Journal of King Saud University – Engineering Sciences (2013) 25, 125–134

King Saud University

Journal of King Saud University – Engineering Sciences

www.ksu.edu.sa
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ORIGINAL ARTICLE

Indicators for measuring performance of building

construction companies in Kingdom of Saudi Arabia
Hany Abd Elshakour M. Ali, Ibrahim A. Al-Sulaihi *, Khalid S. Al-Gahtani

Civil Engineering Department, College of Engineering, King Saud University, Saudi Arabia

Received 28 October 2011; accepted 27 March 2012

Available online 12 April 2012

KEYWORDS Abstract Slow economic growth, high competition, and construction industry restructuring have
Benchmarking; put a strong pressure on construction companies to continually improve their productivity and per-
Performance measurement; formance. Many studies on performance measurement have been carried out at the project level.
Key performance indicators However, recently, the demand for performance evaluation and management at the company level
(KPIs); has increased. This paper aims to identify a set of KPIs that can be implemented by construction
Construction industry; executives in measuring the performance at the company level in Saudi Arabia. List of 47 potential
Saudi Arabia performance indicators have been identified through the literature review. A survey questionnaire
was conducted on a randomly selected sample of large construction firms in Saudi Arabia. The sta-
tistical analysis of the collected responses was provided in 10 significant KPIs. Findings indicate
that the traditional financial measures can no more be the sole determinant of firm success. Other
performance indicators such as external customer satisfaction, safety, business efficiency, and effec-
tiveness of planning are increasingly becoming important. The results of the study is a set of KPIs
that are useful as a first step in developing a national benchmarking system for enhancing the per-
formance of construction firms in the Kingdom of Saudi Arabia.
ª 2012 King Saud University. Production and hosting by Elsevier B.V. All rights reserved.

1. Introduction et al. (2008), ‘‘performance measurement is the heart of cease-

less improvement. As a general rule, benchmarking is the next
Highly competitive and profound changes in the construction step to improve contractors’ efficiency and effectiveness of
industry are forcing construction executives to continuously products and processes’’. The main objective of performance
improve the performance of their firms. According to Luu evaluation is to assist managers and members of the organiza-
tion in developing the direction, traction and speed of their
* Corresponding author. Tel.: +966 548010390.
organization ( Cokins, 2006). Benchmarking can be applied
E-mail addresses: halii@ksu.edu.sa (Hany Abd Elshakour M. Ali),
by an organization to measure and compare its performance
ialsulaihu@ksu.edu.sa (I.A. Al-Sulaihi), kgahtani@ksu.edu.sa (K.S.
Al-Gahtani).
against results from recognized leaders for the purpose of iden-
Peer review under responsibility of King Saud University.
tifying the strengths and weaknesses in performance, then
using lessons learned from the best ones to determine the best
practices that can lead to superior performance when adapted
and implemented (El-Mashaleh et al., 2007; Stapenhurst,
Production and hosting by Elsevier 2009).
1018-3639 ª 2012 King Saud University. Production and hosting by Elsevier B.V. All rights reserved.
http://dx.doi.org/10.1016/j.jksues.2012.03.002
126 H.A.E.M. Ali et al

For measuring the performance of companies and for business units within the same organization, for example, be-
applying benchmarking approach, one must first establish suit- tween different branches, geographically scattered subsidiaries,
able key performance indicators (KPIs) that are most critical and divisions. Competitive benchmarking involves comparing
in determining the overall success of the company. KPIs are the products, services, and performance of an organization
compilations of data measures used to assess the performance with those of its direct competitors in the same industry. Func-
of a construction operation (Cox et al., 2003). KPIs play a key tional benchmarking identifies best practices in any type of
role in providing information on the performance of construc- organization, and then compares the performance of the com-
tion tasks, projects, and companies. pany with the best practices applied in other companies oper-
Many researches and studies are conducted to determine ating in other fields (Camp, 1989; Watson, 2007; CCIC, 2006;
KPIs. Most of them are project specific. They concentrate on Swan and Kyng, 2004).
the performance measurement at the project level. Existing re- Based on the application level of benchmarking, bench-
search, which has been conducted for performance evaluation marking was broken down into the following levels: (1) task
and comparison at the company level, is limited in the litera- (e.g. project specific activities such as placement of steel or con-
ture. Moreover, most of the conducted researches have devel- crete); (2) project (e.g. cost of the project or phases in the pro-
oped KPIs that are suitable for specific national features. ject life cycle, times for design or construction, cost and time
In Saudi Arabia, a few previous efforts have been done to predictability, health and safety issues, and client satisfaction);
identify indicators that can be used to measure the perfor- (3) organization (e.g. profitability of the company, productiv-
mance of construction projects. No insight is provided into ity, training, human resources, ability to innovate); (4) industry
the overall performance of the firms. Therefore, a set of KPIs (e.g. industry productivity, ability to innovate, image, human
that can be used to measure and compare the performance of resources); and (5) economy (e.g. international competitive-
an organization or be considered as a basis for benchmarking ness, financial capacity, and productivity) (Rankin et al.,
is lacking. To bridge this gap, this research aims to identify a 2008).
set of KPIs that can be implemented by construction execu-
tives in measuring the construction performance at the com- 2.2. Benchmarking in the construction industry
pany level in Saudi Arabia. More specifically, our research
objectives are: (1) to highlight the national and international In construction industry, the application of benchmarking
efforts and progress in identifying and implementing KPIs; including the identification of KPIs has emerged in many aca-
(2) to determine the extent of implementing benchmarking ap- demic journals and technical reports. Most studies and re-
proach in construction firms in Saudi Arabia; and (3) to iden- searches in the construction industry have concentrated on
tify the most important KPIs that can be used to evaluate the the performance measurement and evaluation at the project le-
performance of construction companies in Saudi Arabia. vel. The significant performance indicators resulted from such
It is important to note that the study focuses on identifying available researches are summarized in Table 1.
KPIs for the purpose of performance measurement and Existing research, which has been conducted as a perfor-
benchmarking performance of construction firms and not for mance evaluation and comparison at the company level, is lim-
evaluation by clients or shareholders. Additionally, building ited in the literature. Some institutes, such as the Construction
construction firms are considered firms that undertake con- Industry Institute (CII) in the USA, the Department of Envi-
struction of building facilities and can include a design function. ronment, Transport, and the Regions (DETR) and the Depart-
ment of Trade and Industry (DTI) in the UK, and the
Corporation for Technical Development in Chile, have devel-
2. Background oped KPIs that are, to some degree, suitable for their own na-
tional features. Table 2 summarizes the significant performance
The following subsections provide background information on indicators resulting from available studies that are used for per-
benchmarking, benchmarking in the construction industry, formance evaluation at the company level.
and different performance perspectives (classifications of per- On the other hand and due to the solid foundation for met-
formance indicators) as they pertain to this research. rics in the basic areas at the project level; i.e. cost, time, scope,
quality, and safety, project level data have been aggregated to
2.1. Background on benchmarking evaluate organization performance (DETR, 2000). However,
the methods to aggregate data from the project level to the
Camp (1989) wrote the first definitive book on benchmarking organization level are not yet clear (Rankin et al., 2008).
and defined benchmarking as ‘‘the continuous process of mea- Tables 1 and 2 showed that KPIs differ from one country to
suring products, services, and practices against the toughest another. Different market situations, policies and strategies,
competitors or those companies recognized as industry lead- cultures, and competitive environments require different mea-
ers’’. The Construction Industry Institute (CII) has adopted sures (Kaplan and Norton, 1993). Therefore, a need exists to
the following definition of benchmarking: ‘‘A systematic pro- develop a set of KPIs that suits the environment in Saudi
cess of measuring one’s performance against results from rec- Arabia.
ognized leaders for the purpose of determining best practices
that lead to superior performance when adapted and imple- 2.3. Classification of performance indicators in construction
mented’’ (Hudson, 1997 cited in El-Mashaleh et al., 2007). industry
There are several ways to classify types of benchmarking.
Based on the environment against benchmarking, the classifi- Formerly, construction companies used financial measures to
cations of benchmarking are: internal, competitive, and func- measure and evaluate their performance. ‘‘The dissatisfaction
tional. Internal benchmarking is carried out with similar with financially based performance measurement started in
Indicators for measuring performance of building construction companies in Kingdom of Saudi Arabia 127

Table 1 Summary of available previous studies on performance indicators at project level.

No. Author and year Country Performance indicators
1 Jastaniah (1997) Saudi Arabia 1. Client satisfaction 6. Closeness to budget
2. Planning period 7. Profitability
3. Staff experience 8. Payment
4. Communication 9. Claims
5. Safety
2 Egan (1998) UK 1. Predictability – time, cost 5. Profitability
2. Construction cost 6. Safety
3. Construction time 7. Defects
4. Productivity 8. Client satisfaction
3 Department of the Environment, Transport, UK 1. Time 5. Client changes
and the Regions (DETR), 2000 Department 2. Cost 6. Business performance
of the Environment, Transport, and the 3. Quality 7. Health and safety
Regions (DETR) (2000) 4. Client satisfaction
4 Pillai et al. (2002) India 1. Benefit 6. Cost effectiveness
2. Risk 7. Customer commitment
3. Project status 8. Stakeholders
4. Decision effectiveness 9. Project management
5. Production
5 Cheung et al. (2004) China 1. People 5. Safety
2. Cost 6. Client satisfaction
3. Time 7. Communication
4. Quality 8. Environment
6 Wong (2004) UK 1. Staff experience 5. Contractor experience
2. Resources 6. Time
3. Site management 7. Cost
4. Safety 8. Quality
7 Constructing Excellence (2005, 2006, 2009) UK 1. Client Satisfaction 7. Profitability
and Roberts and Latorre (2009) 2. Defects 8. Productivity
3. Predictability cost, time 9. Safety
4. Construction cost, time 10. Social indicators
5. Variance cost, time 11. Environment
6. Contractor satisfaction
8 Rankin et al. (2008) and Canadian Canada 1. Cost 5. Scope
Construction Innovation Council (CCIC) 2. Time 6. Innovation
(2007 3. Quality 7. Sustainability
4. Safety 8. Client Satisfaction
9 Luu et al. (2008) Vietnam 1. Construction cost 5. Team performance
2. Construction time 6. Change management
3. Customer satisfaction 7. Material management
4. Quality management 8. Safety
10 Skibniewski and Ghosh (2009) USA 1. Construction cost 4. Defects
2. Construction time 5. Client satisfaction product
3. Predictability cost and time
11 Toor and Ogunlana (2010) Thailand 1. On time 6. Safety
2. Under budget 7. Defects
3. Specifications 8. Stakeholders
4. Efficiently 9. Disputes
5. Effectiveness
12 Construction Industry Institute (CII) (2011) USA 1. Cost 4. Accident
2. Schedule 5. Rework
3. Changes 6. Productivity

the 1950s and has built momentum since the late 1970s’’ (Bas- et al., 2004). After a long dependence on financial measures,
sioni et al., 2004). The main problem lies in the fact that finan- many studies and researches have been conducted to develop
cial indicators are lagging indicators, in the sense that they tell performance measurement frameworks that included financial
the results of managerial actions already taken. However, and nonfinancial indicators. The balanced scorecard (BSC),
managers need current, up-to-date, and mostly nonfinancial first proposed in 1992 issue of Harvard Business Review
information to be able to take better decisions (Bassioni (HBR) by Kaplan and Norton, presents four different perfor-
128 H.A.E.M. Ali et al

Table 2 Summary of available previous studies on performance indicators at company level.

No. Author and years Country Performance indicators
1 DETR (2000) UK 1. Profitability 4. Return on value added
2. Productivity 5. Interest cover
3. Return on capital employed 6. Ratio of value added
7. Repeat business
2 DTI (2002) UK 1. Customer satisfaction
2. People
3. Environment
3 El-Mashaleh (2003) and El-Mashaleh et al. (2007) USA 1. Schedule performance 4. Safety
2. Cost performance 5. Profitability
3. Client satisfaction
4 Ramirez et al. (2004) , Alarcon et al. (2001) Chile 1. Safety 6. Training
2. Productivity 7. Planning effectiveness
3. Quality 8. Cost variation
4. Efficiency of labor 9. Schedule variation
5. Rework
5 Yu et al. (2007) Korea 1. Profitability 6. Development
2. Growth 7. Technological capability
3. Stability 8. Business efficiency
4. Customer satisfaction 9. Informatization
5. Market share 10. Organization competency
6 Nudurupati et al. (2007) UK 1. Quality 5. Safety
2. Clients satisfaction 6. Time
3. Employee satisfaction 7. Cost
4. Environment impact
7 Wang et al. (2010) USA 1. profitability 6. Market shear
2. Return on capital 7. Quality
3. Cash flow 8. Internal business
4. Reliability 9. Innovation and learning
5. Customer focus 10. Environment
8 Horta et al. (2010) Portugal 1. Productivity 4. Safety
2. Profitability 5. Customer satisfaction
3. Growth 6. Predictability

mance perspectives from which executives can choose mea- EFQM Excellence Models continued to grow in stature
sures. The BSC complements financial indicators with opera- throughout the 1990s. They were recognized as descriptive
tional measures on customer satisfaction, internal processes, holistic business models, rather than just quality models
and the organization innovation and improvement activities and mutated into frameworks for Business Excellence (Oak-
– operational measures that are the drivers of future financial land and Marosszeky, 2006).
performance. Additional general perspectives have been identi- The USA Baldrige Model aims to promote performance
fied, such as competition (Neely et al., 1995) and employee excellence and improvement in competitiveness through a
(Neely et al., 2000), as well as application-specific perspectives, framework of seven categories which are used to assess the
such as project and supplier for construction (Kagioglou et al., organization leadership, strategic planning, customer focus,
2001; Wang et al., 2010). Constructing Excellence Organiza- measurement, analysis and knowledge management, work-
tion in UK which aims to improve construction performance force focus, operations focus, and results (National Institute
in order to produce a better built environment, developed a of Standards and Technology (NIST), 2011)).
set of performance indicators and classified them into three The EFQM Excellence Model operates through a simple
main groups, namely; economic, social and environmental per- framework of performance improvement through involvement
spectives (Constructing Excellence, 2009). Syuhaida and Ami- of people in improving processes. The full Excellence Model is
nah (2009) classified performance indicators into functional, a framework for achieving good results (people results, customer
operational, and professional perspectives. results, society results, and key results) through the enablers
Over the last few decades many quality management (leadership, people, strategy, partnerships and resources, pro-
models have been adopted for the purpose of enhancing cesses, products and services) (EFQM, 2011). The framework in-
performance. The most-utilized models are the Malcolm cludes proposed weightings for performance assessment.
Baldrige National Quality Award in the United States, the Based on the above mentioned models and studies, the po-
European Foundation for Quality Management (EFQM) tential performance indicators in this study were classified into
Excellence Model in Europe, and the Deming Prize in five perspectives: financial, customer, internal business process,
Japan. Through usage and research, the Baldrige and learning and growth, and environment.
Indicators for measuring performance of building construction companies in Kingdom of Saudi Arabia 129

3. Research methodology tion was calculated based on the following formula (Kish,
1995):
The determination of KPIs is an initially important step in
establishing a performance measurement system. These KPIs, n0
n¼ ð1Þ
when identified and implemented properly, can play a key ½1 þ ðn0 =NÞ
role in providing information on the performance of con-
where
struction companies. To determine and analyze the set of per-
ceived KPIs utilized by construction executives in the ðp  qÞ
n0 ¼ ð2Þ
construction industry in Saudi Arabia, the large construction V2
companies specialized in building works in Saudi Arabia were
targeted and a representative sample of this population was where n = the required sample size, n0 = the first estimate of
determined. sample size, N = the population size, P = the proportion of
The potential key performance indicators that can be used the characteristic being measured in the target population,
to evaluate and compare the performance of construction com- q = 1  p, and V = standard error of sampling population.
panies were identified from literature review. These KPIs For the purpose of getting the maximum sample size, the val-
formed the basis of a questionnaire, which was used to sample ues of p and q were taken as 0.5. The standard error used in
the opinions of construction executives on the degree of impor- determining the sample size was set equal to 10%, which rep-
tance of the key performance indicators. Through data collec- resents the maximum standard error allowed (AlSalman,
tion and analysis, the relative importance of the key 2004). Substituting the pre-defined variables, a sample size of
performance indicators was identified using the relative impor- n = 18.2 is obtained. In other words, the minimum required
tance index. The detailed research approach is thoroughly response rate is 27.2%. A total of 67 questionnaires were deliv-
introduced in the following sections. ered to the respondents, together with a covering letter
explaining the purpose of the study and assuring them of
anonymity.
3.1. Performance indicators and questionnaire design
3.3. Data analysis
A set of 47 raw KPIs were initially obtained from rigorous lit-
erature review of previous studies on KPIs/success criteria. The participating respondents have provided numerical scor-
These indicators were classified under five performance per- ing expressing their opinions on the degree of importance of
spectives. The classified 47 KPIs formed the basis of a ques- each KPI. The data collected were analyzed using various sta-
tionnaire survey. The questionnaire is divided into four tistical methods. The relative importance of the KPIs was iden-
major parts. The first part contained questions about the con- tified using the relative importance index (Eq. (3)) (Aibinu and
struction firm; for example the number of employees, annual Odeyinka, 2006)
work volume and how long the firm has been in building con-
struction industry. It also provided general information about X
5

the individual completing the questionnaire such as their posi- W i Xi

i¼1
tions and the number of years of experience in current posi- RII ¼ ð3Þ
An
tion. The second part included questions about the extent,
importance, and mechanism of applying KPIs in construction where Wi = the weight given to the ith response: i = 1, 2, 3, 4,
firms. The third part contained question about the degree of 5, Xi = frequency of the ith response, A = the highest weight
utilization of benchmarking approach in construction organi- (5 in this study), and n = the number of respondents.
zations in Saudi Arabia, and which benchmarking type is the
most dominant. In the fourth part, the construction executives
4. Characteristics of respondents and firms
were asked to rate each KPI based on their professional judg-
ment on a given five-points Likert-type scale (where 1 = very
A total of 24 surveys were completed and returned, resulting in
low importance, 2 = low importance, 3 = medium impor-
a 35.8% response rate, which is greater than the minimum re-
tance, 4 = high importance, and 5 = very high importance).
quired response rate of 27.2%. About 87.5% of the construc-
At the end of each group of indicators in this part, the chance
tion firms that participated in this study had more than 150
was given to respondents to add and rate any additional
employees, and only 12.5% had less than 150 employees. With
indicator.
respect to the annual volume, 21% of the firms had annual vol-
ume less than Saudi Ryial (SR) 250 million. This was followed
3.2. Sample size closely by the range SR 250–500 million, with 13%. Eight per-
cent of the firms were in the range SR 500–750 million. Of the
The target population of the study is the large building con- remaining firms, 4% were in the range SR 750–1000 million,
struction firms working in Saudi Arabia. A representative 21% were more than SR 1000 million, and 33% of the respon-
sample was selected from the 2010 classified contractors list dents did not answer this question. The respondents were
which is published by Contractors’ Classification Agency, asked to provide the number of years that their firms worked
Ministry of Municipal and Rural Affairs in Saudi Arabia. in the building construction industry. Eight percent of the
The sample was selected from contractors classified and reg- firms have been in building construction industry for less than
istered as ‘‘Grade 1’’ companies working in Saudi Arabia. 5 years, 4% for 6–10 years, and 88% for over 10 years. The re-
The list of ‘‘Grade 1’’ companies includes 67 building con- sult shows that the majority of firms (88%) worked more than
tractors. The sample size that would represent this popula- 10 years in the building construction industry and this means
130 H.A.E.M. Ali et al

that most of the firms which participated in this study have tions. A set of measures that balances financial and opera-
long experience in this field. This elongated experience in con- tional measures should be the basis of any performance
struction industry should give high reliability for the results of measurement system.
the study. The study revealed that the top ranked KPIs were distrib-
uted among three perspectives namely, financial, customer,
and internal business. These results indicated that the con-
5. Extent of application of KPIs and benchmarking struction organizations realized that the traditional financial
measures are not an inclusive measure of organization perfor-
Many construction companies in Saudi Arabia identify KPIs mance anymore. Insufficiency of traditional financial measures
to evaluate their performance. Fifty-eight percent of the con- led to increased interest of non financial measures, such as
struction firms (14 companies) that participated in this study external customer satisfaction, safety, business efficiency, and
used KPIs in evaluating company performance. Fifty-seven effectiveness of planning.
percent of them (eight companies) believed that identifying The study revealed that the financial perspective included
and using KPIs is very important to improve their perfor- four measures that received high ranking by respondents,
mance. Most of them used five to ten indicators to measure namely profitability, growth, financial stability, and cash flow.
the performance each six months. Benchmarking is not com- Profitability is found to be the most important KPI for the
monly used in the construction industry in Saudi Arabia. Only construction company managers. Profitability is also consid-
25% of the construction firms that participated in the study ered as one of the most important indicators in many other
(six firms) apply benchmarking approach. Thirty-three percent studies, such as Wang et al. (2010) and Yu et al. (2007). Con-
of respondents (eight firms) believed that benchmarking is very struction companies are business organizations that exist to
important as a means for improving performance and the rest accomplish tasks in the large environment. Two classes of
(67% = 16 firms) considered that benchmarking has a moder- objectives for business organization have been widely recog-
ate importance in improving performance. Although all the nized: economic and non-economic. The most common corpo-
respondents (24 companies) realized the importance of bench- rate economic objectives concern profitability, return on
marking as a methodology for improving performance at the investment (or equity or net assets), and growth. Therefore
company level, the benchmarking application in Kingdom of construction executives ranked profitability as the first indica-
Saudi Arabia is still limited due to the lack of national based tor to measure (financial) performance of the company.
benchmarking system, which can be used to assess and com- Growth is ranked third among the 47 performance indicators
pare organizations’ performance in Saudi Arabia. The internal by construction executives. Growth can be seen as a measure
benchmarking is the only type that is applied by the construc- of success for the company. Financial stability and cash flow
tion firms in Saudi Arabia. Internal benchmarking requires less are ranked fourth and fifth among the 47 indicators, respec-
time and resources, provides accurate information, and is tively. Survival can be measured by cash flow and financial sta-
usually the first step in any benchmarking application. Also bility. Financial performance indicators help construction
internal benchmarking can reveal many opportunities for per- executives to specify the particular actions they want employ-
formance improvement, and aims to narrow the performance ees to take and then measure to see whether the employees
gap between different divisions of the same organization. have in fact taken those actions (Kaplan and Norton, 1992).
Increased profitability, high cash flow, and high growth should
6. Ranking of performance indicators be the logical consequence of improvements in the fundamen-
tals, i.e. quality, productivity, safety, time, cost, etc.
The main purpose of this step is to identify the appropriate KPIs Many construction companies today have a corporate mis-
that can be used to measure the performance of the construction sion that focuses on the customer. How a company is perform-
companies. Table 3 shows the mean value, standard deviation, ing from its customers’ perspective has become, therefore, a
and relative importance index (RII) of 47 indicators. Standard priority for top management. The results indicated that the
deviation of each indicator was relatively small enough to con- customer perspective encompassed three indicators, namely,
clude and the respondents agreed on its importance. quality of service and work, external customer satisfaction,
Normally, the organizational performance is measured in and market share. Quality of service and work comes second
terms of KPIs. Since too many KPIs can be unmanageable, in importance after profitability. Quality measures the defect
management must select appropriate KPIs. According to Swan level of deliverables as perceived and measured by the cus-
and Kyng (2004), the suitable number of KPIs should be 8–12. tomer. This indicator affects many other indicators such as
Table 4 shows the most important 10 indicators based on the profitability, external customer satisfaction, market share,
values of RII, along with proposed measurement methods col- growth and financial stability. Quality should be managed –
lected from the literature. it does not just happen. Effective leadership, involvement of
people, good process management, customer focus, and good
7. Discussion of study results supplier relationships are fundamental parts of the recipe of
success. The results revealed that external customer satisfac-
The complexity of managing an organization today requires tion is considered heavily in measuring performance of the
that managers be able to view performance in several areas construction companies. This indicator is ranked sixth among
simultaneously. No single measure can provide a clear perfor- the 47 indicators by construction executives. There is no doubt
mance target or focus attention on the critical areas of busi- that construction organizations depend on their customers,
ness. Many have criticized financial measures because of therefore they should understand and meet their needs and
their well-documented inadequacies, their backward-looking expectations. Satisfaction of customers and other interested
focus, and their inability to reflect current value-creating ac- parties is necessary for the success of the project and organiza-
Indicators for measuring performance of building construction companies in Kingdom of Saudi Arabia 131

Table 3 Ranking of performance indicators.

No. Perspective Performance idicators Mean Standard deviation RII %
1 Financial Profitability 4.58 0.72 91.7
2 Customer Quality of service and work 4.29 0.62 85.8
3 Financial Growth 4.25 0.79 85.0
4 Financial Financial stability 4.08 0.72 81.7
5 Financial Cash flow 4.00 0.88 80.0
6 Customer External customer satisfaction 4.00 0.98 80.0
7 Internal business Safety 3.92 0.78 78.3
8 Internal business Business efficiency 3.83 0.64 76.7
9 Customer Market share 3.79 0.83 75.8
10 Internal business Effectiveness of planning 3.75 0.74 75.0
11 Internal business Labor efficiency 3.71 0.86 74.2
12 Internal business Successful tenders rate 3.67 0.70 73.3
13 Learning and growth Organization competency in management human resources 3.63 0.71 72.5
14 Environment Risk control 3.63 0.92 72.5
15 Internal business Managers competency 3.58 0.83 71.7
16 Environment Partnership and suppliers 3.58 0.50 71.7
17 Financial Reliability of financial performance 3.42 0.58 68.3
18 Internal business Innovation 3.42 0.65 68.3
19 Learning and growth Continuous improvement 3.42 0.72 68.3
20 Internal business Productivity 3.38 1.01 67.5
21 Environment Policy or law of government 3.38 1.01 67.5
22 Internal business Resource management 3.33 0.96 66.7
23 Customer Internal customer satisfaction 3.29 0.91 65.8
24 Customer Number of new customers 3.29 0.75 65.8
25 Learning and growth Investors in people 3.25 0.99 65.0
26 Financial Capital 3.21 0.93 64.2
27 Internal business Technological capability 3.21 0.83 64.2
28 Internal business Number of high-performance professionals 3.13 0.85 62.5
29 Learning and growth Motivation 3.13 1.03 62.5
30 Financial Investment in development of new markets 3.08 1.06 61.7
31 Learning and growth Human resource training and development 3.08 0.83 61.7
32 Customer Value of money 3.04 1.04 60.8
33 Environment Competitors 3.04 0.75 60.8
34 Customer Competitive price 2.96 0.95 59.2
35 Internal business Quality control and rework 2.92 0.58 58.3
36 Learning and growth Informatization 2.92 1.06 58.3
37 Internal business Defects 2.88 1.30 57.5
38 Learning and growth Empowered work force 2.79 1.06 55.8
39 Internal business Research and development 2.75 0.79 55.0
40 Customer Hassle-free relationship 2.58 1.38 51.7
41 Financial Interest cover 2.54 1.06 50.8
42 Internal business Staff turnover 2.42 1.25 48.3
43 Environment Impact on society 2.25 1.03 45.0
44 Environment Waste 2.21 1.22 44.2
45 Environment Energy use 2.08 0.97 41.7
46 Environment Main water use 2.08 1.14 41.7
47 Environment Impact on biodiversity 1.92 0.93 38.3

tion. In other words, increasing the satisfaction of customers department. The new focus emphasized measures that inte-
and stakeholders through effective goal deployment, cost grated key business processes. The internal measures can in-
reduction, productivity and process improvement has proved clude productivity, safety, quality, and business efficiency
to be essential for organizations to stay in operation (Oakland and effectiveness. The results indicated that the internal busi-
and Marosszeky, 2006). Finally, market share (the ninth ness perspective included three high ranked indicators, namely
ranked indicator) provided objective evidence that improves safety, business efficiency, and effectiveness of planning. The
in customer satisfaction was being translated into tangible respondents felt that safety was a major competitive factor.
benefits. Safety is ranked seventh among the 47 performance indicators
Excellence in company performance derives from enablers by executives. With the increasing complexity of construction
that include leadership, people, resources, processes, and ac- projects and the rapid increase of construction activities, con-
tions. Managers need to focus on such critical internal opera- struction safety has become a big concern because workers’
tions that enable them to satisfy customer needs. Formerly, the injuries cause tremendous losses (Fang et al., 2004). The busi-
companies stressed high performance for each functional ness efficiency and effectiveness of planning were ranked
132 H.A.E.M. Ali et al

Table 4 Summary of available measurement methods of KPIs.

Perspective No. KPIs Measurement methods
Financial 1 Profitability (Constructing  Return on EquityðROEÞ ¼ Net income after tax
Shareholder equity
Excellence, 2006; Yu et al., 2007;  Economic Value Added (EVA) = (Net operating profit after taxes 
Bizwiz, 2011) money cost of capital)
 ReturnonCapitalðROCÞ ¼ Net operating income afte rtax
Book value of invested capital
 Net Income (NI) = (Total revenue  all expenses)
 Profitability ¼ Profit before tax and interest
Total revenues
2 Growth (Yu et al., 2007)  Volume of works growth rate
 Revenues growth
Total debt
3 Financial stability (Yu et al., 2007)  DebtRatio ¼ Total assets
4 Cash flow (Bizwiz, 2011)  CashFlow ¼ Cashflowgeneratedfromoperations
Currentliabilities
 Cash Flow ¼ Cash flow from0perations
Net income
 Cash Flow ¼ Net cash flowCurrent portions of long term debt
Net cash flow from operations
 Cash Flow ¼ Cash flow from operationsþfixed cost
Fixed cost

Customer 5 Quality of service and work  ReworkFactor ¼ Total direct cost of field rework
Actual construction phase cost
(El-Mashaleh et al., 2007)  PAF model ¼ Prevention cost þ Appraisal cost þ Failure cost
6 External customer satisfaction  Percentage of Repeat Customers ¼ Number of repeated customers
Total number of customers
(Excellence 2006; El-Mashaleh et al.,  Customer Satisfaction Survey
2007; Rankin et al., 2008)  Number of Complaints
7 Market share (Yu et al., 2007)  MS ¼ Company’s volume of works in a marketðunitÞ
Total volume of works in that marketðunitÞ
Company’s revenue in a market
 MS ¼ Total revenue available in that market

Internal 8 Safety (Excellence 2006; El-Mashaleh  Safety Performance ¼ Number of reportable accidents in amount of time
Average number employed in that time
business et al., 2007; Rankin et al., 2008)  Incidents Rate ¼ Number ofTotal
recordable incidents200;000
site work hours
 Time Lost ¼ Amount ofTotal
lost time to incidents200;000
site work hours
 Accident Cost ¼ Direct and indirect costs to accidents200;000
Total site work hours
9 Business efficiency (Yu et al., 2007;  Efficiency Ratio ¼ Expenses
Revenue
Bizwiz, 2011)  Net Profit Margin ¼ NetTotal
profit after taxes
revenue
10 Effectiveness of planning (Excellence  Predictability Cost ¼ ActualAnticipated
costAnticipated cost
cost
2006; El-Mashaleh et al., 2007;  Predictability Time ¼ Actual Anticipated
timeAnticipated time
time
Rankin et al., 2008)
 Change Cost Factor ¼ Total cost of changes in works
Actual total cost of works

eighth and tenth among the 47 indicators, respectively. These 8. Conclusion

indicators can be viewed as a key core competency for the
companies. Performance measurement is one of the important aspects of
Intense global competition requires that companies make company management. The major objective of this study was
continual improvements to their existing processes and have to explore the most important indicators for measuring com-
the ability to achieve deliverables in less time and cost, and pany performance as perceived by large building contractors
low defect and accident rate. The results revealed that perfor- working in Saudi Arabia. In this paper, relying on a review
mance indicators that classified under both learning and of the national and international literature, 47 performance
growth perspective got less importance by respondents. indicators classified under five performance perspectives were
Moreover, energy use, main water use, and impact on bio- identified to assess performance of construction organization.
diversity are the lowest ranked indicators for measuring per- Questionnaire form was then designed to collect data from
formance of construction companies. These indicators belong large building construction companies working in Saudi Ara-
to the environment perspective. Comparing with the results bia. A total of 24 surveys were completed and returned. The
of other studies in different countries, learning and growth, second and third parts of this questionnaire intended to ex-
and environment indicators are heavily considered when con- plore the extent of application, and importance of KPIs and
struction executives assess the performance of their companies. benchmarking in building construction industry in Saudi Ara-
The results of this study suggested that the most important bia. Despite the agreement of respondents on the importance
ten performance indicators can be used to evaluate the perfor- of benchmarking approach, the competitive benchmarking
mance of construction companies and also can be considered application in Kingdom of Saudi Arabia is still limited due
as the basis for benchmarking. The question that needs an an- to the lacking of standard benchmarking system. The only type
swer is how to measure these indicators? As Table 4 shows of benchmarking that is applied by some organizations in Sau-
there are many ways and formulas to measure each indicator di Arabia is the internal benchmarking which requires less time
a standardized method of measurement should be existed to and resources. The statistical analysis of the collected re-
simplify the application of these KPIs and any proposed sponses regarding the degree of importance of the 47 perfor-
benchmarking methodology. This is the target of the next step mance indicators is provided using 10 most significant KPIs
of this research. which include profitability, quality of service and work,
Indicators for measuring performance of building construction companies in Kingdom of Saudi Arabia 133

growth, financial stability, cash flow, external customer satis- London, UK. Available at: <http://www.constructingexcellence.
faction, safety, business efficiency, market share, and effective- org.uk/resources/publications/default.jsp> (accessed December
ness of planning. Energy use, main water use, and impact on 2010).
biodiversity are the lowest ranked indicators for measuring Constructing Excellence, 2006. Economic KPIs methods of measurement.
UK Construction Industry Key Performance Indicators, London,
performance of construction companies. The 10 indicators
UK. Available at: <http://www.constructingexcellence. org.uk/
consistently perceived as being highly important can be used
resources/publications/default.jsp> (accessed December 2010).
as a basis to build a model for evaluating the performance of Constructing Excellence in partnership with Department of Business
construction companies and also can be considered as the first Enterprise and Regulatory Reform, 2009. UK Industry Perfor-
step for developing a competitive benchmarking approach. mance Report. London, UK. Available at: <http://www.construct-
This study focused on building construction companies ingexcellence.org.uk/resources/publications/default.jsp> (accessed
working in Saudi Arabia where engineering companies in other December 2010).
disciplines were not included. In conclusion, it is recommended Construction Industry Institute (CII), 2011. Benchmarking and
that more in-depth studies should be performed to better metrics. Available at: <file:///D:/computer%20data%2011-1-
understand KPIs. Further studies may be conducted to stan- 2011/master%20thesis/Paper1/draft/master%20 thesis/reference/
USED/33/Construction%20Industry%20Institute.htm> (accessed
dardize the methods for measuring the KPIs, to determine
January 2011).
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