Key Performance Indicators With Construction – Production Reports (Part 1 of 3)
Minimum Bottom Line Profit Should Average 9.4%!
For Trades & Subcontractors, at Least 11%
After Income Taxes Are Paid!
The primary key performance indicators with construction include the annual financial income statement (profit and loss statement). For most traditional contractors, the bottom line, net profit after taxes should be no less than 7% with an average of 9.4%. If the contractor desires to be in the upper 10% of the industry, net profit must be greater than 12%. For those involved in the trades, minimum net profit should be greater than 10%, with the average being 14% and the upper tenth percentile bracket having greater than 18% net profit. Again, after income taxes are paid.
However, a year is a long time to wait to review performance. In the interim there are other key performance indicators to identify trends and provide feedback to the management team. They consist of three distinct groups of indicators:
- Production Reports
- Backlog/Pipeline Information (Part 2 of 3)
- Interim Financial Statements (Part 3 of 3)
All three groups of reports have key performance indicators that provide the necessary information to the construction management team of overall performance. All the reports must be taken into consideration as a synergetic system of feedback. The following subsections illustrate the top three reports for production and the corresponding best methods to interpret the data. This article is an introduction to the field production reports with key performance indicators. The sequential series of articles on this website cover backlog and pipeline of future work finishing up with interim financial statements. Other articles on this website go into greater detail, evaluation techniques and of course, analytical procedures. This is Part 1 of 3 articles introducing the respective key performance indicator reports for construction.