# 10 most important KPIs for construction companies

April 29, 2024 | 5 min read

[Liam Semple](https://www.bluevine.com/blog/contributor/liam-semple)

Each construction project presents its own web of budgets, deadlines, and [profitability](https://www.bluevine.com/blog/profit-first-cash-management-method), which can make it difficult for construction company owners to manage more than one of them simultaneously. One way to simplify your project strategy and planning is to choose and follow a few key performance indicators—metrics that can suggest where to enhance efficiency, improve project outcomes, and increase customer satisfaction to [achieve sustainable growth](https://www.bluevine.com/blog/long-term-business-growth-strategies).

## What are KPIs?

A [**key performance indicator**](https://www.bluevine.com/blog/small-business-financial-kpis-to-scale) **(KPI)** is a metric used to evaluate performance against a set objective. A KPI can be **company-wide** or **department-level**, but most construction-related KPIs will be **project-level**.

## Why you should use KPIs

#### KPIs are easy to understand and track

With industry-specific software, you (or your analysts) can gather, track, and analyze KPIs in real time and generate data reports consistently. These provide an easy, at-a-glance way to help understand how your company or projects are progressing.

#### KPIs can help streamline your operations

Monitoring KPIs in real time helps to identify and resolve problems at the first sign. This can prevent costly and dangerous mistakes, avoid delays, and ensure consistent work.

#### KPIs can help motivate your employees

Assigning KPIs to your employees gives them clear and transparent targets to aim for, helping them to stay informed about organizational goals. Measuring employee performance can also inform bonuses or rewards for meeting or exceeding targets.

## How to use KPIs to fuel business growth

#### Focus on a few KPIs

While there are dozens of KPIs relevant to construction companies, trying to follow too many will dilute your strategy rather than focus it. Choose just a handful of KPIs that are most relevant to your goals, and use them to track progress and evaluate performance in specific ways.

#### Set realistic targets

If you present arbitrarily inflated KPI targets, your employees will disregard KPIs altogether. Instead, set realistic targets which still promote performance. To find this level, discuss with your employees and synthesize your numbers based on:

- **Data** from previous projects/periods
- **Conditions** of company and industry (present and forecasted)
- **Risk** of financial harm from unpredictable future events

#### Use software to monitor your KPIs in real time

Digital performance tracking tools can effectively gather and evaluate KPIs for you. Research tools specifically for construction companies of your size to keep your data accurate and consistent.

#### Review results consistently, but not too consistently

Following KPIs too closely can obscure your view of the company, as every rise or dip will appear more significant than it actually is. Don’t review KPI results obsessively, but do review them on a practical schedule—perhaps weekly or monthly—especially for indefinite KPIs. For your project-level KPIs, be sure to review them after the project is over.

#### Don’t substitute KPIs for strategy

Each KPI is one metric of many, and no metric(s) can substitute for a holistic view of your business. Always use KPIs to inform your strategy, not to replace it.

| **What KPIs can track** | **What KPIs can’t track** |
| --- | --- |
| Causes | Effects |
| Actions | Interactions |
| Efficiency | Innovation |
| Company processes | Company culture |
| Customer satisfaction | Customer wants |

## 10 important KPIs for construction companies

Choose a few of the following KPIs that are most relevant to your business or construction project.

#### 1. Net cash flow

**Net cash flow = Cash inflows – Cash outflows**  
Measures how much cash your business generated during a specific time frame. This is a basic metric of what you’re bringing in compared to what you’re spending.

#### 2. Working capital

**Working capital = Current assets – Current liabilities**  
Measures your company’s ability to cover short-term obligations. This KPI indicates whether you have enough funds to cover your current bills, debts, and project costs.

#### 3. Safety incident rate

**Safety incident rate = (Number of work-related nonfatal injuries and illnesses x 200,000) / Total actual hours worked by all employees in the calendar year**  
Measures work-related injuries and illnesses in a calendar year, read as “x incidents per 100 full-time employees.” Your incident rate gives insight into your business safety, which you can use to help identify hazards and implement systems to prevent further accidents.

#### 4. Cost performance index (CPI)

**CPI = (Earned value / Actual cost) x 100**  
Measures how efficiently you’ve used the project budget (in terms of financial returns). CPI can identify cost variances in a project, which you can use to make changes and achieve profitability.

- If **<1.0**, then project is over budget
- If **=1.0**, then project is on-budget
- If **>1.0**, then project is under budget

#### 5. Schedule performance index (SPI)

**SPI = (Earned value / Planned value) x 100**  
Measures a construction project’s progress as compared with the initial plan or timeline. SPI can help identify when and why construction efficiencies or delays occur.

- If **<1.0**, then project is behind schedule
- If **=1.0**, then project is on-schedule
- If **>1.0**, then project is ahead of schedule

#### 6. On-time delivery

**On-time delivery = (Number of projects delivered on time / Total number of projects) x 100**  
Measures how often projects are completed and delivered on time, expressed as a percentage. This KPI helps you to determine how often you’re meeting projected timelines.

#### 7. Hours worked variance (planned vs. actual hours)

**Hours worked variance = (Actual hours – Planned hours) / Planned hours x 100**  
Measures the average difference between how long a project was expected to take and how long it actually took, expressed as a percentage.

- If **<0%**, then project was behind schedule
- If **=0%**, then project was on-schedule
- If **>0%**, then project was ahead of schedule

#### 8. Average revenue per hour worked

**Average revenue per hour worked = Total revenue / Total hours worked**  
Measures how efficiently your construction teams generate value. This KPI can help evaluate how effectively your construction teams are working toward projects.

#### 9. Equipment downtime

**Equipment downtime = (Total downtime hours / Planned hours) x 100**  
Measures the time your tools and equipment are unavailable for use (because of maintenance, repairs, or breakdowns) against how long your project was expected to take, expressed as a percentage.

#### 10. Design defects

**Design defects = (Number of design defects / Total projects) x 100**  
Measures the average number of design flaws of your construction projects. This KPI can help identify areas for improvement in your construction process to help you ensure your designs are safe, compliant, and of high quality.