Project scorecard in construction projects.

Katic, Dragan ; Bevanda, Ladislav

1. INTRODUCTION

The construction industry in general has a bad rating due to un-efficient execution of projects. This paper shortly describes project scorecard to measure the performance of construction projects from the standpoint of construction companies.

Throughout the last two decades a number of industries have introduced new methods and techniques (concurrent engineering, lean production, TQM, etc) to improve their performance. The main driver behind those philosophies is the optimization of an organization's performance both internally and externally within its respective market place. Inevitably, this has led to the rethinking of performance management systems through effective performance measurement (Kagioglou et al., 2001).

Organizations traditionally have measured their performance solely in financial terms. This limited approach of measurement the performance success is not sufficient because it show the results of decisions made in paste, have no impact on improving current performance and don't show causes of such results. It is very important to see how to measured organizational performance, as has the impact on market share, so this may be accepted from potential investors, employees and customers. For these, the most important is system that represents balance between financial score and drivers for further performance. At the same time that system beam intangible assets potential and help organizations in enforcement different strategies.

All organizations today create sustainable value from leveraging their intangible assets such as human capital, databases and information systems, high quality processes, customer relationships and brands, innovation capabilities and culture. Because an organization's intangible assets may easily represent more than 75 percent of its value, then its strategy formulation and execution need to explicitly address their mobilization and alignment (Kaplan & Norton, 2004).

The new research's area has developed, whose objectives were to identify the correct number and types of performance measures in ways that are integrated into company strategy.

2. PERFORMANCE MANAGEMENT IN CONSTRUCTION

Performance management has defined as the use of results performance measurement to achieve a positive change in organization's culture, a business system and processes, set agreed objectives, effectively utilize resources, informed the management about the need for changes strategic goals demand and results could be exchanged in order to stimulate continuous system improvement (Vukomanovic et al., 2008).

At the beginning of 1990-those years in the development of tools for performance management developed the balanced scorecard (BSC) of the author R. Kaplan and D. Norton, as one of the most important inventions in the field of management. The BSC results in helping organizations work through effective measurement of organizational performance, increase intangible assets and implementation strategies through financial and nonfinancial indicators.

In 2005 Neely took the surveys about citation analysis of work in the field of performance measurement to explore developments in the field globally. According to this research, through analysis of citation data, it is obviously dominance of

Kaplan and Norton and BSC. Between 1991 and 1995 the 10 most frequently cited works are cited 514 times. 56,8 per cent of these 514 citations are work from Norton on the balanced scorecard and that has increased in the last few years (60 per cent of 2002 citations, 58 per cent of citations in 2003 and 59 per cent citations in 2004).

The BSC examines organizational strategy and make it clearer through prism of different perspectives. Measures selected in the BSC represent tool that senior management can use to help employees and external stakeholders by the results and performance drivers that help organizations achieve its mission and strategic goals (Niven, 2002).

The BSC allows managers to look at the business from four important perspectives. It provides the answer to four basic questions (Letza, 1996.):

* Customer perspective: How do customers see us?

* Internal perspective: What must we excel at?

* Innovation and Learning perspective: Can we continue to improve and create value?

* Financial perspective: How do we look to shareholders?

The following keywords are most important in the BSC:

* Goals: Briefly statements that describe what must we do in each of four perspectives how to achieve our strategic plan.

* Measures: Indicators that we use for monitoring our success in achievement ours goals.

* Targets: Quantitative values that determine success of measurement.

* Initiatives: What do we have to do get given goals.

The BSC could be extend with new perspective such as projects and suppliers and adapt for construction industry. The main problem of the BSC is finding the optimal model choice of key performance indicators and the inability of benchmarking (Vukomanovic et al., 2008).

3. PROJECT SCORECARD IN CONSTRUCTION PROJECTS

The subject of performance measurement is vast and numerous authors continuously add to the body of literature on the subject. Most authors agree that managers measure for two main reasons. Either they want to know where there are and what they have to improve or they want to influence their subordinate's behavior (Beatham et al., 2004).

In the transformation process of mission, vision and strategy for the construction company as a business system has defined measurable goals are essential for the success of business. Construction business companies implement their activities through construction projects.

The balanced scorecard (BSC) of construction company contains goals and measures those represent basis for development particularly balanced scorecard on the project's level known as project scorecard (PSC). The PSC is used for measurement and controlling project's goals.

Project scorecard (PSC) is based on technical specification requirements and the requirements related to project management. PSC is a way to manage and implement the project through a set of measurable project's goals essential to the project success. These measurable goals are determined through a set of key performance indicators (KPIs).

The KPIs are compilations of data measures used to assess the performance of a construction operation. They are the methods management uses to evaluate employee performance of particular task. These evaluations typically compare the actual and estimated performance in terms of both workmanship and product (Cox et al., 2003). The KPIs is method for measuring construction project success. They encourage others project's participants (owners, contractors, customers) to their contribution in final project success. The aim of KPIs is measuring project and company performance.

Project success is almost the ultimate goal for every project. However, owners, designers, consultants, contractors have their own project objectives and criteria for measuring success. It means different things to different people (Chan & Chan, 2004).

The project's plans and goals are transformed in success criteria through performance system financial and nonfinancial indicators. For each set of goal has defined critical success factors with appropriate performance measures (indicators). The set of key performance indicators contain lagging and leading indicators. The leading indicators diagnose current performance and enable forehand corrective actions toward deviation of given target during project execution.

Designing performance measures is process with input and output information. Each performance measures need to contain title, purpose, relates to, target, formula, frequency of measurement, frequency of review, who measures, source of data, who owns the measure, what do they do, who acts on the data, what do they do, notes and comments (Neely et al., 1997).

Time, cost and quality (iron triangle) are the basic criteria of project performance but they are not enough for balanced view of project performance or success.

The set of KPIs include objective indicators and subjective ones to measure the performance of a construction projects. According Vukomanovic (2006.) the top ten KPIs in construction projects are quality, cost of construction, owners involving in construction, changes in supporting to project, increase of construction time, customer satisfaction, employee satisfaction in company, innovation and learning, time of construction and identification client interest.

As the result of processes cascading mission, vision and strategy in the balanced scorecard and after that in project's goals through performance measures or the KPIs is created the project scorecard of construction project shown in the figure 1.

[FIGURE 1 OMITTED]

Realized achievement of performance measures (indicators) at project level represents input data for performance evaluation at construction company level through the balanced scorecard.

4. CONCLUSION

The aim of this paper was to point the project scorecard (PSC) as methodology of translating the project plans and goals in criteria success through performance measures (indicators) in performance measurement system. Performance measurement of construction projects through project scorecard providing efficiency execution construction company strategy through their projects.

For further research recommendation is finding the optimal model choice of the performance measures or the key performance indicators for project scorecard.

5. REFERENCES

Beatham, S., Anumba, C. & Thorpe, T. (2004). KPIs: a critical appraisal of their use construction, An International Journal, Vol. 11, No. 1, 93-117

Cox, R.F., Issa, R.A. & Ahrens, D. (2003). Management's perception of key performance indicators for construction, Journal of construction management and engineering, pp 142-151

Kagioglou, M.; Cooper, R. & Aouad, G. (2001). Performance management in construction: a conceptual framework, Construction Management and Economics, 19, pp 85-95

Kaplan, R. S. & Norton, D. P. (2004). The strategy map: guide to aligning intangible assets, Harvard Business School Press, Vol. 32, No. 5, pp 10-17

Letza, S. R. (1996). The design and implementation of the balanced business scorecard: an analysis of three companies in practice, Business process Re-engineering & Management Journal, Vol. 2, No. 3, 54-76

Nelly, A. (2005). The evolution of performance measurement research, International Journal of Productivity and Performance management, Vol. 25, No. 12, 1264-1277

Nelly, A., Richards, H., Mills, J., Platts, K. & Bourne, M. (1997). Designing performance measures: a structured approach, International Journal of Operations and Production management, Vol. 17, No. 11, 1131-1152

Niven, P. (2002). Balanced scorecard step-by-step Maximizing Performance and Maintaining Results, John Wiley & Sons, New York

P.C. Chan, A. & P.L. Chan, A. (2004). Key performance indicators for measuring construction success, An International Journal, Vol. 11, No. 2, pp 203-221

Vukomanovic, M. (2006). The Key Performance indicators in project oriented construction, Master work, Zagreb

Vukomanovic, M.; Radujkovic, M. & Burcar Dunovic, I. (2008). Performance management models in construction companies, Gradjevinar 60, pp 771-778