Teknik Dergi, 2022 12635-12661, Paper 698

Identification and Prioritization of Key Performance

Indicators for the Construction Small and Medium
Enterprises*

Ozan OKUDAN1
Cenk BUDAYAN2
Yusuf ARAYICI3

ABSTRACT
Purpose: The central purpose of this study is to propose a set of key performance indicators
(KPIs) to measure the performance of construction small and medium enterprises (SMEs)
that have been ignored in the performance management literature so far. Secondly, this study
aims to determine the most crucial KPIs by using the fuzzy VIKOR method to improve cost-
effectiveness in the performance measurement of construction SMEs. At the first stage of
this study, KPIs proposed by the existing studies were identified via a literature survey. Then,
the KPIs extracted from the literature survey were verified, and eight new KPIs were
proposed as a result of focus group discussions with 12 participants who are
owners/managers of construction SMEs. Additionally, the Balanced Scorecard (BSC) was
modified in line with the needs of construction SMEs, and each KPI was grouped into a BSC
perspective. A questionnaire survey followed this grouping to gather data associated with the
KPIs. Based on these data, KPIs were prioritized by using the fuzzy VIKOR. It is found out
that external indicators such as “effectiveness of monitoring market conditions” are
determined as the most important KPIs, in contrast to the findings in the studies about large-
scale companies. Furthermore, “Attracting new customers”; “Reliability of financial
performance” and, “Competency of managers” are identified as important indicators. Four
KPIs proposed by experts during the focus group discussion are placed among the most
important KPIs, which highlights the need for a specific performance measurement system
(PMS) for construction SMEs.
Keywords: Performance measurement, KPIs, construction SMEs, fuzzy VIKOR, MCDM.

Note:
- This paper was received on August 3, 2021 and accepted for publication by the Editorial Board on
April 8, 2022.
- Discussions on this paper will be accepted by November 30, 2022.
 https://doi.org/10.18400/tekderg.977849

1 Department of Civil Engineering, Yildiz Technical University, Istanbul, Turkey

okudan@yildiz.edu.tr - https://orcid.org/0000-0001-7816-2761
2 Department of Civil Engineering, Middle East Technical University, Northern Cyprus
cbudayan@metu.edu.tr - https://orcid.org/0000-0002-8433-2824
3 Department of Architecture and Built Environment, Northumbria University, Newcastle, United Kingdom
yusuf.arayici@northumbria.ac.uk - https://orcid.org/0000-0001-5705-2272
Identification and Prioritization of Key Performance Indicators for the Construction …

1. INTRODUCTION
The construction SMEs are essential parts of the construction industry (CI). The Department
for Business Innovations and Skills (2012) underlined that 85.1% of employment and 72.9%
of total revenue in the UK construction industry is driven by construction SMEs.
Construction SMEs contribute to construction projects in diverse ways. They can deliver
small and medium-sized projects as main contractors and undertake specialist works as
subcontractors in large projects due to the lack of skilled labour force in large construction
companies. The industry relies on construction SMEs especially when it comes to off-site
manufacturing such as design and procurement, on-site manufacturing, assembly, and
supporting services in large construction projects (Rezgui and Miles 2010). Therefore,
construction SMEs’ performances play a vital role in completing large construction projects
successfully (Williams 2016).
Although the CI is considered one of the “locomotive industries”, it is often criticized because
of its low productivity and underperformance (Cui et al. 2018). Perhaps it is accurate to say
that it performs the worst compared to other industries (Institution of Civil Engineering
2018). One of the most critical reasons for the low performance of the industry can be that
most construction SMEs, as crucial players in the CI, show mediocre performance and fail
to survive in the market. The report published by U.S. Small Business Administration (2012)
stated that the survival rate of SMEs in the CI is less than 40% which is the lowest among
the industries such as manufacturing, retail trade, food services & hotels. The report of the
Institution of Civil Engineers (2018) also underlined the same issue. The report pinpointed
that over 90% of construction SMEs experienced financial difficulties due to unfair and
overdue payments in the UK. Considering that chronic performance issues of construction
SMEs can have a drastic domino effect on the entire industry, more innovative and effective
solutions must be developed for the construction SMEs to boost the overall performance of
the industry.
Performance measurement could be an effective concept to boost the performance of
construction SMEs. Performance measurement plays a crucial role in improving companies’
performances since they provide the means to allocate and coordinate the resources (Melnyk
et al. 2014). Besides, performance measurement ensures that all departments of an
organization working to achieve the same corporate objectives. Therefore, the same
performance measures and targets can be specified to measure and analyse the performance
of all departments in the organization, which in turn, can lead to feedback loops across the
organization (Kolehmainen 2010).
One of the outstanding concepts used for performance measurement is key performance
indicators (KPIs), and this concept has been widely used in the CI. KPIs can be used to
monitor the financial and non-financial success of a company (Tripathi et al. 2019), since
“KPIs are measures that are indicative of the performance of associated process” (Beatham
et al. 2004). Prioritization of KPIs is also crucial for effective performance measurement
since monitoring all KPIs is not feasible and manageable (Luu et al. 2008b). KPIs in a PMS
must be monitored by the management of SMEs to ensure that targets are met. In other words,
each KPI must be measured repetitively, and the measurement data should be analysed,
reported, and stored in the company periodically (Parmenter 2007). Therefore, the required
time for performance measurement increases enormously as the number of KPIs increases.
The information necessary to analyze these KPIs may be unavailable inside the organization,

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and supplementary financial and human resources must be allocated to measure, analyze and
store these KPIs (Kaplan and Norton 1996; Parmenter 2007). Thus, construction companies
can save an enormous amount of time and money if they identify which KPIs are suitable for
their needs (Ali et al. 2013). Since construction SMEs have limited resources and time
compared to large companies, the complex and formalized performance measurement system
may eventually become inefficient (Madsen 2015). Consequently, determination,
prioritization, and monitoring of KPIs are vital for success in CI (Cox et al. 2003).
Performance measurement is widely known as a critical concept for construction companies.
Therefore, multiple studies have been conducted to develop a PMS in the CI (Ali et al. 2013;
Chan and Chan 2004; Cox et al. 2003; Luu et al. 2008a; Radujković et al. 2010; Skibniewski
and Ghosh 2009; Tripathi and Jha 2018). However, Ciu et al. (2018) stated that this research
area is not mature, and there is still some distance to be covered. Deficiencies of the existing
body of knowledge from this perspective are continuously criticized by authors such as Liu
et al. (2018a) and Okudan et al. (2020). Because most of the existing studies focus on the
performance measurement of large construction companies and construction projects and
ignore the construction SMEs. The PMSs developed for large construction companies and
construction projects are not applicable for the construction SMEs due to their substantial
differences which are elaborated within the scope of this study. Thus, the lack of the
theoretical basis is a critical roadblock to the implementation of performance measurement
practices in construction SMEs, causing the abovementioned issues within the entire
industry. Since knowledge on performance measurement of construction SMEs is limited,
construction practitioners keep implementing conventional management practices at the
expense of their companies’ future (Kagioglou et al. 2001; Skibniewski and Ghosh 2009).
Therefore, there is still a gap in the performance measurement literature. Consequently, the
cornerstone of this research is identifying a set of KPIs meeting the needs of construction
SMEs. Additionally, existing studies mostly adopted simple descriptive methods which
prioritize the KPIs based on a single criterion (Ali et al. 2013; Chan and Chan 2004; Cox et
al. 2003; Luu et al. 2008a; Radujković et al. 2010; Skibniewski and Ghosh 2009; Tripathi
and Jha 2018). Since such a prioritization should consider all strategic objectives of the
construction SMEs, the multi-criteria decision-making (MCDM) approach becomes an
essential need (Rogulj and Jajac 2018).
Consequently, the aims of this study are: (1) proposing a set of KPIs to measure the
performance of construction SMEs which have been ignored in the performance management
literature so far, (2) and determining the most important KPIs by using the fuzzy VIKOR
method to improve cost-effectiveness in performance measurement. The practical
implications of this study can be summarized as follows:
 Owners and/or managers of construction SMEs can measure their companies’
performance and test outcomes of their managerial processes and decisions on
performance by using the PMS developed in this study.
 The decision-makers within the construction SME can revise and refine managerial
processes, as well as strategies, to ensure that the objectives of their construction SMEs
are met. In this manner, the proposed system could function as a decision support
framework by construction SMEs.

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2. LITERATURE REVIEW
2.1. Performance Measurement in the Construction Industry
As stated above, there are many studies conducted to develop a PMS in the CI. The summary
of these studies is shown in Table 1. Differences between this study and the existing studies
in the construction management literature in terms of scope are provided to show the
contribution of this study to the overall body of knowledge.

Table 1 - Summary of performance management studies in the construction management

literature
Scope of the Study
Reference Brief description of the study
A B C D E
Developed a set of indicators that can be
utilized to measure performance at the project
Cox et al. level. 14 indicators were extracted from the
X
(2003) literature, and analysis showed that 6
indicators were the most useful to measure the
performance.
Determined 14 KPIs that can be used for
Chan and measuring the project performance. The
X
Chan (2004) application of the KPIs was demonstrated
through case studies.
Proposed 9 KPIs to benchmark construction
Luu et al.
projects. Later, the validity of KPIs was tested X
(2008b)
by considering three case studies.
Identified strategic goals of large construction
Luu et al.
companies in Taiwan. They proposed 30 KPIs X
(2008a)
from a Balanced Scorecard perspective.
Proposed 8 KPIs to measure the performance
Chan (2009) X
of the Malaysian construction industry
Skibnewski Identified 9 KPIs and proposed a framework
and Gosh that uses Enterprise Resource Planning to X
(2009) collect data required to analyse KPIs.
Proposed 36 KPIs that can be used to measure
the performance of construction companies in
Radujkovic et
Eastern Europe. The study adopted an in- X
al. (2010)
depth literature review and descriptive
methods as the research methodology.
Proposed KPIs for large construction
Ali et al.
companies and ranked KPIs by using the X
(2013)
Relative Importance Index.
Tripathi and Extracted 20 indicators from literature and
X
Jha (2018) ranked them using descriptive methods.
Note: A: Measuring industries’ overall performance; B: Measuring project performance; C: Measuring the
performance of large companies; D: Measuring the performance of construction SMEs; E: Integrating
MCDM to performance management field to link strategic objectives to performance measurement.

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Considering the critical evaluation of the literature given in Table 1, there seems to be a clear
gap in the literature review in areas related to performance measurement of construction
SMEs and integrating MCDM to performance measurement to develop a PMS that is aligned
with the construction SMEs’ strategic objectives. Accordingly, the following section answers
the question of why construction SMEs need their own PMS and KPIs.

2.2. The Reasons for Why Construction SMEs Need Their Own KPIs
Kaplan and Norton (1996) emphasized the essentiality of companies’ strategic objectives in
performance measurement. The authors also asserted that effective PMS can only be
designed when a company’s strategic objectives are translated into a coherent set of
performance measures (KPIs). Similarly, Garengo et al. (2005) and Nelly et al. (2002)
pinpointed that a PMS must be designed and implemented in full accordance with a
company’s business strategy to link strategy into measurable objectives of functions, groups
of people, and individuals. The design process of a PMS should include strategic planning
and implementation. The performance measurement, therefore, highlights the gap between
the company’s current performance and its strategic objectives (Garengo et al. 2005; Garengo
and Bititci 2007).
The main difference between construction SMEs, construction projects, and large companies
regarding the performance measurement stems from the differences in strategic objectives,
corporate governance, and business model (Garengo and Bititci 2007). Construction SMEs
have their particular management style and needs compared to large construction companies
and construction projects due to the uniqueness of the owner roles, ownership and
management, culture and behaviour, processes and procedures, human resources and
customers, markets management as well as the availability of resources (Madsen 2015; Sousa
and Aspinwall 2010). Therefore, they need a PMS tailored to successfully fulfil their needs.
For instance, while construction projects are temporary endeavours whose durations vary
generally between 1 to 5 years, the lifespan of construction SMEs are longer than the
construction projects. Thus, the managers of construction SMEs certainly have different
perspectives than project managers. Due to the construction industry’s unique dynamic and
turbulent environment, construction SMEs cannot implement any PMS developed peculiarly
for SMEs working in other industries. Consequently, an ideal PMS should be discussed and
developed based on the perspectives and needs of construction SMEs.
The critical evaluation of the literature presented in Section 2.2 revealed that construction
management literature lacks an appropriate PMS for construction SMEs. Instead, the existing
studies chiefly focus either on construction projects or large companies. Thus, these
measurement systems were developed based on the perspectives of the managers in large
construction companies or projects. It is widely addressed in the literature that developing a
PMS without considering the fundamental differences between construction SMEs,
construction projects, and large companies results in poor adoption in practice (Hudson Smith
and Smith 2007; Turner et al. 2005; Wiesner et al. 2007). Consequently, a PMS that works
in large construction firms is, in many instances, less likely to work in construction SMEs
and vice versa (Taylor and Taylor 2013). Therefore, the views of the managers/owners of
construction SMEs should also be considered to develop an applicable PMS for them.

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3. RESEARCH METHODOLOGY AND RESULTS

Figure 1 - Research Process Flowchart

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The research methodology followed in this study is illustrated in Figure 1. At the first stage,
a conceptual framework was developed by considering the existing performance
measurement frameworks. Firstly, these frameworks were evaluated, and the balanced
scorecard was selected. The balanced scorecard was revised and modified as in line with the
needs of the construction SMEs. Then, a literature survey was conducted to determine KPIs
for the construction SMEs. Besides, the strategic dimensions of SMEs were extracted from
the survey. Therefore, the first stage of the study was completed.
Although the PMS was developed based on the existing literature, it was verified by
conducting focus group sessions at the second stage. Then, a questionnaire was designed to
rank the identified KPIs. The final step is the prioritization of KPIs of the construction SMEs
by using fuzzy VIKOR analysis.

3.1. Stage 1. Identification of the Performance Management Frameworks

In literature, many different frameworks have been developed to measure the performance
of companies. However, in recent years, multidimensional frameworks are preferred to
satisfy all strategic objectives of performance measurement. One of the most widely used
multidimensional performance measurement frameworks is proposed by Kaplan and Norton
(1996), namely the balanced scorecard (BSC) that satisfies a balance between the financial
and non-financial indicators. Similarly, different multidimensional performance
measurement frameworks, such as result and determinants framework (RDF) (Fitzgerald et
al. 1991), performance prism (Neely et al. 2002), and dynamic multi-dimensional
performance framework (DMPF) (Neetu and Mahim 2013) are developed. Among these
multidimensional performance measurement frameworks, this study adopts the BSC since it
is one of the most efficient business ideas (Bassioni et al. 2004). Besides, although there is
no BSC-based PMS for construction SMEs yet, BSC has been used widely to develop PMSs
for other construction companies. For instance, Yu et al. (2007a) developed a comparable
PMS for large construction companies based on BSC. Similarly, Oyewobi et al. (2015)
integrated the BSC into the business excellence model to develop a system that measures the
strategic performance of construction organizations.
Kagioglou et al. (2001) defined BSC as a performance measurement framework that
combines four main perspectives, namely finance, customer, internal business process, and
learning and growth. BSC incorporates a wide range of indicators through various sub-
measures under these four perspectives. Thus, companies can utilize performance drivers
(leading indicators) and outcome measures (lagging indicators), while traditional PMSs only
utilize outcome measures. A balance between the lagging and leading indicators should be
established to develop an effective PMS (Wu 2012). Thus, by combining these lagging and
leading measures, a common language is achieved, aligning top management and employees
with the vision of the organization (Kaplan and Norton 1996).
The central purpose of BSC is to convey the mission and strategy of organizations into
indicators that facilitate the analysis of results and decision-making processes. Therefore, the
strategic objectives are identified according to the strategic priorities of organizations at the
initial stage. These strategic objectives are then translated into performance measures.

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3.2. Stage 2. Modification of the Balanced Scorecard

The practicality of the BSC in construction SMEs has been thoroughly discussed in the
literature, and BSC is determined as an efficient framework for measuring the performance
of construction SMEs (Malagueño et al. 2018; Monte and Fontenete 2012). However, the
BSC had initially been developed for large companies. Therefore, it should be modified by
considering the characteristics of construction SMEs. Modified BSC should be faster and less
complex so that construction SMEs can implement it with their limited resources and
capabilities (Madsen and Stenheim 2014).
As stated above, traditional BSC considers the KPIs under four perspectives, though it is not
mandatory. To reflect the organizational strategy, the traditional structure of BSC can be
modified by adding divergent perspectives. Besides, Schneiderman (1999) and Neely and
Bourne (2000) stated that four main perspectives are insufficient. Primarily due to the
complex environment of the CI, new perspectives are proposed for construction companies.
For instance, Ali et al. (2013) proposed the environment as a new perspective. Construction
Excellence (2017) stated that one of the KPIs perspectives for construction companies should
be the environment. The performance of construction SMEs is chiefly affected by factors
derived from the outside of the organization (Banham 2010). Therefore, external factors are
crucial as well. Consequently, in this study, two new perspectives are included to propose a
comprehensive PMS.
BSC includes strategic objectives in the development of performance measurement.
However, SMEs have to make frequent changes in strategic objectives since the business
environments where they operate are not stable (Madsen 2015). Therefore, to increase the
applicability rate of the BSC and to propose a generic PMS for the construction SMEs, the
strategic dimensions that show the possible strategic orientations of the organizations are
used. A literature review was performed to determine the generic strategic dimensions of
construction SMEs for BSC. Fernandes et al. (2006) clustered the strategic objectives into
three strategic dimensions while developing a strategy map for an SME based on BSC.
Gomes et al. (2009) conducted a factor analysis and determined five strategic dimensions for
SMEs. Monte and Fontenete (2012) proposed three dimensions for the small gas stations in
Portugal. Likewise, Sofiyabadi et al. (2016) proposed eight research criteria for SMEs in the
service business. Consequently, in this study, eight strategic dimensions were identified by
combining the strategic dimensions proposed for SMEs in the literature. The strategic
dimensions extracted from the literature are then validated through focus group discussion,
as shown in Section 3.6.

3.3. Stage 3. KPIs Identification

A comprehensive literature review was conducted via search engine Scopus to extract KPIs.
At the end of this search, a total of 68 studies were retrieved. A first-level screening was
performed by carefully reading the titles and abstracts. As a result, papers directly related to
company performance were filtered, and the studies dealing with project performance were
eliminated as projects and construction companies almost have entirely different
management systems (Turner and Müller 2003). Based on this research, eleven existing
studies related to performance measurement of construction companies proposing KPIs were
identified. All the KPIs proposed in these studies were then extracted to prepare an initial

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list. To prevent duplicates, these KPIs were re-evaluated to remove, merge, and/or rename
some KPIs with similar meanings. Finally, thirty-eight KPIs were identified.

3.4. Stage 4. KPIs Verification

The strategy and vision for the construction SMEs should also be verified since the BSC
framework requires strategies as a guideline to develop KPIs. However, the extracted KPIs
are proposed mainly for large construction companies. Therefore, they may not be in line
with the strategy and vision of the construction SMEs. Besides, KPIs should be determined
by considering the perspectives of BSC and classified into these perspectives. Therefore, to
filter out irrelevant KPIs, a discussion session led by a moderator (one of the authors of this
study) was conducted with a group of 12 experts. There is no determined rule about the size
of the focus group. It is important to note that a large sample size such as 20 or even 50 could
make the moderation of the session complex and hard to control. On the other hand, few
participants may lead to low-reliability and inhibit the extraction of creative ideas from the
sessions (Budayan et al. 2020). The experts were selected cautiously by considering their
positions to increase the reliability of the group discussion sessions. Therefore, judgment
sampling was applied to determine the participants. The following criteria were proposed to
select the most appropriate participants. It should be noted that, during the expert selection,
project types were not considered as a selection criterion. Unlike the project-specific studies
which consider the effect of project types, the project type becomes a negligible criterion for
the studies focusing on company performance (Ali et al., 2013; Radujković et al., 2010).
Furthermore, when a performance measurement system is developed for a company that
focuses on a single project type, it will have a limited practical implication since construction
companies have to undertake various project types simultaneously.
1. The respondent should work in a construction SME that identifies itself as a specialist
in residential building construction.
2. The respondent has a high-level management role.
3. The respondent’s company has survived more than five years in the industry.
4. The respondent has worked for more than one year in a management role.
The profile of the participants and their companies is shown in Table 2. Although the
participants were selected from construction SMEs, the total turnover and the total number
of employees were also checked and verified. All companies have worked in the CI for at
least five years. The experience levels and positions of the participants also show that these
participants satisfy the predefined criteria. Consequently, the ideas captured from these
participants can be considered reliable.
These KPIs were verified by following a similar methodology as described by Budayan et al.
(2020). According to this methodology, firstly, the participants reviewed the suitability of
KPIs considering the vision and strategy statement of construction SMEs. The participants
assessed the suitability of each KPI based on a 1 to 5 Likert scale without discussion. The
scale intervals are interpreted as follows: (1) not suitable; (2) partially suitable; (3) suitable;
(4) very suitable; and (5) most suitable. Then, the responses of the participants were evaluated
by conducting a descriptive analysis. Since the average of the appropriateness levels of all

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KPIs was calculated higher than 3.5, none of the KPIs was eliminated at this stage. Then,
these KPIs were discussed by the participants one by one to reach a final decision. At the end
of this session, all KPIs were verified by the participants with a consensus. Besides, each of
the experts was given an opportunity to propose a new KPI during this stage. Suggestions of
each expert were discussed during the session with other participants. The discussion ended
when a consensus about the appropriateness of KPIs was reached. At the end of this session,
8 new KPIs were proposed. Consequently, a final list of 46 KPIs was obtained and is shown
in Table 3. It should be noted that the “*” mark at the rightest column of Table 3 indicates
that this KPI was proposed during the focus group discussion sessions.

Table 2 - Profile of participants participating in group

discussion sessions.

Sample Specifications Counts and Percentages

Owner Manager
Role of Participants
7 (58.33%) 5 (41.66%)

Experience of the 5-10 10-20

Company in CI (Year) 5 (41.66%) 7 (58.33%)

Experience of Participants 1-5 5-15

in SMEs (Year) 5 (41.66%) 7 (58.33%)

Total Turnover of the 0-3 3-5

Company (Million $) 6 (50%) 6 (50%)

Number of Employees in 1-50 50-250

the Company 6 (50%) 6 (50%)

BSc. MSc.
Education Level
7 (58.33%) 5 (41.66%)

3.5. Stage 5. Classification of the KPIs into six perspectives

The second session was conducted with the same participants to classify the KPIs according
to the predefined six perspectives. The workflow conducted in this session is illustrated in
Figure 2. Consequently, the participants classified the identified KPIs into six perspectives
within a consensus, and the classification of KPIs to these six perspectives is illustrated in
Table 3 as well.

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Figure 2 - Workflow of the third session

Table 3 - Perspectives and Sources of Key Performance Indicators

Key Performance Indicators A B C D E F G H I K L Count
Financial
Profitability — X X — X X X X X X X 9
Reliability of financial performance — — — — — — — — — X — 1
Growth of organization — — X — — — — — X X X 4
Financial stability — — X — — — — — — X — 2
Proper cash flow — — — — — — — — — X — 1
Percentage of loan interest from profit — — — — — — — — — X — 1
Rate of return of an investment — — — — — — — — — — — *
The growth rate of annual revenue — — — — — — — — — — — *

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Table 3 - Perspectives and Sources of Key Performance Indicators (continue)

Key Performance Indicators A B C D E F G H I K L Count
Customer
The satisfaction of the internal customer — — X — — — — — X X — 3
Attracting new customers — — — — — — — — — — — *
Good customer relationships — — — — — — — — — X X 2
The satisfaction of external customers — X X — X X X — X X X 8
Good service or/and product quality — — — X X — — — X X — 4
Market share — — X — — X — X — X X 5
Value of local currency — — — — — — — — — — — *
Competitive price — — — — — — — — — X — 1
Effectiveness of managing contracts and 1
————————X ——
legal disputes
Internal Business Process
Productivity X X — — — X X X X X X 8
Innovation — — — — — — — — X X — 2
Healthy and safe working environment X X — X X — X X — X X 8
Business productivity — — X — — — — — X X — 3
Competency of managers — — — — — — — — — X — 1
Effectiveness of planning X X — X X X X — X X — 8
Labour force productivity — — — — — X — — — X — 2
Effectiveness of resource management — — — — — — — — — X — 1
Improving technological capacity — — X — X — — — — X — 3
Rate of professional employee — — — — X — — — — — — 1
Rework X — — — — — — — X X X 4
Defects — X — — — — — — X X — 3
Research and development level — — X — — X — — — X — 3
Satisfaction of employees — — — — — — — — X — X 2
Effectiveness of material planning — — — — — — — — — — — *
Learning and Growth
Empowered workforce — — — — — — — — — X — 1
Appropriateness of informatization — — X — — — — — X X — 3
Continuous improvement — — — — — — — — X X X 3
Training of personnel — — X — X X — — — X — 4
The capability of the HR management 1
—————————X —
team
Motivation ————————X X — 2

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Table 3 - Perspectives and Sources of Key Performance Indicators (continue)

Key Performance Indicators A B C D E F G H I K L Count
Environment
Impacts on society — — — — — — — — — X X 2
Effectiveness of waste management — — — — — — — — — X X 2
Optimizing energy use — — — — — — — — — X X 2
Conformity to standards — — — — — — — — — — — *
External
Effectiveness of Risk management —————————X — 1
A good relationship with stakeholders ————————X X — 2
Effectiveness of monitoring and *
———————————
managing changes in policy or law
Effectiveness of monitoring market *
———————————
conditions
Note: A: (Cox et al. 2003); B:(Bassioni et al. 2004); C: (Yu et al. 2007b); D: (Luu et al. 2008b); E: (Luu et
al. 2008a); F:(Chan 2009); G: (Skibniewski and Ghosh 2009); H: (Horta et al. 2010); I: (Radujković et al.
2010); K: (Ali et al. 2013); L: (Tripathi and Jha 2018).

3.6. Stage 6. Verification of the Identified Strategic Dimensions

The third session of group discussion was determined the strategic dimensions appropriate
to the construction SMEs. To verify the identified strategic dimensions, each strategic
dimension was discussed by the same participants one by one until they reached a consensus.
At the end of this session, two strategic dimensions, namely effective risk management and
atonement of HR strategy, were classified as unsuitable for construction SMEs and,
consequently, eliminated. The final list of strategic dimensions is illustrated in Table 4.

Table 4 - The final list of strategic dimensions

Abbreviation Criteria Abbreviation Criteria

C1 Ability to Run C4 Key Results
C2 Business continuity C5 Company Sales and Earnings
Competitive Coordinated Strategy with the
C3 C6
Advantage Enterprise Architecture

3.7. Stage 7. Data Collection

In this stage, a questionnaire was prepared by including the strategic dimensions and KPIs.
The questionnaire consisted of three parts. In the first part, respondents provided information
about themselves and their companies. In the second part, the respondents rated the KPIs
with respect to each strategic dimension (given in Table 4) based on seven linguistic variables
shown in Table 5. Fuzzy linguistic variables were used rather than numbers in this study

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since the experts can reflect their opinions about the identified KPIs more precisely and
ambiguity can be eliminated (Karwowski and Mital 1986). In this study, fuzzy membership
function and fuzzy numbers suggested by Lin et al. (2006) were followed. In the third part of
the questionnaire, the respondents also rated the importance of strategic dimensions for the
construction SMEs using the same linguistic variables.

Table 5 - Linguistic variables and fuzzy numbers

Linguistic Linguistic
Fuzzy numbers Fuzzy numbers
variables variables
Extremely low (0,0.05,0.15) Fairly high (0.5,0.65,0.8)
Low (0.1,0.2,0.3) High (0.7,0.8,0.9)
Fairly low (0.2,0.35,0.5) Extremely high (0.85,0.95,1)
Medium (0.3,0.5,0.7)

This questionnaire study was conducted with 55 respondents who were selected by using
judgment sampling, as shown in Section 3.4. The profile of the respondents and their
companies are shown in Table 6.

Table 6 - Profile of respondents and their companies

Sample
Counts and Percentages
Specifications
Role of Owner Manager
respondents 35 (63.63%) 20 (36.36%)
Experience of
5-10 10-20 20-25 25-30
the company
14(25.45%) 24(43.63%) 11(20%) 6(10.90%)
in CI (year)
Experience of
respondents 1-10 10-20 20-25 25-45
in SMEs 17(30.90%) 16(29.09%) 7(12.72%) 15 (27.27%)
(year)
Total
Turnover of 0-3 3-5
the Company 37(62.27%) 18(32.72%)
(Million $)
Number of
1-50 50-250
employees in
41(74.54%) 14(25.45%)
the company
Education BSc. MSc. Other
Level 35 (63.63%) 11(20%) 9(16.36%)

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Based on this table, the experiences of respondents who are top-level managers satisfy the
experience level criterion. Also, their companies survive longer than the criterion.
Consequently, the positions of the respondents, their experience levels, and their companies’
experiences satisfy all the predefined criteria. Finally, to avoid misunderstandings and
increase the reliability of the study, all questionnaires were completed through face-to-face
interviews.

3.8. Stage 8. Fuzzy VIKOR Analysis

To determine the effectiveness of the KPIs in measuring the performance of the companies
in achieving the determined strategic dimensions, a multiple-criteria decision making
(MCDM) perspective was used. As an MCDM method, VIKOR analysis was selected, and
all the processes were formulated accordingly. VIKOR is developed to determine a
compromise solution for a discrete decision-making problem with conflicting criteria. The
method is a convenient tool to use when decision-makers cannot select or do not know how
to decide on the most suitable alternatives. VIKOR was selected because it has several
advantages compared to other MCDM methods such as TOPSIS (Rostamzadeh et al. 2015).
Unlike the TOPSIS that considers only group utility maximization and individual regret
minimization, VIKOR also can fully reflect the experts’ subjective preferences (Liu and Wu
2012; Opricovic and Tzeng 2004). The VIKOR method is used in various fields many times
in the literature, such as performance management (Sofiyabadi et al. 2016) and risk
management (Gul et al. 2019).
As stated above, the fuzzy theory was considered a viable alternative. The decision-makers
make decisions under vague and uncertain conditions, leading to numerous uncertainties.
Therefore, the scientific methods should be selected in the decision-making process carefully
to reduce the risk of any uncertain decision environment (Sofiyabadi et al. 2016), and the
fuzzy theory is an effective method for dealing with vague and risky problems. VIKOR
method is also redesigned by using fuzzy theory and named as fuzzy VIKOR. Thus, the fuzzy
VIKOR was used in this study.

3.8.1. Appropriateness of the Collected Data for Fuzzy VIKOR Analysis

Before performing the fuzzy VIKOR analysis, the appropriateness of the sample for this
analysis was checked. Firstly, the sample size was considered. In the MCDM studies, the size
of the sample is a quite subjective and contextual measure. Therefore, there is no strict rule
for minimum sample size. However, MCDM methods such as VIKOR and TOPSIS do not
require a large sample size for the analysis (Gupta 2018; Volmohammadi 2010).
Consequently, the fundamental advantage of these methods is that they give reliable results
with a small sample size (Bacalan et al. 2019). A large sample size may even cause
unreliability due to cold-called respondents (Cheng and Li 2002), especially when the
questionnaire takes a long time to complete the questionnaire used in this study. Besides,
many authors pinpointed that MCDM techniques can offer reliable results with a small
sample size of 10 or lower experts, stating that the findings of these techniques might be
unrealistic with a large sample size since a large sample size can lead to a high degree of
inconsistency (Pun and Hui 2001). Therefore, many researchers, such as Suganthi (2018) (3

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experts), Liu et al. (2019) (6 experts), Liu et al. (2018b) (7 experts), Sofiyabadi et al. (2016)
(8 experts), performed either VIKOR or fuzzy VIKOR methods with small sample size.
Nonetheless, this study was conducted with 55 experts to maximize the reliability of the
results. In this manner, the sample size used in this study is way above the sample size of
similar studies as shown above.
Secondly, the reliability of this data set was reviewed. All questionnaires were collected via
face-to-face interviews to increase the reliability of the data. For this reason, the data
collection methodology used in this study is extremely reliable compared to studies collecting
the data via e-mails (Lee and Yang 2018). Namely, this study maximized the quality of the
data rather than the quantity.

3.8.2. Application of Fuzzy VIKOR Analysis

Although various software is available to perform fuzzy VIKOR analysis, an excel sheet was
developed in-house by following the fuzzy VIKOR method proposed by Opricovic (2011) to
have a broader knowledge about the method and its mechanism. The computational accuracy
was tested by using the data presented in Sofiyabadi et al. (2016).
In this study, first, a decision matrix was prepared for each participant, and 55 decision
matrices were obtained at the end. Later, these 55 matrices were merged to form an
aggregated decision matrix before applying the fuzzy VIKOR analysis. By following the
remaining steps of the fuzzy VIKOR, crisp Q values were obtained. Ranks of the KPIs were
obtained by sorting Crisp Q values (given in Table 7) in descending order. A KPI with the
smallest crisp Q value is the most important KPI, as understood from Table 7.

Table 7 - Outputs of Fuzzy VIKOR

KPIs Crisp Q KPIs Crisp Q KPIs Crisp Q KPIs Crisp Q
A1 0,0610 A13 0,0332 A24 0,0381 A36 0,0873
A2 0,0304 A14 0,0450 A25 0,0497 A37 0,0726
A3 0,0575 A15 0,0671 A26 0,0709 A38 0,0527
A4 0,0636 A16 0,0779 A27 0,0665 A39 0,1267
A5 0,0343 A17 0,0645 A28 0,0689 A40 0,1274
A6 0,1209 A18 0,0879 A29 0,0700 A41 0,1287
A7 0,0795 A19 0,0566 A30 0,0673 A42 0,0345
A8 0,0730 A20 0,0893 A31 0,0647 A43 0,1288
A9 0,0586 A21 0,0704 A32 0,0724 A44 0,0918
A10 0,0182 A22 0,0316 A33 0,0616 A45 0,0396
A11 0,0398 A23 0,0517 A34 0,0618 A46 0,0163
A12 0,0424 A35 0,0606

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4. RESULTS AND DISCUSSION OF FINDINGS

4.1. The Top KPIs
The top ten KPIs shown in Table 8 are discussed in this section since the number of KPIs
should be limited to eight to twelve while developing a PMS to improve its applicability
(Kaplan and Norton 1996; Parmenter 2007).
According to Table 8, eight KPIs are non-financial indicators. Therefore, a PMS that involves
only financial indicators such as conventional financial measurement systems is not accurate
and applicable in practice. For this reason, a broader perspective is necessary to evaluate the
performance of these companies. Additionally, “effectiveness of monitoring market
conditions” and “effectiveness of monitoring and managing changes in policy or law”
obtained very high scores as measures of external perspective. These results show that
external factors play crucial roles in the performance of construction SMEs. The intensive
dependence of construction SMEs on the external environment is also stated in the literature
(Li et al. 2011).
Furthermore, four KPIs proposed by experts during the focus group discussion sessions
obtained very high scores, highlighting the differences of construction SMEs. It is important
to note that these KPIs had been neglected in the existing studies focusing on large
construction companies and projects. Thus, the results verified that the perceptions of the
managers in large construction companies are different from the construction SMEs. Due to
this reason, construction SMEs need a PMS tailored according to their specific needs.

Table 8 - Top ten KPIs

KPIs S R Q Rank
Effectiveness of monitoring market conditions 1.127 0.245 0.0162 1
Attracting new customers 1.169 0.242 0.0182 2
Reliability of financial performance 1.233 0.259 0.0304 3
Competency of managers 1.314 0.248 0.0315 4
Good service and/or product quality 1.199 0.270 0.0332 5
Proper cash flow 1.235 0.267 0.0343 6
Conformity to standards 1.183 0.275 0.0344 7
Labour force productivity 1.282 0.267 0.0380 8
Effectiveness of monitoring and managing changes
1.260 0.274 0.0396 9
in policy or law
Good customer relationship 1.271 0.273 0.0398 10

Another notable point is that three indicators placed in the top ten KPIs are customer-
oriented, namely “attracting new customers”, “good service and product quality” and “good
customer relationships”. Construction SMEs should develop good relationships with their
customers since they generally utilize personal networks and rely on personal

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recommendations to attract new customers. Most construction SMEs consider the most
efficient marketing approach “word of mouth” (Buser and Carlsson 2014). Similarly,
qualities of end products and satisfaction of external customers are also acknowledged as
important KPIs for large construction companies (Ali et al. 2013; Radujković et al. 2010;
Tripathi and Jha 2018)
“Effectiveness of monitoring market conditions” was presented as the most important KPI in
this study. Construction SMEs should earn money as soon as possible after an investment;
otherwise, they will be out of business. However, especially during an economic crisis, the
money circulation in the market decreases, and these companies can confront difficulties in
getting their payments. Hence, market imperfections, such as financial distress, affect
construction SMEs severely (Belghitar and Khan 2013). Therefore, the owners or managers
of construction SMEs should continuously monitor and control market conditions to forecast
any fluctuations and should take precautions to keep their enterprises financially balanced.
In this way, they can have a chance to establish more sustainable management.
Additionally, Ulubeyli et al. (2018) asserted that construction SMEs are more vulnerable to
adverse market conditions than larger firms due to their relatively limited resources.
However, in the study of Radujkovic et al. (2010), “effectiveness of monitoring market
conditions” is not determined as one of the most significant KPIs since large construction
companies can maintain a strong stance against the fluctuations in the market, unlike
construction SMEs (Smallbone et al. 2012). This conclusion can also support the hypothesis
of this study, stating that large construction companies and construction SMEs have different
dynamics and strategic objectives, and therefore, a different PMS should be developed for
construction SMEs.
“Competency of managers” was considered as the fourth most significant performance
indicator by the respondents. Due to their economies of scale and limited resources,
construction SMEs confront with more difficulties compared to large companies. However,
they are more flexible and open to changes due to their simple internal management processes
(Aragón‐Sánchez and Sánchez‐Marín 2005). In construction SMEs, most of the internal
management processes are conducted by the CEO/entrepreneur or a small group of managers.
Therefore, to gain an advantage of construction SMEs’ flexible nature, the managers should
have competence, capabilities, and strong personality traits. Their capabilities and other
features are crucial in the performance of construction SMEs (McAuley 2010).
Consequently, the competency of managers must be measured both before and after the
recruitment continuously.
“Proper cash flow” was ranked in the sixth order. Comparatively, construction SMEs rely on
networking capital more than larger firms. Strictly speaking, the percentage of current assets
and liabilities to total assets and total liabilities are higher in construction SMEs than larger
companies (Padachi 2006). However, high investment in working capital can be one of the
fundamental reasons for bankruptcy (Soenen 1993) due to the requirement of external finance
which is more expensive for construction SMEs because of the asymmetric information
(Belghitar and Khan 2013). However, the availability of cash flow can help companies to
avoid the need for expensive external finance (Baños-Caballero et al. 2014). Companies
having proper cash flow can exploit the advantages of high investment in working capital
without dealing with expensive external finance. This advantage makes the availability of
cash flow crucial for construction SMEs. Besides, since construction SMEs have relatively

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higher transaction costs than larger companies due to the economies of scale, proper cash
flow is profoundly demanded by construction SMEs (Tauringana and Adjapong Afrifa 2013).
Indeed, Navon (1996) emphasized the importance of cash flow for the construction
companies and indicated that most construction companies fail due to a lack of proper cash
flow. For this reason, construction SMEs should continuously control this KPI.
The ninth most significant indicator is determined as “Effectiveness of monitoring and
managing changes in policy or law”. Governments, together with their policies and laws, are
the key factors affecting the development and success of SMEs in all industries (Smallbone
and Welter 2001). Therefore, policies or regulations might act as enabling and/or constraining
forces for SMEs. Bannock and Peacock (1989) explained the costs resulted from the changes
in policy or law and defined the types of costs as direct costs and compliance costs. They
argued that these costs are relatively higher for SMEs than larger companies due to small
enterprises’ limited resources. Therefore, studies conducted for large construction companies
generally neglected these KPIs in their PMSs. Consequently, owners or managers of
construction SMEs must be aware of the significance of the changes in policies and laws and
monitor this KPI.

4.2. The Least Rated KPIs

According to Table 7, all KPIs related to environmental issues except “conformity to
standards” were considered as the least significant KPIs by the respondents. However,
conformity to standards is determined as the seventh most important KPI. Two possible
reasons can explain this conflict. The first reason might be that construction SMEs do not
pay enough attention to examining their impact on the environment and stay passive in the
face of sustainable development (Loucks et al. 2010). The second reason might be that
respondents may not be thinking of environmental issues, which could help them improve
their enterprise performance. The most possible perception is that they consider
environmental issues as all about achieving laws and some standards.
Another interesting finding is that the KPIs related to human resource management are
ranked in the list of least important KPIs. Although the positive relationship between the
human resource management practices and organizational performance of SMEs is stated in
the literature (Ogunyomi and Bruning 2016), most construction SMEs consider that the
training of employees is expensive and the return of the investment from it is insignificant
(Dainty et al. 2005) due to the high employee turnover and low retention rate in construction
SMEs compared to large construction companies.

5. CONCLUSIONS AND RECOMMENDATIONS

Although the importance of the performance of the construction SMEs for the CI and the
whole economy is widely recognized, they do not perform the expected performance.
Therefore, performance measurement is critical for these companies to improve their
performance. This research attempted to determine the KPIs that can be used to measure the
construction SMEs performances.

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This research has shown that construction SMEs are vulnerable to external factors.
Construction SMEs generally perform their operations with their limited resources. They do
not have sufficient abilities and resources to adapt to the changes and resist crises in the
market compared to the large construction companies. Therefore, these external factors affect
construction SMEs in achieving their strategic objectives. In other words, there is a
relationship between the performance of these companies and the external factors.
Consequently, they should measure the effectiveness of their procedures to monitor market
conditions and their performances.
This study also highlighted that the cash flow and the reliability of financial performance are
more important than profitability. The construction SMEs prefer permanent earnings to high
profitability since they conduct their operations based on working capital. This preference
means that these companies do not hold a capital buffer for their immediate financial
obligations required to survive in the market. Therefore, they should measure the reliability
and stability of their cash flow and financial performance.
On the other hand, the least rated ten KPIs also provide crucial insights into the tendency of
the respondents. Results show that all environmental indicators, except for conformity to
standards, were ranked among the lowest-ranked indicators for measuring the performance
of the construction SMEs. This finding reflects the general view of the CI. Construction
companies consider making extra efforts for having good environmental performance as
insignificant. The respondents regard that conformity to standards is adequate since they can
avoid fines.
This study also hypothesizes that there are perspective differences between the managers
and/or owners of construction SMEs, projects, and large construction companies. As stated
before, the manager preferences on the implementation of the PMSs are as crucial as the
structure of PMSs itself. The results of this study verified this hypothesis. For instance,
although owners or managers of construction SMEs think that external factors have
significant effects on their enterprises, the results of other performance measurement-related
studies conducted for larger companies have opposite results. Consequently, the preferences
and perspectives of the managers of construction SMEs should be revealed to develop a PMS
specific to construction SMEs.
This study provides vital contributions to the literature. The applicability of BSC is in
question due to the complexity of the BSC. However, this study develops a faster and more
flexible PMS based on BSC by identifying the most significant KPIs and using the strategic
dimensions. Therefore, owners and/or managers of construction SMEs who want to improve
the performance of their enterprises can use the KPIs proposed in this study. Besides, they
can develop a strategic map for their organizations by utilizing the findings of this study and
revise their managerial processes to ensure that strategic objectives are met.
Although the validation is a substantial part of studies that used an MCDM approach, the
validation of the findings of this study was not performed. However, to run this study, two
different research methods, namely questionnaires and focus group discussions, were used
with two separate groups. Similarities between the obtained results and the past studies are
observed, which can be considered as a support for the findings of this study. In addition, one
purpose of this study was to increase the practical application of BSC in SMEs. However, to
improve the reliability of this study, a validation session should be conducted, which is also

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planned as a case study in the future. On the other hand, the participants of the questionnaire
survey and focus group discussions are all located in Turkey so that the results derived from
their judgements are likely to be affected by their experience in the Turkish CI. Thus,
although the list of KPIs can be considered generic, the ranking of the KPIs may change
concerning a different group of participants experienced in other countries. For instance, as
elaborated above, external KPIs related to macroeconomic conditions were given top priority
by the participants. The fluctuating economic conditions of Turkey can be one of the reasons
for this conclusion, however, in a more stable economy, the macroeconomic conditions can
be considered uncritical. Contrarily, although environment related KPIs are considered
among the least important KPIs, in a country where stricter environmental regulations are
applied, these indicators can be ranked at the top level. Thus, the performance measurement
framework proposed in this study should be perceived as a generic framework so that
minimal modifications might be necessary based on the needs and conditions of a country.
In this study, the fuzzy VIKOR was selected due to its aforementioned benefits. However, in
performance management literature, the effects of MCDM methods over the ranks of KPIs
were not thoroughly investigated. However, there is a possibility that the ranks of the KPIs
can vary among different MCDM methods. Consequently, the forthcoming studies should
investigate this issue. Another essential step for improving the developed PMS is to
determine how to measure KPIs within the system. For this purpose, future studies can
promote a performance index based on the findings of this study. Furthermore, the
differences between various industries can also be investigated to reveal how the
characteristics of the industries affect the preferences of the managers on performance
measurement in these industries.

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