benchmarking initiatives in the construction industry: lessons learned and improvement opportunities

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Benchmarking Initiatives in the Construction Industry:Lessons Learned and Improvement Opportunities

Dayana B. Costa1; Carlos T. Formoso2; Michail Kagioglou3; Luis F. Alarcón4; andCarlos H. Caldas, M.ASCE5

Abstract: Benchmarking is a systematic process of measuring and comparing an organization’s performance against that of other similarorganizations in key business activities. The lessons learned from other companies can be used to establish improvement targets and topromote changes in the organization. The benchmarking process can create a fertile ground for ideas, but only in a receptive environment;companies that share good practices and compare their performance against others benefit most. Recently, industry groups in severaldifferent countries have initiated benchmarking programs focused mainly on construction performance measures. This paper describes thescope of these initiatives and discusses the lessons learned and improvement opportunities that were identified in their design andimplementation. This investigation is focused on four initiatives, carried out in Brazil, Chile, the United Kingdom, and the United States.This paper concludes by recommending some further directions on this research topic.

DOI: 10.1061/�ASCE�0742-597X�2006�22:4�158�

CE Database subject headings: Bench marking; Construction industry; Evaluation; Organizations.

Introduction

Despite their importance, performance measurement data havenot been widely identified and collected in construction compa-nies. As a result, information on the performance of the construc-tion industry as a whole tends to be scarce. This is because, to agreat extent, managers have a reluctant attitude and lack training�Formoso and Lantelme 2000�. In fact, several companies mea-sure and control a wide range of project variables, but only a fewhave performance measurement processes, which should providekey support for decision-making processes �Lynch and Cross1995; Kaplan and Norton 1992�.

Moreover, some companies have too many measures, most ofthem linked to support functions rather than to the key processesthat companies most need to control �Costa and Formoso 2004�.This tends to make it difficult for the company staff to determinepriorities and to define the key indicators that should be used for

1Ph.D. Candidate, Federal Univ. of Rio Grande do Sul �UFRGS�,Building Innovation Research Unit �NORIE�. E-mail: [email protected]

2Professor, Federal Univ. of Rio Grande do Sul �UFRGS�, BuildingInnovation Research Unit �NORIE�. E-mail: [email protected]

3Manager of SCRI/Reader, Univ. of Salford, Salford Centre forResearch and Innovation �SCRI� in the Build and Human Environment.E-mail: [email protected]

4Professor, Univ. Católica de Chile, Escuela de Ingeniería. E-mail:[email protected]

5Assistant Professor, Univ. of Texas at Austin, Dept. of Civil,Architectural, and Environmental Engineering. E-mail: [email protected]

Note. Discussion open until March 1, 2007. Separate discussions mustbe submitted for individual papers. To extend the closing date by onemonth, a written request must be filed with the ASCE Managing Editor.The manuscript for this paper was submitted for review and possiblepublication on July 27, 2005; approved on December 16, 2005. Thispaper is part of the Journal of Management in Engineering, Vol. 22, No.
4, October 1, 2006. ©ASCE, ISSN 0742-597X/2006/4-158–167/$25.00.
158 / JOURNAL OF MANAGEMENT IN ENGINEERING © ASCE / OCTOBER

J. Manage. Eng. 2006

comparison with other companies �Schiemann and Lingle 1999�.However, the effective implementation of performancemeasurement systems is not simply a matter of selecting the rightmeasures. It also implies a much deeper change in the decision-making processes and the learning approaches adopted within anorganization �Lantelme et al. 2001�.

An important role of performance measurement is to enable acompany to do benchmarking. Benchmarking is a systematic pro-cess of measuring and comparing an organization’s performanceagainst that of other similar organizations in key business activi-ties. Then, lessons learned from other organizations are used toestablish improvement targets and to promote changes in the or-ganization �KPI 2000; Barber 2004�. Benchmarking must be anintegral part of the planning and ongoing process of improvementto ensure a focus on the external environment as well as tostrengthen the use of factual information in developing plans�Camp 1995�.

According to Garvin �1993�, the greatest benefits of the bench-marking process are that it allows more efficient work and that itinvolves managers proactively in the process rather than depend-ing exclusively on results. It can be used to improve performanceby helping managers understand the methods and practices re-quired to achieve higher performance levels �Camp 1995�. There-fore, the general purpose of benchmarking—its function as anassessment process—is to encourage continuous learning for bothmanagers and organizations �Barber 2004�.

The benchmarking process can also generate innovation, butonly in a receptive environment �Garvin 1993�. This open envi-ronment can be created in benchmarking clubs, forums for indi-viduals to learn from the best practices within a local supportnetwork �Constructing Excellence 2004�. In general, these initia-tives involve a group of similar companies that compare resultsand share practices with the goal of continuous improvement.

In recent years, benchmarking programs have been establishedin countries such as Australia �Karim et al. 1997�, Brazil �Costa et
al. 2004�, Chile �CDT 2002�, Denmark �Byggeriets Evaluerings
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Center 2002�, the United Kingdom �Constructing Excellence2004�, the United States �CII 2000�, Hong Kong, Singapore, andthe Netherlands �Bakens et al. 2005�. These programs havemainly been related to the creation and implementation of perfor-mance measurement systems.

Such initiatives typically aim to �1� offer guidance for perfor-mance measurement; �2� provide benchmarks that can be used byindividual companies to establish business goals and objectives;and �3� identify and disseminate the best practices in the industrythrough reports and benchmarking club networks.

The objective of this paper is to describe the scope of theseinitiatives and to discuss the lessons learned and improvementopportunities that were identified in the design and implementa-tion of these systems. This investigation is focused on four initia-tives carried out in Brazil, Chile, the United Kingdom, and theUnited States.

The Role of Performance Measurementin the Benchmarking Process

The evolution of the benchmarking concept is similar and inex-tricably linked to the evolving pattern of performance measure-ment �Anderson and McAdam 2004�. In general, performancemeasurement is limited to traditional broad financial measures,such as return on investment, profit, and liquidity ratios, indexesthat have been strongly criticized for being out of step with recentchanges in the industry �Kaplan and Norton 1992�. Among otherproblems, these measures tend to be focused backward, make itdifficult to trace operational costs, and fail to monitor the benefitsof new investments �Berliner and Brimson 1988�. Moreover, ex-isting performance measurement systems are often used for im-posing centralized control �Senge 1999� and, for that reason, areoften rejected by employees.

Several models aiming to redress these problems have beenproposed to support the development of performance measure-ment systems; these models focus mostly on establishing a bal-anced set of measures that consider financial measures as well asclient satisfaction, production efficiency, organizational learning,the environment, and the supply chain. For example, Lynch andCross �1995� devised a pyramid of measures that integrates per-formance measurement throughout the hierarchy of the organiza-tion. Neely et al. �1996� proposed a framework for specifyingperformance measures, while Maskell and Baggaley �2004� sug-gested a set of guidelines for devising and implementing perfor-mance measurement in lean production systems. Finally, Kaplanand Norton �1992� designed a performance measurement frame-work, called the Balanced Scorecard, which has received a favor-able academic industry response. All these models andapproaches are usually multidimensional in the sense that theyfocus on a broad set of both financial and nonfinancial measuresand are concerned with different managerial levels. They providemechanisms to facilitate the alignment of performance indicatorswith a company’s strategic objectives, linking them to key mana-gerial processes.

Previous studies indicate that the use of performance measureshas had a significant effect on the development and effectivenessof benchmarking; when performance is tracked, outdated uncom-petitive management practices are identified, and changes are in-vestigated �Anderson and McAdam 2004; KPI 2000; CII 2000;Alarcón et al. 2001�. Therefore, companies must be flexible andable to adapt to unanticipated organizational changes; this in the
long run will improve organizational competitiveness �Anderson
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and McAdam 2004�. Conversely, benchmarking adds value toperformance measurement because it allows companies to com-pare their data; it also allows for better decision making based onthese comparisons �Beatham et al. 2004�. Authors concur to arguethat most organizations involved in benchmarking initiatives tendto focus more on the comparison of performance metrics overtime than on understanding and learning from other companies’good practices �Welch and Mann 2001; Hilton et al. 2000; Ander-son and McAdam 2004�.

According to Anderson and McAdam �2004�, the use ofbenchmarking should be extended beyond the comparison of lag-ging performance measures. Although lagging indicators are im-portant to assess the achievement of a company’s strategicobjectives, leading performance measures are also necessary be-cause they are proactive and preventive in nature. Leading mea-sures help to anticipate the impact on future desired results�Manoochehri 1999�. Therefore, the benchmarking process shouldinvolve a set of indicators that includes both leading and laggingindicators.

Creating Knowledge through the BenchmarkingProcess

Spendolini �1994� found that, although the major focus of bench-marking is usually planning and organizing, one of its main ob-jectives is to introduce new ideas to an organization. One of theimplications of the benchmarking process is that organizationsneed to overcome their internal boundaries in order to assess op-portunities and threats in the external environment. In this con-text, benchmarking can be used to identify innovation by helpingmanagement understand the external environment and by promot-ing organizational learning �Spendolini 1992�. Garvin �1993� alsostresses learning from the experience and best practices of othersas essential to promoting a learning organization. Barber �2004�argues that the benchmarking of managerial practices helps toaccelerate and manage organizational changes by creating a cul-ture of continuous improvement. To him, benchmarking properlyfosters incremental changes along a gradient of continuous im-provement and learning �Zairi and Leonard 1995�.

Despite the arguments for the positive relationship between thebenchmarking process and organizational learning, the literatureshows that it is important to understand how practices andmeasures can be translated into practical knowledge; such usefulinformation makes it possible to identify and adopt superior per-formance standards �Hinton et al. 2000�. According to Lillrank�1995�, the ability to understand practices and their application ina local context depends on how such transfers of knowledge hap-pen. He suggests that practices can be more effectively carriedacross different contexts and cultures if they are first translatedinto abstract ideas, as illustrated in Fig. 1.

According to Lillrank �1995�, a successful abstraction must gobeyond the simple description of the directly observable pro-cesses because in such cases know-how remains context bound.Effective transportation of concepts usually demands a deeperand, by implication, more abstract understanding of the meaningand dynamics of processes than simply viewing them in theiroriginal context �Lillrank 1995�. However, the level of abstractionis determined by the complexity of the system or idea itself. Inthis context, complexity refers to the number and types of socialinterfaces, as well as to the degree to which knowledge is tacitlyembedded in management practices �Lillrank 1995�. Therefore,
the transmission of knowledge within a benchmarking process is
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more likely to succeed when the essence of a particular practicehas been grasped abstractly and translated into practical applica-tions for other settings.

Drew’s research �1997� also finds that the benchmarking pro-cess is affected by a strong tacit element in the practices beingstudied. For example, a particularly difficult situation is encoun-tered when operators are themselves not consciously aware ofwhat they do or how it contributes to success. Consequently, largeamounts of tacit knowledge in a business process add signifi-cantly to the difficulties of benchmarking that process.

It is equally important that the benchmarking team share whatthey have learned with the aim of creating an atmosphere inwhich knowledge transfer is actively encouraged �Hinton et al.2000�. Learning cycles are set in motion once people absorb thetransferred knowledge and apply it to their local conditions.

Research Method

Four benchmarking initiatives were analyzed: �1� KeyPerformance Indicators �KPI� from the United Kingdom; �2� theNational Benchmarking System for the Chilean Construction In-dustry �NBS-Chile�; �3� the Construction Industry InstituteBenchmarking and Metrics �CII BM&M� from the United States;and �4� the Performance Measurement for Benchmarking in theBrazilian Construction Industry �SISIND-NET Project�.

The information about the KPI initiative was obtained from itswebsite, published papers, and reports. For the CII BM&M ini-tiative, the information was obtained from its website, reports,and interviews with a project researcher and the associate direc-tor. The information about the NBS-Chile initiative was obtainedfrom its websites, from published papers and reports, and from itsexisting database. Also, semistructured interviews were con-ducted with managers of seven construction companies involvedin the program and the current coordinator of the initiative. Fi-nally, two of the authors of the SISIND-NET Project have beendirectly involved in this project. Table 1 shows the main sourcesof evidence used for each initiative.

Three main issues were chosen for analyzing each initiative�Table 2�: �1� type of benchmarking; �2� scope of the performancemeasurement system; and �3� implementation of the initiatives.The data were analyzed in two stages. In the first one, each ini-tiative was analyzed independently �within-case study analysis� todetermine the results of each and to organize the existing data. Inthe second stage, the initiatives were compared �cross-case study

Fig. 1. Knowledge transfer model �adapted from Lillrank 1995�

analysis� to identify similar or divergent patterns between them.



Description of the Benchmarking Initiativesin the Construction Industry

Key Performance Indicators „KPIs…in the United Kingdom

The KPI program was launched by the U.K. Best PracticeProgramme in 1998. This program is supported by the British

Table 1. Sources of Evidence for Each Benchmarking Initiative

Initiatives Sources of evidences

KPI Information was obtained from theproject’s website �www.dti.gov.uk/construction/kpi/� and published papers�Beatham et al. 2004; Kagioglou et al.2001�.

NBS-Chile One of the authors of the present reportparticipated in the conception of theprogram. Information was also obtainedfrom the project’s website �www.cdt.cl�,from published papers �Alarcón et al. 2001,Ramírez et al. 2004�, and also by means ofsemistructured interviews withrepresentatives from seven constructioncompanies involved with the coordinationof the program.

CII BM&M Information was obtained from theproject’s website�www.cii-benchmarking.org� and also fromtwo interviews, one conducted as e-mailcorrespondence and one as conversationwith the associate director of the program.

SISIND-NET Project Two authors of the present report haveparticipated in the conception andimplementation of this program.Information was also obtained fromdocuments, meetings, site visits, interviews,the project’s website �www.cpgec.ufrgs.br/norie/benchmarking�, and the projectdatabase.

Table 2. Main Issues Involved with the Analysis of the BenchmarkingInitiatives

IssuesWithin-case study

analysisCross case study

analysis

Type of benchmarking Principal purpose Sector, firm or project

Principal purpose

Scope of the PMS Development Types of measures

of the system Common measures

Lack of measures

Implementation Data collection Positive issues

of the PMS process Difficulties

Data analysis process

Availability of data

Company involvement

Difficulties

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government through national and regional offices. Recently, theConstructing Excellence body, the amalgamation of RethinkingConstruction and the Construction Best Practice Programme�CBPP�, was created. Constructing Excellence aims to achieve astep change in construction productivity by tackling the marketfailures in the sector and by selling the business case for continu-ous improvement �Constructing Excellence 2004�.

Four integrated programs were created aiming to deliver Con-structing Excellence’s strategic objectives: �1� innovation, aimedat identifying and promoting tomorrow’s best practices; �2� pro-ductivity, aimed at improving the competitiveness of the U.K.construction industry; �3� best practice knowledge, aimed atcreating continuous improvement through the sharing of bestpractices; and �4� engagement, aimed at working with people,businesses, and organizations to change the culture of the con-struction industry. These programs are complementary, and ineach one is a set of integrated activities �Constructing Excellence2004�.

KPI is currently part of the Constructing Excellence produc-tivity program. The first set of KPI data was produced in Novem-ber 2000, and the current set of KPIs is based upon projectscompleted in 2002 �KPI 2003�. The design of the first set of KPIswas the result of an initiative involving extensive reviews ofconstruction projects by a panel of experts, followed by the pub-lication of a report. The set of KPIs is annually updated by theConstruction Best Practice Programme �Constructing Excellence2004�.

To implement the KPIs, companies receive a support hand-book, guidance for measurement, and access to online software.The companies are responsible for collecting data, introducingthem into the database, and updating them. The software supportsthe analysis of a project’s performance in relation to the bench-marks. The companies involved can also access reports and wallcharts, containing graphs of performance �ranking curve and radarchart� for 10 key issues for the construction sector, such as clientsatisfaction, cost, and time. The wall charts show the benchmarkscores and allow an organization’s score to be benchmarkedagainst a large sample across the industry.

A few hundred companies have been voluntarily participatingin the Best Practice Knowledge Program, testing it on demonstra-tion projects. The companies present their projects for review bya panel of experts. The companies involved can participate in abenchmarking club and are given access to information from allmain benchmarking initiatives, clubs, and organizations that pro-vide services to the construction industry �Constructing Excel-lence 2004�. The clubs are local services, and each new club isformed by the people in the local construction industry who areinspired by the promise of benchmarking �Constructing Excel-lence 2004�. Companies join the KPI program for two main rea-sons: marketing advantages and improved performanceopportunities.

According to Beatham et al. �2004�, the most significant prob-lem with the KPIs in their current format is that they do not offerthe opportunity for organizational change. They are designed tobe used as post-result lagging KPIs. The authors recommend theuse of leading measures to provide early warnings, identify po-tential problems, and highlight any need for further investigation.

Kagioglou et al. �2001� made the following observations re-garding the KPI initiative in the United Kingdom:• The KPIs are specific to projects and offer very little indication

of the overall performance of the organizations from a busi-ness point of view, apart from the perspective of customer
satisfaction;
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• It is important not only to use the right measures to measurethe right things, but also to show the relationships between thedifferent measures from a holistic viewpoint, since this is away of identifying potential mechanisms for improvement;

• The main difficulties of the entire KPI process are the avail-ability and validity of data.

National Benchmarking System for the ChileanConstruction Industry „NBS-Chile…

The National Benchmarking System was developed in 2000 bythe Corporation for Technical Development �CDT� of the ChileanChamber of Construction and the Program for Excellence in Pro-duction Management of the Pontificia Universidad Católica deChile �GEPUC�, being supported by the Building Research Estab-lishment �BRE� from the United Kingdom and sponsored byCORFO �Foundation of Development and Innovation of theChilean Government�.

The program consists of two initiatives: �1� performance mea-surement for benchmarking, which aims to devise and implementperformance measurement in the construction industry; and �2�benchmarking clubs, which are groups of companies that aim toshare managerial practices and information and to compare per-formance through meetings and visits to construction sites �Grilloand Garcia 2003�.

A selection of performance indicators was based on previousstudies that included extensive literature reviews and empiricalresearch �Alarcón and Serpell 1996; Grillo 1997�. Initially, over30 performance indicators were discussed in several meetings in-volving company representatives. This set was later reduced,based on the experience and needs of the companies. The final setof indicators is concerned with five subsectors of the constructionindustry: �1� high-rise building; �2� low-rise building; �3� civilworks; �4� heavy industrial construction; and �5� light industrialconstruction.

For the implementation of these indicators, the companies in-volved received a support guidebook and had access to computersoftware that enabled performance comparisons �CDT 2002�. TheNational Benchmarking System mainly used quantitative tools,such as mean, ranking curves, radar graphs, and tables displayingcompanies’ results, for data analysis �CDT 2002�. By March 2005the NBS-Chile had a database of 247 projects provided by 39Chilean companies.

An evaluation system for managerial practices has been devel-oped recently as an additional part of the benchmarking initiative�Ramirez et al. 2004�. This system seeks to incorporate qualitativedata as a complement to quantitative performance indicators,using a set of analysis techniques such as Pearson’s correlation,factor analysis, and multivariate linear regressions �Ramirez et al.2004�. This evaluation system aims to compare managementpractices, identify relationships between performance data, anddetermine industry trends. It can be applied independently of thepresence of hard performance data, thereby increasing the feasi-bility of applying the system periodically as part of a continuousimprovement program.

The benchmarking club initiative was carried out indepen-dently, using the following approach: �1� researchers of the pro-gram interviewed construction managers aiming to identify thebest industry practices; �2� researchers and members of the bench-marking clubs visited construction sites to observe the best prac-tices; and �3� technical presentations were promoted twice a yearfor members of the benchmarking club.

Based on the interviews with representatives of seven partici-


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pating Chilean construction companies, researchers identified themain difficulties, the improvement opportunities, and the mainbenefits from the point of view of the companies. Intervieweesidentified the main difficulty for the implementation of the per-formance measures for benchmarking in the companies, as thelack of an internal systematic collection of measures. Most com-panies did not have a well structured performance measurementsystem. Most existing measures were concerned with cost ac-counting and were not clearly linked to the company’s goals.Moreover, there was no external demand for performance mea-surement systems in Chile, as is the case in other countries; suchdemand exists in Brazil �Costa et al. 2004� because there is ademand for quality management systems from public clientsthere, and the demand exists in Denmark because of an industry-wide qualification system �Byggeriets Evaluerings Center 2002�.

Furthermore, a number of improvement opportunities wereidentified by the interviewees: �1� most measures are concernedwith outcomes and do not provide real-time information that en-ables managers to take actions during a project. Therefore, thereis a need to introduce leading performance indicators; �2� thedissemination of results takes a relatively long time and createsthe necessity of frequent contacts between the companies and theprogram; and �3� most companies have not developed the neces-sary internal capabilities for effectively implementing a perfor-mance measurement system. Some kind of technical support forimplementing data-collection processes seems to be desirable formost companies.

The main benefits observed by the participating companieswere the opportunities to share and discuss experiences, includingdifficulties and good practices, with other companies with similarproblems. Moreover, they found that learning through real-worldexperiences happens faster than through using only measures.

The research team perceived that most companies found itdifficult to continually implement the chosen set of measures.This difficulty was largely caused by the lack of corporate com-mitment to benchmark at the company level. Researchers saw theneed for a regular and committed team of representatives fromeach company involved in the benchmarking initiative. Table 3presents a summary of factors that have positively and negativelyaffected the success of the Chilean initiative based on the inter-views carried out with representatives of the construction

Table 3. Summary of Findings

Initiatives Positive factors

Performance measurement • Comparison among competitors

system for benchmarking • Guidance concerning the implementat

and use of measures

• Fast transmission of information

• Use of measures in real time

Benchmarking clubs • Visits to projects sites

• Exchange of experiences among engin

• Presentation and discussion of manage

and building systems

• Fast transmission of information

• Involvement of top managers

companies.



Construction Industry Institute Benchmarking andMetrics „CII BM&M…

The CII BM&M was created in 1993 �CII 2000� with four mainobjectives: to provide the construction industry with a commonset of metric definitions, to provide performance norms to theindustry, to quantify the use and value of best practices, and tohelp focusing CII research and implementation efforts. A commit-tee of industry representatives working with the CII staff has de-veloped the BM&M policy and is in charge of overseeing theexecution of the program. This committee has defined criticalperformance measures that can be used in practice and developeda strategic approach to CII’s collection, analysis, and dissemina-tion of industry data.

The CII BM&M first collected data in 1996, and established acore set of indicators in 2000 �CII 2000�. The CII BM&M collectsproject data as an ongoing process through its web-based system.Each participating company nominates a “benchmarking associ-ate,” a liaison who has a leading role in in-house training and whovalidates project data before submission to the CII BM&M data-base. Each participant fills out the web-based questionnaire basedupon his or her best knowledge, updating data online over the lifeof a project �CII 2003�. Participants receive real-time evaluationof their projects’ performance using the web-based Progress KeyReport. In this system, projects can be immediately compared toother projects also in the database, and reports show metricsscores, performance quartiles, and graphic comparisons of indi-vidual project performance overtime �CII 2003�.

In October 2004, the CII BM&M database held over 1,240projects from CII owners and contractor member companies, ECI�European Construction Institute� companies, and Benchmarking& Metrics Participant Program �BMPP� organizations. This in-volvement represents $60 billion in total construction costs. Oneof the noticeable trends in the database is a recent increase ininternational projects. Currently, approximately 25% of theprojects are from Europe, the Middle East, Asia, and SouthAmerica. The projects are from the heavy industrial, building,light industrial, and infrastructure industry sectors, with the ma-jority representing heavy industrial �CII 2003�.

Besides performance measurement, CII also promotes a forum

Negative factors

• Exclusive use of lagging measures

• Excess of measures

• Overload of information to be collected

• Collection of data imposed by top manager

• Comparison between projects that are very different

• High cost and low benefit

• Lack of connection between measures and practices

• Very long meetings

• Lack of continuity between the meetings and site visits

chniques • Lack of focus on site visits

• Provide more information than receive

ion

eers

rial te

called BM User Platforms, a support network similar to bench-

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marking clubs. In this forum, participants and independent ex-perts discuss the best practices in the industry and how to applythem for better performance.

In the interview conducted for the present report, the CII as-sociate director for benchmarking identified data collection andanalysis processes as key elements of this initiative. CII conductsmandatory training for companies that benchmark with them. Theprogram emphasizes standard definitions and then uses amultitiered validation process; data is validated at the time oftheir entry with computer algorithms. Trained company bench-marking associates for each company must review and approvesubmitted projects for validation, and their CII-trained accountmanagers examine all data for validation before it is submitted.The main difficulty in data collection is getting companies tocomplete surveys once they have started them. Beyond that, thevalidation noted above is difficult and time consuming.

CII data indicate that companies that benchmark more oftentend to have better cost, schedule, and safety performance. Thesecompanies, however, tend to already employ continual improve-ment programs. Participating companies report that the three mainbenefits of the program are �1� access to a cost-effective systemfor benchmarking many projects; �2� agreement on commondefinitions for metrics of performance and practice use; and �3�creation of norms for many performance indicators that were pre-viously unknown or not available.

One of the main challenges faced by program participants is alack of resources for implementation. Most companies lack thepersonnel to enter data and evaluate the reports that are returned.Complicating this obstacle, CII staff is also small and part timeand is sometimes delayed in returning reports to companies. Ad-ditional challenges include getting corporate commitment tobenchmark at the company level and implementing company-wide improvement processes based on the findings from thebenchmarking program. CII has also found that companies havebeen using benchmarking with varied results and that successdepends mostly on the commitment at the organizations’ upper-management levels to improvement through the use ofbenchmarking.

Performance Measurement System for Benchmarkingin the Brazilian Construction Industry „SISIND-NETProject…

The SISIND-NET Project was initiated in April 2004 by theBuilding Innovation Research Unit �NORIE� of the Federal Uni-versity of Rio Grande do Sul �UFRGS� and the Association ofConstruction Companies from the State of Rio Grande do Sul�SINDUSCON/RS�, with the support of the National Council forScientific and Technological Development �CNPq�. It involvesthe design and implementation of a performance measurementsystem for benchmarking in construction companies.

The first stage of the SISIND-NET Project was the definitionof the set of measures for benchmarking. The starting point forthis standardization task was the knowledge gained from threeprevious international experiences �CII 2000; KPI 2000; CDT2002� and from past studies carried out in Brazil �Oliveira et al.1995; Lantelme et al. 2001; Costa 2003�. The lessons learnedfrom other programs have been very important in the conceptionand implementation of this initiative, especially in terms of en-couraging the participating companies’ pursuit of performanceimprovement.

Several meetings involving both representatives of the compa-
nies and members of the research team were held to define the set
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of measures. In each meeting an aspect of the measurement pro-cess, including objectives, formulae, and data collection andanalysis procedures, was discussed. The final version of the set ofmeasures was defined by the end of August 2004.

So far, 18 construction companies from the State of RioGrande do Sul have been involved in this initiative, most of themfrom the residential, commercial, and industrial building markets.A training course was provided for company staff members in-volved in the implementation of performance measurement. InOctober 2004 the implementation process was started, and com-panies began to send data to the database.

Currently, the companies are sharing results and practices inthe benchmarking club through monthly meetings, some of themcarried out on the construction sites of member companies. Inthese meetings, several themes—such as health and safety, layoutand logistics of construction sites, cost management, and the bestpractices in the implementation of the performance measurementsystem for benchmarking—are discussed. In these meetings, link-ing the practices discussed to the benchmarking measures isparamount.

In these meetings facilitators abide by three rules: �1� membersmust participate regularly in the meetings and site visits; �2�member companies must share information with other membercompanies; and �3� participants must engage actively indiscussion to ensure proper understanding of the practices beingpresented. These rules have helped the information exchange be-tween member companies and have fostered the learning process.

Another important component of this project is the individualsupport offered for the implementation of performance measure-ment in each company, especially those that face implementationdifficulties. This support is aimed at enabling the incorporation ofthe measures in the organizational routine and has increased theengagement of the companies in data collection and analysis.

A project website has been developed in which data can bedirectly input by the member companies. In the private area of thewebsite, these companies also have access to some project reportsand graphs derived from the existing database. Moreover, a vali-dation procedure has been implemented to assess the consistencyand coherency of the data sent by the companies. This procedureincludes two types of controls: �1� the first one is carried out inthe online system, since data must be approved by the researchstaff before they are incorporated into the database; and �2� thesecond type is carried out through audits of the companies. Bothtypes of validation guarantee that the information that is providedto the companies and to the construction industry is reliable.

One positive result of this initiative is the participatory processthat has emerged from the benchmarking PMS definition meet-ings. Through the meetings, the companies experience thedecision-making process for the definition of measures, includingthe negotiation of data-collection criteria. As a consequence, therepresentatives of the companies involved have come to under-stand the relevant set of measures well.

The preliminary assessment of this participatory process indi-cates that the meetings and visits, the availability of a private sitefor the benchmarking club members, and the exchange of e-mailscan be regarded as triggers for starting the learning process con-cerning the sharing of practices and the comparison of measuresamong participants. However, for the consolidation of the learn-ing process, companies need to develop mechanisms to facilitatethe incorporation of the improvement actions identified throughbenchmarking. In other words, the prescribed actions need to be
modified, enriched, and translated so that they can be applied to

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the real-world context of a company. This enables the creation ofnew knowledge and effective organizational learning.

Lessons Learned and Opportunitiesfor Improvement

Based on the analysis of benchmarking initiatives in the UnitedKingdom, the United States, Chile, and Brazil, and also on theliterature review, some key issues for the design and implemen-tation of benchmarking systems were identified. First, there areseveral barriers to the implementation of performance measure-ment systems in the construction industry, due the peculiarities ofthis sector. These barriers arise because �1� construction is aproject-oriented industry and each project is unique in terms ofdesign and site conditions; �2� establishing a project performancemeasurement system and incorporating the measures into thecompany routine require a fairly intense effort; �3� the responsi-bilities for data collection, processing, and analysis, in general,are not well defined at the beginning of the project; �4� eachproject usually has a different managerial team and the use ofmeasures will depend on the capabilities and motivation of eachmanager �Costa and Formoso 2004�. To combat these barriers, abenchmarking initiative demands a joint effort from severalorganizations, such as governmental entities, construction clients,individual companies, research institutions, and industryorganizations.

Regarding the type of benchmarking used, the four initiativeshave nationally or regionally carried out performance compari-sons within the construction sector. In all of them, the aim is tomaintain continual data collection so that up-to-date statistics canbe easily derived. The participating companies submit projectdata to a database manager.

Furthermore, these initiatives have also sought to promotechange through the identification and description of best prac-tices. In Brazil, Chile, and the United Kingdom, benchmarkingclubs tend to be focused around a particular client group, a type offirm, or a geographic area. Using a different structure, the U.K.’sDemonstration Projects initiative and the United States’ BM userplatforms both aim to stimulate industry improvement by makingexplicit links between the adoption of certain management prin-ciples or technologies and superior performance. It appears thatbenchmarking clubs as well as demonstration projects may havean important impact on the construction industry because theyencourage the development of a culture of innovation, leading toimprovement action instead of only data comparison.

In general, the set of measures for benchmarking should besimple and well designed to effectively support improvement ini-tiatives and should include a mixture of leading and laggingindicators. Table 4 summarizes the main set of performance mea-sures adopted in each of the four initiatives.

Although a wide range of measures is involved, some of themore common in the programs are cost and cost predictability�total project cost and cost deviation�, time and time predictability�total project duration or time deviation�, and safety �accidentstatistics or measure of site management quality�. Understandingthe differences between the approaches adopted in different coun-tries makes it possible to identify the generic measures that canform the basis for international benchmarking. However, it is im-portant to determine why different approaches have been used indifferent regions before assessing what seems essentially to be acommon goal.

As discussed above, the KPI and NBS-Chile program involve



mostly lagging measures that, by definition, are based on projectoutcomes. Such measures are important for assessing the successof company strategies but do not help to identify improvementopportunities during the period for which the measure has beentaken. By contrast, the CII BM&M and SISIND-NET Project in-clude several leading performance measures that can be used forsupport improvement programs and real-time control.

No measures related to suppliers’ performance, employee sat-isfaction, site management, and quality management were foundin the CII, NBS-Chile, and KPI initiatives. Because these wereconsidered to be of major importance for the Brazilian compa-nies, they were included in the SISIND-NET Project.

The analysis of these benchmarking initiatives confirmed thatthe procedures for data collection should be objective and simple;streamlining the creation of the database makes it easierto compare project performance evaluation in real time. All fourinitiatives offer an interactive online tool for the collection andevaluation of the benchmarking measures. Such a tool allowsusers to access an assortment of documents and provides imme-diate feedback for the benchmarking club members. Beatham etal. �2004� suggest that the online tool must be used over the lifeof a project to create continuous opportunities to analyze the re-sults and to promote improvements. Only the CII BM&M andSISIND-NET Project provide this kind of access. Also crucial tothe implementation of the online tool is data confidentiality, se-curity, and information quality control, all of which guarantee thereliability and validity of the information provided by companies.Table 5 summarizes the positive issues and difficulties regardingthe implementation of the four initiatives.

One aspect that has not been sufficiently explored by any ofthe initiatives is the alignment of the benchmarking measures tocompany strategy. Therefore, benchmarking club members shouldbe encouraged to design their own performance measurement sys-tem according to their companies’ strategies and capabilities,while making sure that the set of measures is relevant and feasiblefor them. According to Hudson et al. �2001�, a strategic perfor-mance measurement system for small-sized companies must bevery resource effective and produce noticeable short-term results.In addition, it must be dynamic and flexible enough to accommo-date strategic changes, since those companies tend to experiencesudden contingencies. For Hudson et al., in practical terms, thismeans that the process should be iterative, so that the strategicrelevance of performance measurement is consistentlymaintained.

There are other important issues to attend to in this kind ofinitiative, mainly concerning its implementation. These issuesinclude:�1� Promoting training for the companies involved, including in-

struction in data collection, processing, and analysis, andcommunication of results to the companies;

�2� Providing closer support for the companies, mainly to guidethem to a better use of the information provided by the mea-sures and practices exchanged. Such support encouraged theapplication of these practices and the creation of knowledgein the companies;

�3� Motivating internal benchmarking and, afterward, externalbenchmarking;

�4� Motivating the companies to share equivalent informationand also stimulating discussion to generate understanding ofthe practices being presented; and

�5� Creating a learning environment within the companiesthrough the benchmarking clubs, motivating them to transfer
the knowledge from that forum into the local condition.
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Table 4. Scope of Measures’ Comparison among Benchmarking Initiatives

Scope of measures KPI �United Kingdom� CDT �Chile�CII Benchmarking and

Metrics �USA� SISIND-NET �Brazil�

Lagging measures •Client satisfactiona •Cost deviation by projecta •Project cost growth •Cost deviationa

•Defectsa •Deviation of construction due datea •Project budget factor •Time deviationa

•Predictability costa •Change in amount contracted •Project schedule growth •Degree of client

•Predictability timea •Rate of subcontracting •Project schedule factor satisfaction �user�

•Profitability •Cost client •Total project duration •Degree of client

•Safety •Efficiency of direct labor •Change cost factor satisfaction �owner�

•Productivitya •Accident ratea •Recordable incident rate •Average time for

•Risk ratea �RIR� selling unit

•Risk ratea •Lost workday case •Contracting index

incident rate �LWCIR� •Ratio between thenumber of accidentsand total man-hourinput

•Nonconformity index inthe unit delivery

Leading measures •Effectiveness of planning •Total field rework factor •PPC �percentage of plan

•Urgent orders phase cost completed�

•Productivity performancea •Factor phase cost •Construction site best

growth �owner data practice

only� •Supplier performance

•Phase duration factor �subcontractors,

•Construction phase material

duration suppliers, and

designers�

•Number ofnonconformity in audits

•Degree of employeesatisfaction

•Rate of training courses

•Rate of employeestrained

a
Measures that could be used if measured during the process.
Table 5. Comparison of Implementation among Benchmarking Initiatives

ImplementationKPI

�United Kingdom� NBS �Chile�CII Benchmarking and

Metrics �USA�SISIND-NET Project

�Brazil�

Positive issues • Online software • Online software for users • Online software for users • Online software for users

for users • Outlined system �qualitative • Annual training • Validation process like an audit

• Benchmarking club analysis� • Annual questionnaire for • Benchmarking club

• Demonstration • Benchmarking club companies’ evaluation • Visits to construction sites

project • Visits to construction sites

Difficulties • Exclusive use of • Exclusive use of lagging • Commitment of the companies • Analysis of the results by

lagging measures measures • Implementation of companies

• Availability of data • Support for the improvement process based • Use of the information for

and validity of data measurement on the findings of the decision making

• Lack of • Commitment of the companies benchmarking program • Continuous measurement

opportunities for • Continuous measurement

real control time

JOURNAL OF MANAGEMENT IN ENGINEERING © ASCE / OCTOBER 2006 / 165

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Finally, the current format of the four initiatives discussed inthis paper has focused on metrics for benchmarking, an objectiveaimed at improving the productivity of the industry. However, thebenchmarking process can lead to benefits beyond productivity, ifit is used for encouraging innovation. For example, benchmarkingclub initiatives have a huge potential for providing learning op-portunities to participating companies; by identifying and sharingtheir own and other companies’ best practices, participants areimmersed in an atmosphere of improvement.

Still and yet, it seems that many construction companies in-volved in these initiatives have a limited view of benchmarking.They maintain a singular interest in comparing their performanceto other companies, especially those from the same market seg-ment, and continue in their habit of copying managerial practicesrather than understanding the principles and concepts involved inthose practices. Such companies should instead see benchmarkingas a source of new ideas, or as a route to support performanceimprovement based on existing best practices.

Recommendations for Future Research Directions

Based on the analysis of the four performance measurement sys-tems developed in different countries, four improvement opportu-nities were identified and new research directions were suggested.Future research should address the main problems and limitationsof the existing systems, as follows:

(1) Establishing a classification of performance measures.Clear distinctions should be made between measures that areproper to the construction process, organizational performance,client-oriented product specification, facility performance, etc.The product-development process is only a starting framework,one which needs to be extended to the whole lifecycle. Suchcomprehensive approach is increasingly popular in the industrybecause it allows for retrospective assessment of completedprojects, in particular if this evaluation is extended to the organi-zational level. Useful lessons can be learned from such compari-sons of final product with their original conceptions.

(2) Developing frameworks that allow migration from per-formance measurement processes to performance manage-ment systems. This is the arena in which relationships betweenperformance measures can be examined and used to improveoverall performance of projects and organizations. New and im-proved frameworks are needed to consider the cause and effectrelationships of actions taken at the operational and strategic lev-els. Performance modeling �Alarcón et al. 2001� is one suchframework, but many of its existing indicators should be re-viewed to make them more adaptable to individual projects. Onlywhen these mechanisms are fully understood will it be possible tofully develop benchmarking systems. Dynamic simulation of suchmodels can be used to perform what-if analyses.

(3) Developing collaborative learning processes. Further in-vestigation is needed on collaborative initiatives in which compa-nies can mutually share their benchmarking experience and learnfrom each other. Recent experiences in benchmarking clubsaround the world have demonstrated the benefits of this win-winapproach to accelerating the improvement process. Such initia-tives should be fully described and critically analyzed, with afocus on the transmission of knowledge from the benchmarkingclub to the companies’ local conditions.

(4) Devising new measures. There is a need for new perfor-mance measures that can better explain the performance of pro-
duction systems in the new operations management paradigm. For


instance, measures for uncertainty and variability that exist in theproject processes are probably necessary to understand the dy-namics of the production system. Moreover, qualitative measuresof the organizational and cultural characteristics of companies andprojects are also needed to enable more comprehensive explana-tions of project performance.

(5) Developing a theoretical framework for performancemanagement. The establishment of a theoretical framework forperformance management can be used for assessing existing per-formance measurement systems at two different levels: first, ex-tensive reviews of literature in general management and socialscience disciplines and, second, through good practice implemen-tation. For instance, data-mining analyses can be performed onlarge amounts of data to identify unrecognized critical successfactors, such as the relationships between safety and leanproduction systems.

Conclusions

This article has discussed initiatives to develop performance mea-surement systems for benchmarking in four different countries�the United Kingdom, Chile, the United States, and Brazil�. Thisstudy has pointed out some of the benefits, problems, limitations,and opportunities for improvement of these initiatives. The les-sons learned should be used for upgrading the existing initiativesand devising new ones. A joint effort involving several organiza-tions is necessary for the successful design and implementation ofbenchmarking programs. Such an effort should not be limited todata collection but should also provide data analysis and training,as well as enable the exchange of best practices among the com-panies aiming to promote innovation. Moreover, the set of mea-sures should be assessed and revised periodically, according tothe needs of the companies involved.

The commonalities among these initiatives indicate that theypotentially could be used for international benchmarking. Interna-tional benchmarking refers not only to the identification ofcommon measures for data comparison among companies fromdifferent countries but also to learning opportunities that exist bysharing managerial practices among companies. Such enablessharing of new ideas in construction management.

There are several mechanisms to promote the transfer ofknowledge between companies from different countries: technicalvisits to foreign construction companies and projects; workshopsand seminars involving companies from different regions of theworld; and the development of web portals that make informationon managerial practices, new technologies, and performance mea-sures widely available. The existing benchmarking initiatives indifferent countries can potentially improve the effectiveness ofthose mechanisms, by making the participating companies moreprepared to transfer knowledge and data that can be used forcomparing performances.

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