National Report from BRAZIL by Carlos T. Forrnoso Federal University of Rio Grande do Sul, Porto Alegre 11 5

IMPROVEMENT EXAMPLE FROM 'THE 1990's: System of Quality and Productivity Indicators for the Building Industry

Measurement of performance is an essential element of quality management. It is the process which involves the decision on what to measure, the actual collection of data, the processing of data, and their evaluation. providing the data and fact needed for maklng decisions related to improvement projects. The definition of quality and productivity indicators is crucial for evaluating the current performance of firms, guiding strategies for improvement, and following up the progress achieved in the process of implementing a quality program. Quality and productivity indicators provide the necessary information for evaluating goals and also following up performance improvements obtained from process modifications. Most building firms are not used to measure their performance in terms of quality and productivity. Even the firms which cany out measurements have difficulty in evaluating their performance in relation to the sector due to the lack of data about the industn as a whole. Based on the needs of the industq. a research project was started in 1993, which aims at encouraging and guiding the building industry in Brazil to select quality and productivity indicators. and to establish measurement systems (collection. processing and e\saluation of data) in building companies. A set of quality and productivity indicators was de\,iscd. which can be used for evaluating the performance of both individual finlls and the sector as a whole. in regional or national terms. The primary aim of the set of indicators is to provide the means for performing a general diagnosis in building firms, which is usually necessary before starting an improvement project However, such indicators can also be used as references for process control and benchmarking. The project has been developed by the Building Research Group of the Federal University of Rio Grande do Sul (NORIELFRGS), with the support form the Association of Building Contractors (SINDUSCONRS). and from the Agency for the Support of Micro and Small Businesses (SEBRAERS).

Improvement achieved The first step in the selection of the set of indicators was to organise an extensive list of quality and productivity indicators, based on both the literature and on practical experience of measurement in the building industry and other sectors. More than 500 indicators where identified. They were grouped into a number of processes performed in building firms, such as: design, material supply. sales and marketing, post occupancy client support, production. human resources management, and company administration. As the number of indicators was excessively large. based on a number of criteria and on d~scussions with the industry, a set of 28 indicators was selected. The main criteria considered in the selection were: (a) The indicator ought to be related lo a problem considered as v e n important by the sector; (b) Low cost of measuremcnl, so that it is feasible to apply the indicator even in small sized companics; (c) Simplicity of meaning, since it is important that the people involved in measurement can easily

understand why they are collecting the indicators and what they represent; and (d) Previous use by the building industry in Brazil (in some cases), so that initial benchmarks could be

identified. The list of indicators is presented in Table 1. Some of them are related to the company, while others to individual projects. Many of the indintors can be broken up into a number of partial indicators (sub- indices). The set of indicators was not created based on the assumption that these are the only indicators that should be collected by the companics. On the contrary. it is advisable to collect as many dala as necessary for evaluating the pcrfonnance of key processes in the company. The proposed indicators can be seen as a good set of indicators for starting performance measurement practices. Also, the System has the advantage of

116 Transfer of Construction Manaaement Best Practice between Different Cultures

proposing the same method of collecting data for the whole industry, so that there will be a common ground for comparisons. The implementation of the System of Quality and Productivity Indicators [or the Building Industy was camed out in four stages: (a) A manual for describing the System was produced (Oliveira et al., 1995). It contains a complete

description of each of the indicators, including objective. definition, criteria for calculation, frequency, and reference values, if they exist. There are also forms for collecting and processing the data. The data collected in these forms are not limited to the final indices. It also includes inrorlnation related to the company or to the project which can be useful for evaluating and colnparillg different perfonnances. For instance, some indicators can be broken down according to different categories or firms (snlall, medium, large, etc.), or to the kind of buildings (residential or commercial, high rise or low nse. etc.).

(b) A number of presentations were organised all over tlie country in order to disse~ninate the project and to encouragc construction firms and design ofiices to beconle members or tlie System. Several courses were also carried out aiming at training people on collecting and using tlie set of indicators.

(c) The companies that become nle~nbers or the system collect data and send tlieni to NORIELJFRGS. where there is a database and the perforlnance indicators are processed and evaluated. A report on thc performance of the building industry is produced every six months.

(d) Periodically. an cvaluatlon or the proposed ~nethodology in carried out, based on the recd back provlded by the member companies.

There has been much interest fro111 tlie building industry in participating of the Syste~n. Since Decelnbcr 1993, when the System was launched, data horn Inore that 50 companies and appros~mately 120 building projects have been received. Four rcports on tlie data available have becn produced

lahle 1. Set of indicntors chosen for the System

National R e ~ o r t from Brazil 117

Initiating and driving forces to the improvement There has been a growing competition in the building sector in Brazil, which has encouraged individual firms to improve their performance in ternls of quality and productivity. In fact, during the 1990's a substantial number of building firms have started quality and productivity improvement programs, which tend to be strongly based on the principles of TQM (Total Quality Management), such as continuous improvement, feed back based on actual data. participation of the employees in the decisions, etc. The implementation of quality programs requlres a carefil and systelnatic evaluation of performance, in order to identifj problems. establish priorities. and monitor the results achieved. Measurement of internal processes. especially in tcnns of quality. is cn~cial to achieving excellence in consumer satisfaction and raising business performance. Despite its importance, the use of measurement in management decisions is still very modest in the building industry. Building firms are not very used to the practice of measurement and most decisions tend to be based exclusively on intuition and common sense. The lack of measurement of performance has been observed even in the manufacturing industry, where the implementation of quality programs has been more successful.

Crucial conditions and precautions needed to achieve the improvement Although the project can be considered as successful, many companies which are interested in participating of the system do not manage to fully inlplement pcrfornlance measurement. Tlle main reason for that seems to be the trade culture. Most conlpanies are not used to measuring performance and to making decisions based on actual data. Although managers usually agree that measurement is important. they argue that it takes time and there is a lack of human resources for collecting data. Some companies also find difficult to gather information about past projects. which could be used for calculating some of the indicators. The more responsive companies are those in which managers have delegated the itteasurement task to a larger number of people, from different areas in the organisation. The companies usually do not start collecting all indicators at once. They tend to start by those which are easy to collect. and by the ones they are more interested in. The indicators which the conlpanies usually find difficulty to use are the ones that measure the incidence or non conrormities, such as: "number or non confonnities in the delive? of materials, in relation to the number of deliveries" and "number of complaints by clients in relation to the number of clients per building". The application of non-conformity indicators in general is fairly comples. since corrective action inay involve different sectors of the company. Many companies do collect data but they do not know exactly what to do with them. This 1s a problem that happens when the cycle collection, processing and evaluation of data is not integrated to real time decision making. During the processing of data, it was detected that some forms have been filled inaccurately, causlng difficulties in the evaluation of the ind~cators. It was also observed that scme parts of the manual should be improved. A number of changes were made in the forms in order to improve the consistency of data

118 Transfer of Construction Manaaement Best Practice between Different Cultures

The change process from baselifile to the new improved state After three years of implementation, it is clea- that training is one of the key factors on the success of the System. One of the factors that have encouraged companies to join the System is tlie fact that the report on the performance of the building industry is sent only to its members.

How the affecting factors relate to the draft model The System of Quality and Productiwity 1.1dicators for the Building Industn ai~ils at introduci~ig performance measurement in the industry as ii whole. Its implementation has bccn strongly affected by trade culture, mainly concerned with the lack of practice by the ~ n d u s t n to measure tlie~r performance. It had a great importance for the success of the System tlic fact that tlie project was supported by SINDUSCONISP. Recently. the System has klccome n triilning package that will be disseminated in the industry by SEBRAERS. through courses in n,any rcglons of Brazil.

References Oliveira, M.; Lantelme, E.; Formoso. C.T. Sistema de indieadores de qualidade e 1)rodutividade para a construqio civil: manual de utilizaqiio. Porto Alcgrc. SEBRAERS. 1995. Formoso, C.T.; Lantelme, E. & Oliveira. M. Measurement of performance: quality and productivity indicators for the building industry. In: 10'" 4nnual Confere~lcc of the Association of Researchers in Construction Management (ARCOM). Loughborough. 14-16 sep. 1994. Proccedings. Loughborough, ARCOM, 1994.

IMPROVEMENT EXAMPLE AS A FORECAST FOR THE 2000's

Introduction The construction industry in Brazil p1ays a v e p i~ilportant role in the social and cco~iomic develop~nent of the country. This sector is responsible for 7% C I C the Brazilian GNP, c~nploys more tlinn 10% of the working population in urban areas, and is faced wvith a !;hortage of an estimated amount of 12 ~iiillion I~ouses. Despite its importance. tlic conslruction industry has ncwJcr bccn chosen by tlic government as a priority among the econo~nie sectors to be developed. That is due to the traditiolial ro1c played bv the industry in terms of creating jobs for unqualified people. mainly nligrants frorn rural areas to the large cities. During the late Sixties and the Seventies, for instance. wvlicn the construction industrj went through a period of remarkable growth, both in the public and priw.atc scclor. there was no govern~nc~lt policy for encouraging the industry in terms of improving its technology and managerial capacity. For that reason. the construction industry pclfofonnance In terms of productivity, waste, and quality of its products has always been poor, if compared . o other industrial sectors. Also. it has an image of being a backward industry. In the mid-Eighties some inlportant changes :;tarted to happen in the Brazilian construction industry. The demand from the government for civil engineering and building dropped drastically. The Housing Financial System, created in the Sixties for financing low cost dwvellings was extinct. decreasing significantly the amount of loans available for investing in resi,dential buildings. As a result of this rcccssion, the market for building companies becarne nluch sn~aller and colnpetition between them nluch higher. In 1090. there wvcre important changes in the Brazilian industrial and foreign trade policies. The Federal Government decided to open gradually the cchuntry to foreign colnpetition in order to make the Brazilian economy more competitive. A nation-wide Frogramme for improving quality and productivity (PBQP - Progranla Rrasile/ro de Qualidade e Produrividarie) was created. causing in recent years a significant

National Re~0I-t from Brazil 119

impact in the performance of industrial companies. PBQP has created Inany initiatives for involving businesses in quality improvement programmes, such as courses, seminars, databases, prizes, etc. Nowadays, there is a very strong movement for improving quality and productivity in Brazil. specially in industrial sectors. As a result many companies decided to get formal I S 0 900 1/02/03 certification of quality systems. so that they could sell their products in foreign markets. In fact. Brazil is the country with the fastest growing rate of I S 0 9000 certification in the world. By the end of 1996 the number of certified companies was around 1600. On the other hand, there is also a very large number of companies which decided to improve their performances by starting ilnprovement programmes using a TQM approach. This is the approach usually adopted by the house building companies in Brazil. In recent years, however, many building companies have decided to go for certification. SOIIIC of them have to do that because of demand from clicnts. mainly the Government and large industrial companies. Other companies in the residential building segment of the industry made the same option as a lnarkclillg strategy. so thal they would become differentiated from the competitors from the point of view of tllc final clients.

National factors affecting management development

Positive factors Communication: one of the main issues in\,ol\,cd in TQM ilnplelnelltation is elnployee empowerment and involvement. In this rcspccl, Brazilian culture tends to make TQM implelnentation easier, since people tend to be very informal and extrovert if co~llparcd to other cultures. That makes communication between people from different managerial levels lnucll easier. Integration between the industn, and research institutes: since the late Eighties. many companies started developing partnerships with the industry so that they could improve their processes. This practice has increased in recent years and there are several research groups throughout the country which have helped the industry to improve their performance. Most Government research funding programmes encourage academics to work together with the industry. Institutional programmes for training and consultanq: PBQP has created a number of initiatives for disseminating new management philosophies and techniques in the industry. by training managers and consultants. So there is a considerable number of managers and consultants who are able to introduce new ideas in the constn~ction industry. Also, a number of lnethodologies for incremental implenlentation of TQM have been developed, one of then1 devised specifically for the construction industry. Even small sized companies have benefited from some of these progralnmcs since there is an institution. named SEBRAE, which subsidises training and consultanq for such companies. Increasing consumer awareness: the growing awareness of consumers have put more pressure on the industry for delivering better quality producls. Some new laws on consumer rights have also contributed for such change. Government purchasing po\vcr: in recent years a number of government deparlments have started using its purchasing power to cncouragc tllc industn to i~llprovc performance, by demanding certification from contractors or by reinforcing thc applicatioll of ~cchnical standards. Although it is not spread over all levels of government. this practice has been irlcrcased drastically. Moreover, solne government departments established. in co-operation with the building industry. a gradual ccrlification system. in which there is a sequence of goals to bc achicvcd by the companies. Development of suppliers: some construction industry suppliers have been through major changes, since they had to become more competitive at an international level, in order to sell their products abroad - for example, reinforced concrete steel industry, ceramic tile industry, plumbing industry. Some of these sectors have helped the constnlction industry to developed by introducing some industrialised building conlponents. They are also very keen on establishing parlnerships with individual companies or associations of contractors.

120 Transfer of Constructior: Management Best Practice between Different Cultures

Negative factors Lack of education: there is a very large percentage of construction workers who are uneducated and between 20 and 30% of them are not able t 3 read or write. This makes training very diff~cult. specially for production workers. Lack of technical standards: despite the effort that has been made by COBRACONIABNT (National Technical Standards Association - Cons.ruction Committee), the number of technical standards available is far behind the industry needs. It is also necessary to develop inaterial and component certification systems, in order to reduce costs of controlling the delivery of ~natcrials on building sites. Conservative general management: it is siill \ , e n difficult to change the attitude of several general managers. Many of thern tend to be \:cry sceptical on the new production philosophies. representing sometimes a barrier for impro~~ing perfor~nance in the industry. Planning and time nlanagement: as part of Brazilian culture. there is a lack of awareness on the importance of production planning and tim: management. Another difficulty in terms of managing the construction process is the lack of pcrfonnancc ~ncasurcmcn~.

New trends Training and new metl~odologies: it \+ill be inore focused on the development and application of methods and tools for construction management. rather than on Inore general ~nethodologies, as it has been so far. - I S 0 9000 certification: A number of de\,elol)-build companics \\.ill try to get IS09000 certification in the near future, but the real pressure is on the companies which 11ai.c the go\.ernment as clients. Down-sizing of companies: many contractcrs and building firms have become much smaller than they used to be, because of instability in the economy. Although the economy has become more stable in recent years (inflation has gone down to 6% a year), it is very unlikely that they will grow again in the short term, since they need to be flcsible ill order to compete. For that reason. a number of specialiscd sub-contractors have appeared. sonle of thern producing ready-to-assemble components in separate sites. Integration between material and componelit supplier and constn~ction firms: Illere has been a growing concern for integrating the construction se8:tor and the material supplier sectors. in order to introduce new production philosophy practices. such as just in time, effective risk sharing partnerships. nodular co-ordination, etc. -- Globalization effect: sonle of the effects of the globalization of the economy arc slill to happen. There arc very few foreign companies working in Brazil, and ~ n o s ~ nlaterials and componenls used by the industry are manufactured in the count?.. Once the Brazilian constnlclion market becomes Inore integrated wilh the global construction market. i t is likcly that ne\v management practices will be introduced in the constnlclion activity.