequent decision making are necessary to convert measure-
ent disciplines to identify frameworks’ utilization, or the mea- ment systems into management systems. This notion has been
sures most used in the industry. Methods for evaluating discussed by Grady 共1991兲 and Medori 共1998兲. Failure to take
whether to use existing systems/measures/information or to actions and manage with measurement data has been consid-
develop a totally new system need to be developed. Further- ered an ultimate management sin, but has however been a
more, techniques are required to identify how the existing common and increasing issue in many modern organizations
measures/information can be used within a certain perfor- 共Neely and Bourne 2000兲. Research needs to identify the rea-
mance measurement framework or in a newly designed sys- sons for failure to translate measurement information into ac-
tem. tion and suggest necessary remedies.
• Procedures for designing performance measures/indicators
have been described in many publications. However, the issue
of target- and standard-setting of measures is still problematic Performance Measurement in U.K. Construction
for firms. Target-setting techniques have been covered in re-
search 共Sinclair and Zairi 2000兲, yet target values are usually The construction industry in the U.K. and many other developed
negotiated rather than studied 共Flapper et al. 1996; Schneider- countries has a long track record of less than optimal performance
man 1999兲. Research still needs to identify how managers 共Kagioglou et al. 1999; Lee et al. 2000; Smith 2001兲. A number
could be encouraged to adopt target- and standard-setting tech- of industry reports and investigations, dating back to the Simon
niques. It is possible that other techniques are needed, or it report in 1944 共Banwell 1964兲, have indicated the need for
might just be a problem of awareness. change and improvement. The more recent reports of Latham
• Financial measures have historically been easily aggregated 共1994兲 and Egan 共1998兲 have shed more light on the current status
over organizational levels and across functions. However, with of the industry and the areas and tasks required for performance
the introduction of nonfinancial measures, different units of improvement. The Latham report advocated improvement in the
measurement exist and aggregation is no longer a simple task. efficiency and competitiveness of the industry through reforms in
Suwignjo et al. 共2000兲 and Bititci et al. 共2001兲 have provided contracting, tendering, design process, quality management, pro-
quantitative models that structure measures hierarchically, ductivity, training, education, and other issues. In his report to the
evaluate their effect on each other, and quantify relative effects government, Rethinking Construction, Egan 共1998兲 described
using the standard analytic hierarchy process 共AHP兲. Schrank how the U.K. construction industry, at its best, displays excel-
共1998兲 has also presented a quantification methodology for lence. However, he had deep concerns that the industry is under-
aggregating measures within a ‘‘goal-oriented performance achieving and that substantial improvements in quality and effi-
evaluation’’ approach. On the other hand, Palmer and Parker ciency are possible. He further elaborated that the industry has
共2001兲 have argued, based on the recent applications of uncer- low profitability and invests too little in capital, research and de-
tainty and chaos theory to management, that measures should velopment, and training, and moreover, too many clients are dis-
not be broken down into their components. They stated that satisfied with its overall performance. Egan 共1998兲 identified spe-
the performance of a measure is affected by numerous factors, cific targets for improvements in terms of productivity, profits,
and a small change in any of these factors can result in a major quality, safety, and project performance, and most important for
effect on the resulting measure, thus making aggregation ef- this paper, he emphasized the importance of ambitious targets and
forts pointless. Research is still limited in this area and needs the role of performance measurement in delivering improvement.
to indicate the validity, usability, and practicality of aggrega- Following Egan’s 共1998兲 report, many government and insti-
tion methods and to probably suggest new techniques. tutional schemes and initiatives have been aligned to address the
• Implementation of performance measurement systems has implementation of Egan’s principles 共DTI 2002a兲. A further report
been discussed by a plethora of authors 共Eccles and Pyburn by Fairclough 共2002兲, Rethinking Construction Innovation and
Balanced Scorecard
One of the first reported applications of Kaplan and Norton’s where TQM originated 共Ahmad and Sein 1997; Stockdale 1997兲.
Balanced Scorecard was by a leading engineering and construc- However, the EFQM model, unlike its TQM parent, is a well-
tion company, Brown & Root/Halliburton; the company’s original defined model and has been reported to be easier for construction
scorecard can be found in Kaplan and Norton 共1993兲. Kagioglou companies to understand and implement 共Watson and Seng 2001兲.
et al. 共2001兲 suggested a conceptual framework for application of Nevertheless, some implementation problems exist and can be
the Balanced Scorecard by construction firms and added two per- summarized as resistance to change, inexperience with the model,
spectives important to the construction industry: project and sup- documentation difficulties, and insufficient time and fund alloca-
plier perspectives. Additionally, the framework rationalizes the tion 共Watson and Seng 2001兲. Additionally, Robinson et al.
relationships between performance measures and goals derived 共2002兲 reported that construction firms considered the EFQM
from strategy to indicate potential areas for improvement, through model less difficult than the Balanced Scorecard in terms of de-
a process-performance measurement relationship matrix. Kagio- termining and monitoring indicators. They regard this as due to
glou et al. 共2001兲 argued that methods used to measure perfor- the presence of enabling factors in the EFQM model, which are
mance in construction projects fall into the three main categories not clear or comprehensive in the Balanced Scorecard.
of the Balanced Scorecard:
1. Financial perspective: for example, cash flow and cost ben-
efit analysis; Linking Strategic Management to Performance
2. Internal business processes: for example, critical path analy- Measurement
sis; and Performance measurement is an important part of the strategic
3. Customer perspective. management process, as shown in Fig. 6. In order to control a
Organizational learning is emerging within the fourth Bal- business strategy, it has to be measured. Therefore, many of the
anced Scorecard perspective of innovation and learning, given by contemporary performance measurement frameworks are used to
Kagioglou et al. 共2001兲, who stated that organizational learning measure strategy deployment. Kaplan and Norton 共1996, 2001a,b兲
can be problematic since participants in construction projects are showed how the Balanced Scorecard should be used as a strategic
only temporarily joined. However, Kululanga et al. 共2001兲 pre- management system. Leonard and McAdam 共2002兲 presented a
sented a framework for organizational learning measurement by grounded model of the strategic application of business excel-
construction contractors that explained definition difficulty and lence models, but reported that managers found difficulties in
used dimensions and supporting factors to measure the degree of attempting to use the model in a strategic manner.
organizational learning. The main aspects of strategic management in construction are
described by Price and Newson 共2003兲 and Price et al. 共2004兲,
European Foundation for Quality Management Excellence based on an industry survey. These aspects and their implications
Model for performance measurement are listed here.
Beatham et al. 共2002兲 reported different uses of the EFQM model • Strategic planning has a low profile in construction and re-
applied to construction. The self-assessment process is used to ceives a low level of attention. In addition, strategic manage-
identify key areas for improvement 共AFI兲 and initiate perfor- ment is not entrenched in construction organizations, but is
mance improvement projects. The RADAR 共results, approach, de- usually performed by top management in a top-bottom ap-
ployment, assessment, and review兲 logic of the EFQM model is proach, with little involvement of the lower echelons of the
used to deliver continuous improvement. Moreover, the model organization, customers, partners, or suppliers 共stakeholders兲.
was used to ensure that all issues related to the business 共hard and Moreover, construction firms tend to focus on operational ef-
soft issues兲 are incorporated in the development of critical success fectiveness 共performing similar activities better than rivals兲 at
factors 共CSF兲 and in-house KPI, as shown in Fig. 5. This was the expense of strategic positioning 共performing activities dif-
done as part of a review of business/project objectives, key busi- ferent from those of rivals or similar activities in different
ness processes 共KBP兲, and sub-KBP. It should be noted that the ways兲 共Edum-Fotwe 1995兲. In this situation, performance
KPIs here are different than the previously discussed KPI of measurement will not likely be used as a strategic deployment
CBPP-KPI 共2002兲. tool.
The implementation of TQM has traditionally been faced with • Firms traditionally pursue a cost leadership 共operational effec-
problems in construction, due to its contrasts with manufacturing, tiveness兲 strategy, mostly by default rather than by design.
However, with the increased focus on the customer, a shift to Conclusion and Recommendations
differentiation 共strategic positioning兲 strategies is emerging.
Companies will need to monitor their new strategic efforts and Performance measurement has been the subject of considerable
align them throughout the organization. Therefore, the need research and attention in the last 15 years. The inadequacy of
for strategic measurement systems is expected to grow. traditional financially based performance measurement frame-
It is evident that with the current situation of strategic man- works and the introduction of nonfinancial measures have trig-
agement, performance measurement systems will not likely be gered much of this research, in what has been considered a re-
used to deploy strategy. However, the need exists and is expected search revolution. The contemporary performance measurement
to grow as firms shift toward differentiation strategies. frameworks have been reviewed, including the Balanced Score-
card and quality-based performance excellence models, such as
Gaps in Knowledge and Practice the European Foundation for Quality Management 共EFQM兲
model. However, their simultaneous existence, in addition to
Construction companies have implemented a number of perfor- many other performance improvement methods 共e.g., activity-
mance measurement frameworks, such as KPI, the Balanced based management, benchmarking, and JIT兲, and their differences
Scorecard, and the EFQM Excellence Model. Each looks at per- in nature, prompt two questions: How can they all coexist simul-
formance measurement from a different angle while they either taneously? Is any one better or more correct than the others? The
overlap or complement one another. Therefore, a need exists for a answer is that they are all valid and correct, but look at the mul-
comprehensive or integrated performance measurement frame- tifacets of performance from different angles 共Neely and Adams
work in construction. This gap is similar to that identified in the 2001兲. A research need exists to develop more comprehensive
previous section of this paper. However, the needs or critical suc- performance measurement frameworks that incorporate the rel-
cess factors of construction might differ from those of other in- evant aspects of different performance frameworks, models, and
dustries, and the required performance measurement framework improvement methods. This remains a main gap in knowledge
might be different and needs to be developed for the industry in that should be further addressed by research and supported by
particular. practice.
The various gaps in knowledge and practice identified in the Additional gaps in knowledge have been identified that apply
previous section were for performance measurement frameworks across industries, including construction. They cover the issues of
in general, and also apply to construction firms. Moreover, but how existing performance measurement systems in companies
specific to the construction industry, additional gaps are reviewed. can interact with newly developed systems, the setting of targets
• The applications of the Balanced Scorecard, EFQM, and KPI and standards for performance measures, measures’ aggregation,
are in their early years. Much can be learned from the prob- difficulties in implementing new performance measurement sys-
lems faced in their implementation, and research is still limited tems, dynamism and flexibility of measures, and using perfor-
in this area. mance information to take managerial action.
• Specific measurement issues for performance in construction, The status of performance measurement in the U.K. industry
particularly relating to soft issues, need more research: for and the usage and implementation of performance measurement
example, leadership, people, innovation, learning, partnership, frameworks 共KPI, Balanced Scorecard, and EFQM model兲 in
and technology management. U.K. construction firms has been reviewed. Further gaps in
• The design of measures/indicators has been covered by many knowledge relevant to the construction industry include the
publications, but the design of measures specific and appropri- implementation of contemporary performance measurement
ate to construction has not been well addressed. Additionally, frameworks in construction firms, measuring of specific areas,
the cascading and aggregation of measures vertically between especially soft issues, the design of measures specific to construc-
the organizational and project levels has not been adequately tion, cascading of measures between organizational and project
researched. levels, and the effects of strategic objectives deployment in con-
• Strategic management in the construction industry opens many struction firms on the development of performance measurement
areas of research, particularly the measurement of strategy de- systems.
ployment. This issue should be accounted for when developing Finally, the identified gaps in knowledge are in no way com-
or applying any performance measurement framework. prehensive, and others surely exist. However, this paper attempts
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