November 18, 2022
Construction benchmarking is one of the most impactful activities a construction company or design firm can engage in to boost its performance. Benchmarking is essentially the process of comparing your business to standards or best practices within the industry. By assessing key metrics and comparing them to competitors, the market, or even past performance, companies can enhance processes, increase productivity, and grow profits.
Benchmarking provides detailed insights into a firm’s commitment to industry best practices and helps assess contract performance at the time of evaluation. Construction companies can benchmark performance across their activities, while also conducting competitor and strategic benchmarking to stay ahead of trends, fill service gaps, and ensure continuous improvement.
Let’s explore the three main types of construction benchmarking that can drive better performance and results for your business.
Why Benchmarking Matters in Construction: An Overview
Benchmarking is essential for setting higher standards in your projects and operations. It helps construction companies identify strengths and weaknesses, recognize industry trends, and pinpoint areas for improvement. Here are the three primary types of construction benchmarking to consider:
Internal Benchmarking: Assessing Your Past Projects for Continuous Improvement
The first step in improving your company’s performance is to look inward. Internal benchmarking involves analyzing past projects to create best practices for future work. It allows you to identify areas of success and areas for improvement by reviewing project data and key performance indicators (KPIs).
Key Questions to Ask When Conducting Internal Benchmarking:
- What worked well in previous projects? What didn’t?
- What were the key performance indicators (KPIs) that defined project success?
- Did all actions occur on time, and were hand-offs seamless?
- Were there an excessive number of changes during the project, and what caused them?
- Did your contract documents clearly outline project roles, responsibilities, and obligations?
- What improvements can be made, and how will they be implemented?
By examining these factors without bias, you can create more effective policies and procedures. This self-reflection is the foundation for creating internal best practices that will boost future project success.
External Benchmarking: Understanding Your Market Position and Competition
External benchmarking is about comparing your company’s performance to others in the industry. Whether you like it or not, your business is always being compared to competitors, and it’s crucial to understand where you stand in the market. By comparing your performance against market standards, you can identify areas for improvement, drive innovation, and stay competitive.
Key Questions External Benchmarking Answers:
- How does your performance compare to the overall construction market?
- How does your performance compare to your specific project types and sizes within your market region?
- What is the average project duration for your type of projects, and does your portfolio align with industry norms?
- How many change orders are acceptable for a project of your size and scope?
- What are the average costs and time impacts of change orders for your project types?
While both internal and external benchmarking require the collection and analysis of data over time, it’s important to note that external benchmarking can be challenging. Gathering precise market data on your own is difficult, and many companies rely on industry reports or survey data from consulting firms to obtain reliable benchmarking insights.
Strategic Benchmarking: Aligning Your Business Strategy with Top Performers
Strategic benchmarking goes beyond performance metrics—it involves comparing your company’s strategic goals to those of the highest-performing firms in your segment. This type of benchmarking helps identify trends, strategic differences, and opportunities that your company can leverage for long-term success.
How to Use Strategic Benchmarking:
- Identify Key Strategic Areas: Focus on financial metrics, safety, environmental impact, marketing, sales, or other aspects of your business strategy.
- Analyze High-Performing Companies: Review your internal and external benchmarking results and research how other top companies are approaching similar challenges.
- Recalibrate Your Strategy: With the insights gained, adjust your company’s vision and long-term goals. Identify gaps in your strategy and fill them by adapting the best practices you’ve learned.
Strategic benchmarking enables you to stay competitive by understanding not only what others in your field are doing, but why their strategies are working and whether they can be adapted to your business.
How to Implement Your Benchmarking Insights
The true value of benchmarking lies in applying its findings to your business. Don’t let the time and resources spent on benchmarking go to waste. Create an action plan based on your insights, and ensure your company moves forward with the knowledge gained from benchmarking.
By acting on these insights, you can position your construction business for growth, increased profitability, and improved operational efficiency.
Stay Ahead with Benchmarking
For any construction company or design firm, benchmarking is a powerful tool to assess past performance, measure against the competition, and refine strategic goals. Whether you are reviewing internal processes, comparing against market standards, or adjusting your business strategy, benchmarking offers invaluable insights that can propel your business forward.
Start benchmarking your business today by reviewing past projects, comparing against industry standards, and refining your strategy to align with the best in the business. Take the necessary steps to improve your business and stay competitive in the ever-evolving construction industry.
AIA Contract Documents has provided this article for general informational purposes only. The information provided is not legal opinion or legal advice and does not create an attorney-client relationship of any kind. This article is also not intended to provide guidance as to how project parties should interpret their specific contracts or resolve contract disputes, as those decisions will need to be made in consultation with legal counsel, insurance counsel, and other professionals, and based upon a multitude of factors.