Key performance indicator (KPI)

Abstract

The performance of an organization or project can be measured using key performance indicators (KPI).

According to David Parameter, the benefits of Key Performance Indicators are yet to be discovered by the construction industry, they represent a set of measures which focuses on aspects regarding organisational performance, that are extremely vital for the current and future success of the project. If company managers and staff focus on the KPIs together, it can guide a company to improve performance effectively, if it is used precisely.

To measure their success, different business industries have various sets ´of KPIs. Companies in the construction industry use specific indicators such as reviewing the cost of materials in comparison to the predetermined budget, the financial advantage of construction projects and lastly, the frequency of safety incidents (Vitez, 2010). Within project management, there is a wide range of tools that can be used to assess the progress towards a target to be achieved and are usually decided at an early stage of the project.

Background

The construction industry in comparison to other industries is in general considered to be underperformed, usually involving postponements and errors throughout the process. When determining the development in a country it is common to measure this by the development of infrastructure. It is therefore crucial for a country to have an effective and efficient construction process, depending on a high quality of financial, technical, organisational and managerial movements. In order to deliver a successful project, there are many factors to take into consideration. The management is the basis of a project or portfolio, and it is, therefore, significant to distinguish the orientation of the project at an early stage.

A KPI is a measurable value that demonstrates how effectively a company is achieving key business objectives, used at multiple levels to measure the performance.

Anatomy of KPI

When examining the meaning and anatomy of Key Performance Indicator (KPI) dissection of the term can be used to determine the meaning by its metric:

Key: A metric where only the key can make or break. Contributor to the success or failure of a project.

Performance: To perform its performance, the metric must be controllable, where it can be measured, qualified, adjusted and controlled.

Indicator: A metric that represents the present and future performance.