How does your company’s labor output compare to the competition? How can you achieve improvements when labor productivity in the industry remains static? Benchmarking is a method of improving performance in a systematic way by measuring and comparing performance against others. It involves the identification of improvement needs within an organization and consideration of how organizations can realize improvements via the adoption of best practices, lessons learned or other forms of innovation.
The combination of benchmarking and labor productivity is not a simple concept. There is no one single parameter that can be used to determine who is best, and the question of why a project, activity or entity performs well is not always obvious. There isn’t a huge amount of accessible information available to help firms identify and recreate best-in-class performance. Benchmarking involves identifying best-in-class performance against which to compare a firm or organization’s performance. The underlying characteristic of a benchmark is that it reflects business performance that has been achieved in real-world operating conditions. Benchmarking can also reflect the best performance observed within a company, between projects or crews. The challenge is recognizing where best-in-class performance exists and understanding the conditions that have allowed it to flourish. Before implementing an improvement program, it is important to understand the most common types of benchmarking.
- Industry level—Obtaining transparency of construction performance across the industry and its many sectors is challenging. Few national or regional initiatives exist for establishing and communicating benchmarks across the industry, meaning efforts at comparing performance can be challenging. Some countries publish national benchmarking data, such as the U.K., while firms in the United States have executed surveys that seek to gather and publish benchmarking data, which is then made available to the industry. Firms looking to assess this data must take care to leverage the correct data sets to assure a like-for-like comparison, and identify the underlying characteristics, assumptions and operating conditions in which the data was obtained.
- Competitive—Competitive benchmarking, where firms assess performance against competitor firms, is a little harder to execute based on a lack of publically available data. Some resources exist to facilitate comparison, but firms will typically have to make assumptions about the underlying business and operational conditions within which the data was measured and generated, which may result in inconsistent comparisons.
- Internal—For most firms, internal benchmarking will be more helpful in identifying internal processes or behaviors that can be the basis of performance improvement, and will often take the form of a comparison of projects, sites or teams. The aim should be to identify a desired level of performance, informed by key performance indicators, and establish a systematic process, possibly driven by lean approaches, Kaizen or Six Sigma, to achieve this across the entire organization. Set tangible targets to allow incremental improvement and ongoing measurement in support of benchmarking objectives to be met.
- Cross industry—Construction lags behind almost every other sector in terms of innovation and production efficiency. However, technologies that seek to bring manufacturing efficiencies to the construction industry are numerous. Robotics, 3-D printing, field digitization, autonomous equipment and advanced surveying and visualization techniques all have parallel deployments in other industries that we can learn from. There are extensive opportunities for workflows, processes and behaviors from other industries to cross-pollinate construction and lead to new ways of managing projects and executing work.
Some of the benefits to companies that pursue this measurement approach include:
- Improving performance in areas that are critical to operational success
- Allows improvement objectives to be constrained by what has been and what is achievable in other areas of the business or industry
- Targets are tangible and realistic, and they can be used to generate competitive tension between teams and projects to further incentivize performance
- Indicates where performance compares with best practices, focusing attention on areas where it is most needed
- Provides assurances that work delivers value for the owner and the public at large (in public works)
What does it take to execute successful benchmarking? Benchmarking requires a straightforward set of requirements.
- Planning—Define the boundaries of what needs to be improved and why. It is important to align these improvement objectives with any overarching organizational initiatives to ensure that incentives and goals of stakeholders are aligned.
- Selection—Establish what areas of organizational performance need to be improved, and make sure that these are important to both you and your customers. Further define what you are assessing against. Comparable entities must be appropriate, and any differences in performance expectations must be clearly understood and communicated.
- Data collection—Consider the means for data collection, in terms of level of effort required, data accuracy, issues around population size and statistical significance. Make sure that your data collection approaches are appropriate and repeatable. Having collected the data, then assess performance gaps.
- Action—Having measured, then establish performance improvement plans. Targets and plans established as part of benchmarking should be simple, measureable, achievable, realistic and time-phased (S.M.A.R.T.).
- Review—Monitor performance improvements against targets and constantly assess progress toward the desired end-state. Constant realignment against S.M.A.R.T. targets can aid progress.
- Management support—Management must support benchmarking efforts and the required changes. Providing feedback on benchmarking efforts is critical to engage participants and maintain the morale of your team.
Barriers to Success
- The following are a few things to avoid when pursuing a benchmarking strategy.
- Limit the number of business areas or elements that are being benchmarked.
- Enjoy initial success, then scale to different areas of the business.
- Assure that every benchmarking activity improves performance in an area that is business-critical to maintain focus and emphasis.
- Be precise in what is being measured, and assure rigor in the measurement and validation processes.
- Be flexible. Organizational priorities change, and your focus on benchmarks and targets can change with them.
Traditional processes for gathering labor production and performance data are time-consuming and often fail to measure performance at an appropriate level of detail. Mobile technology and integrated software solutions can improve field-data collection, empowering operations analysis at a more granular level. By measuring accurately, identifying performance issues can become a routine part of management.