UoG

CONSTRUCTION TECHNOLOGY AND MANAGEMENT PROGRAM

PERFORMANCE MANAGEMENT

And

RESOURCE OPTIMIZATION

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 Chapter one
Focus areas:-
 Performance management
 Performance indicators
 Performance management /measurement in construction
industry
Performance measurement techniques

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 1.1.Introduction to Performance Management
Performance is understood as an integral part of Construction project
management system that:
 works for a reasonable balance among its three major purposes:
Accountability; Trend or Progress Assessment; and Learning: This is
related to the two contending performance demands: Success and/or
Failure, or Poor and/or Good Performances;
 Sets baseline for progress monitoring during Project Definition: That
is, the Performance Criteria;
 Uses objective and subjective measurement & evaluation techniques
during Project implementation and after completion:
 It deals with Performance Measurement, Monitoring and Evaluation;
 considers process - result orientations within the result - outcome
interface limits of the project: and hence Uncertainties Changes and
Risk Management became a vital contribution, and
 Consider both the Critical Failure and Success Factors.

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 cont’d…..

 Performance management is seen as a closed loop control

system which deploys policy and strategy, and obtains
feedback from various levels in order to manage the
performance of the system”
 performance management is the collection and analysis of
performance measures, updating of past performance goals,
implementation of improvements, and communication of
shared vision.

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 Contd……
 Performance management is simply a term used
to describe a set of activities that assess whether
goals or objectives are being met. These activities
include
 defining work,
 setting goals,
providing feedback and
encouraging development

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The performance management/measurement process

Output
Input

Process
Vision Performance Business
Strategy management perform
ance

Performance
measurement

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 Contd…
Importance:
 As such, performance management is intended to determine
the appropriate tool and method that will enhance the
efficiency and effectiveness of an operation or a company
 A performance management system is to strive for constant
improvements in reducing wastage in the future.

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 1.2 Performance Criteria (indicators) and measurement

 Performance measurement system “… is the information

system which is at the heart of the performance
management process and it is of critical importance to the
effective and efficient functioning of the performance
management system.”
 Therefore, performance measurement is the process of “…
determining how successful organizations or individuals have
been in attaining their objectives.

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 Contd…
 To achieve this, the outputs of organizational strategic and
operational processes are measured in a quantifiable form to
monitor the vital signs of an organization.
 The relationship between performance management and
measurement can be seen in its wider context from a process
view i.e. input-process-output

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 Contd….
• Performance measurement perspectives

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 Performance Indicators

• Performance Indicators are quantifiable measurements that

reflect the critical success factors of an organization
 Traditional performance indicators (cost, time and quality):
Their implementation is usually apparent at the end of the
project, and they can be classified as <<lagging indicators>>.
 Recent contributions of performance indicators: indicators
tended to concentrate on productivity and to achieve
continuous improvement is called leading indicators.

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 Contd…
• they are parameters of change or of results,
indicating to what extent the project objectives have been
achieved.
• Indicators help to create transparency conveying to
others what the project intends to do
• They clarify the characteristics of the different levels of
objectives of a project.

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 Contd…
• When formulating indicators we should pay attention
that the indicators are:
– objectively verifiable
– Independent
– Plausible
– Specific
– measurable

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 Indicators
• Specify targets on the basis of the indicators:
– Quantity How much?
– Quality What?
– Target group Who?
– Time/Period Starting when and for
how long?
– Place Where?

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 Key performance indicators in construction

 Client satisfaction – product

 Client satisfaction – service
 Defects
 Profitability
 Productivity
 Safety
 Construction cost
 Construction time
 

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1.3 Performance management/ Measurement in the
Construction Industry

The construction industry's core business is undertaking

projects in generating new buildings or refurbishing existing
ones for a variety of clients
• Traditionally performance measurement in construction is
approached in two ways:
• a) in relation to the product as a facility
• b) in relation to the creation of the product
 the latter of the two has been the prime performance
assessment (in terms of success or failure) of construction
projects

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 Contd…
• when assessing the success/failure of construction projects “a
common approach is to evaluate performance on the extent
to which client objectives like cost, time and quality were
achieved”

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 Contd…
• Importance of performance measurement:-
Feedback as a learning tool
to make operations and results transparent aimed
at improving both performances and
accountability

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 Contd…
• Balanced Scorecard
• The name Balanced Scorecard invokes two images: that of a
balance and that of a scorecard used to keep a record by
making marks or notches on a card or tally board.
• The Balanced Scorecard (BSC) is a performance management
system which incorporates four main measurement
categories (perspectives) each of which with a wide range of
potential sub-measures.

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 Contd…
• The difference with traditional approaches to performance
measurement is that it includes a range of "leading and
lagging" indicators - customer perspective, internal/business
processes, learning and growth, and financial.
• BSC recognizes that the financial measures are lagging
indicators and therefore the result of the other three leading
indicators.

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 Chapter two

Performance factors
Focus areas..
– Project resources

– Project stakeholders
– Project processes
– Project productivity

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 Contd…

2.1 RESOURCES
• For any construction Industry to be efficiently operating and be successful the
elements or the resources should be well known, planned and made available.

• For most of the construction projects, the resources to look into are the following;

 Human Resources / Labor or Workmen

 Financial Resources / Fund

 Information Resources

 Physical Resources such as Materials, Equipment and Other Assets

 Services and Management.

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 2.1.1 Human Resources / Workmen/ Labor

• All works involved, including the operation of equipment

cannot be executed without human labor.
• All other resources are coordinated and generally the work
itself is executed by labor. Therefore careful planning,
organizing and monitoring of workmen are mandatory.
• Human resources include professional, skilled, semi skilled
and unskilled laborers.

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 Contd…

• Human resources can be understood in two values: Capacity

and Capability.
• Human resources need to be attracted, selected, developed,
motivated and retained if an organization needs to successfully
accomplish project objectives.

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 Contd….

• Human resources need the following skills:

 Communication – Inter - personal, group interaction - skills

 Problem solving / Conflict resolution / Negotiation Skills

 Facilitating / Decision – making Skills
 Writing skills for Proposals / Reports / ToRs / ; and

 Hard Skills – Planning, Implementing, Leading and

monitoring tools.

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 2.1.2 Financial Resources / Fund

• One of the basic resources in the construction industry is

Fund, which should be arranged before starting any project.
• The project to be conceived shall be within the fund available
for it.
• Usually funds are available from among Governmental
institution, Private institutions and Donors in the form of loan
or assistance.

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 Financial resources…

• The objective and goal of the project is achieved successfully if

and only if the fund is sufficiently flowing to carry out the project
as planned.
• That is, it is the regular supply of fund that keeps projects moving
progressively.
• Therefore, it is necessary to ensure financial planning for smooth
cash inflow and outflow to avoid delays in project activities.

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 Information Resources

• Information can be understood in two terms: data whether processed or not;

and its technology.
• Contextual information, data useful for estimating duration and costs; etc
are some of informational resources used in projects.
• Information technology both the hard and soft wares have brought the
processing and management of such information becomes important and
helpful in facilitating the comparison of several alternatives.
• This helps in optimization or maximization of uses of project resources.

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 2.1.4 Physical Resources

• Materials: The large portion of a project cost is gone to material

cost.
• proper consideration shall be given in the planning stage to
design with easily available material without compromising the
quality for the intended purpose and for proper flow and storage
of materials.

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 Contd….

EQUIPMENT:
 Provision of equipment replace the hard work that can be made
by human labor taking much time within reasonable period of
time.

 It increases efficiency and economy.

 Depending on the types and nature of construction, machinery at

site includes batching plant, mixers, trucks, tractors, excavators,
dampers, cranes, vibrators, pumps etc.

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 Resources …

OTHER ASSETS :
• Physical Infrastructures and Owned Land are assets which
can be collaterals for capital base enhancement and credit

facilities .

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 2.1.5 Services and Management

 SERVICES: Services such as acquisition of land, provisions of water

supply, electric power, communication systems, etc., are very much
necessary in the construction industry.
 MANAGEMENT:

• To coordinate these resources and achieve the required goal, a system

shall be devised to plan, organize, execute, and control the project.
• Such system which helps to achieve the necessary goal is called
Construction Management, without which it will be a catastrophe
both in cost and completion time to the project.

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  2.2. Stakeholders
• Stakeholders can be defined as either individuals or units or the
organization itself for which they claim a stake in the project
such that they get benefit from or affected by the whole
processes of the project and its deliverables.
• They can generally be classified under Direct and Indirect
stakeholders.
• weak and untrustworthy relationships among stakeholders have
been one of the major factors for low project performances.

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 Contd…
Stakeholders’ relationships management is meant that attitudes,
objectives and self serving interests of individuals, groups or
organizations who have stakes in the project are reflected in
their relationships to affect the success of the project.

As a result, projects need to manage such relationships

in order to ensure their successful completions.

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 Contd…
• The following … steps are useful for successful Project stakeholder
management:
 Stakeholders’ Identification

 Stakeholders’ Information gathering on recurrent attitudes,

strategy (Vision, Mission, Objectives, etc) and self-serving
interests
 Stakeholders’ SWOT Analysis

 Stakeholders’ predicted / expected Behavior, and

 Stakeholders’ Relationships Management Strategy.

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 2.3.Process
• Harrington (1991) refers to a process as “any activity or group of
activities that takes an input, adds value to it and provides output to an
internal or external customer.
• Processes use an organization's resources to provide definitive results.”

• Therefore, a performance process framework will take strategy as an

input deploy the strategy so that it can derive a number of measures
which are effectively activities; add value to the strategy by examining
its validity and implementation; and deliver the performance results to
the organization or its shareholders and customers.

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 Contd…
• Construction projects as it posses its unique characteristics from other
projects, its project cycle exhibited contextual phases.

• For instance SIB 3010 Compendium [11]; defined the construction process
as all processes which guides towards or is a presupposition for the
planned construction works.

• This means that the construction process as a concept covers sub processes
having different characteristics. These sub processes can be grouped under
three major classifications: Core processes, Administrative processes and
Public regulatory processes. These processes are termed Project Processes

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 Contd…
Core Processes Concept Design of buildings, Maintenance Period
Definition /Concept Roads, etc & and
Development Physical Defect Remedies
construction works

Administrative Concept Evaluation Monitoring, Acceptance, Hand

Processes Project Approval Procurement and Over and
Budget Allocation Other Processes

Public Regulatory Right-of-way (if Tender award Final Approval,

Processes necessary) and and
and Changes and User Permit
Regulatory Permits Variation

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 2.4. Productivity

 Labor Productivity

• Productivity in construction is often broadly defined as output

per labor hour.
• labor productivity is a measure of the overall effectiveness of
an operating system in utilizing labor, equipment and capital to
convert labor efforts into useful output, and is not a measure of
the capabilities of labor alone.

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 Contd…

• Construction output may be expressed in terms of

functional units or constant dollars.
• In the functional units, labor productivity is associated
with units of product per labor hour, such as cubic
meters of concrete placed per hour or Kilometers of
highway paved per hour.

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 Productivity at the Job Site
• Contractors and owners are often concerned with the labor activity at job sites. For this

purpose, it is convenient to express labor productivity as functional units per labor hour

for each type of construction task.

• Different levels of measure may be used.

 For example, a cubic meter of concrete placed per hour is a lower level of measure

than kilometers of highway paved per hour.

 Lower-level measures are more useful for monitoring individual activities, while

higher-level measures may be more convenient for developing industry-wide standards

of performance.

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 Factors Affecting Job-Site Productivity

• Job-site productivity is influenced by many factors which can

be characterized either as:
 labor characteristics,
 project work conditions

 Non-productive activities.

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 labor characteristics
• The labor characteristics include:

– Age, skill and experience of workforce

– leadership and motivation of workforce

• Performance analysis is a common tool for assessing worker quality and

contribution. Factors that might be evaluated include:

– Quality of Work - caliber of work produced or accomplished.

– Quantity of Work - volume of acceptable work

– Job Knowledge

– Safety Consciousness etc.

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project work conditions

• The project work conditions include among other factors:

– Job size and complexity.

– Job site accessibility.

– Labor availability.
– Equipment utilization.

– Contractual agreements.

– Local climate.
– Local cultural characteristics, particularly in foreign operations.

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 Contd…

• A base labor productivity may be defined for a set of work

conditions specified by the owner or contractor who wishes to
observe and measure the labor performance over a period of time
under such conditions.
• A labor productivity index may then be defined as the ratio of the
job-site labor productivity under a different set of work conditions
to the base labor productivity
• It is a measure of the relative labor efficiency of a project under
this new set of work conditions.

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Non-productive activities

• The non-productive activities include among other

factors: Rework for correcting unsatisfactory work
– Temporary work stoppage due to inclement weather or
material shortage
– Time off for union activities

– Absente time, including late start and early quits

– Non-working holidays
– strikes

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 contd….
• The non-productive activities associated with a project should also be
examined in order to examine the productive labor yield.
• productive labor yield is defined as the ratio of direct labor hours
devoted to the completion of a project to the potential labor hours.

• The labor hours spent on rework to correct unsatisfactory original work

(and other indirect labor hrs) represent extra time taken away from

potential labor hours.

• The labor hours related to such activities must be deducted from the

potential labor hours in order to obtain the actual productive labor yield.

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Example1 : Effects of job size on productivity

• A contractor has established that under a set of "standard" work

conditions for building construction, a job requiring 500,000 labor
hours is considered standard in determining the base labor productivity.
All other factors being the same, the labor productivity index will
increase to 1.1 or 110% for a job requiring only 400,000 labor-hours.
Assuming that a linear relation exists for the range between jobs
requiring 300,000 to 700,000 labor hours as shown in Figure 1,
determine the labor productivity index for a new job requiring 650,000
labor hours under otherwise the same set of work conditions.
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Figure 1: Illustrative Relationship between Productivity Index
and Job Size

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 solution

• The labor productivity index I for the new job can be obtained by
linear interpolation of the available data as follows:

• This implies that labor is 15% less productive on the large job than on
the standard project.

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 Example 2: Productive labor yield;
• In the construction of an off-shore oil drilling platform, the potential labor
hours were found to be L = 7.5 million hours. Of this total, the non-
productive activities expressed in thousand labor hours were as follows:
• A = 417 for holidays and strikes
• B = 1,415 for absentees (i.e. vacation, sick time, etc.)

• C = 1,141 for temporary stoppage (i.e. weather, waiting, union activities, etc.)
• D = 1,431 for indirect labor (i.e. building temporary facilities, cleaning up the
site, rework to correct errors, etc.)
• Determine the productive labor yield after the above factors are taken into
consideration.

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 Solution: The percentages of time allocated to various non-productive activities, A, B, C
and D are:

The total percentage of time X for all non-productive activities is:

The productive labor yield, Y, when the given factors for A, B, C

and D are considered, is as follows:

As a result, only 41% of the budgeted labor time was devoted

directly to work on the facility. 52