Measuring the Performance of Value Management Studies in Construction: Critical Review

1. Measuring the Performance of Value Management Studies in Construction: Critical Review Gongbo Lin & Qiping Shen Journal of Management in Engineering January 2007

2. Contents • Introduction • Research Objectives • Research Methodology • Measuring Organizational Performance • Measuring Project Performance • Performance Measurement in VM studies • Possibility of Adopting Existing Measurement Frameworks • Desired Features of new system

3. Introduction • Value Management (VM) • Very useful method to use when dealing with issues such as budget and schedule constraints arising in the construction industry • Very little research to evaluate the performance of VM studies • Causes apprehension

4. Research Objectives • To provide a summary of previous studies on performance measurement • To give an insight on how to develop a frame-work to meet measurement requirements in VM studies

5. Definitions • Performance Measurements • The process of determining how successful organizations or individuals have been in attaining their objectives (Bititci et al. 1997)

6. Research Methodology • 7 Major Journals Based on a study by Chau (1997) • Construction Management & Economics (CME) • Journal of Construction Engineering and Management (CEM) • Engineering Construction and Architectural Management • Journal of Management in Engineering • International Journal of Project Management • Automation in Construction • Building Research and Information (BRI)

7. Search Words • Performance • Measure (measurement, measuring) • Evaluate (evaluation, evaluating) • Asses (assessment, assessing) • Critical Success Factors (CSFs) • Key Performance Indicators (KPIs)

9. Number of Papers Classified by Different Levels of Measurements

10. Organizational Performance • 1990’s • Increased competition, • Higher standards for competitive success • Scarce resources • Various studies stressed the need for performance measurement

11. Organizational Performance • KPI frame work developed in late 1990’s • KPI Working Group • Tool to benchmark activities at strategic and operational level • Time, quality, cost etc. • Construction Industry Institute (CII) introduced CII Benchmarking and Metrics • Companies with statistical measurements to improve the effectiveness of capital projects • Helps to identify the companies position among peer organizations

12. Organizational Performance • Kagioglou et al. 2001 • Performance measurement framework on the basis of Balance Score Card (BSC), adding ‘project’ and ‘customer’ perspectives • Beatham et al. 2002 & Bassioni et al. 2004 • Integrated business improvement system that used the European Foundation for Quality Management Approach

13. Project Performance • Traditional approach relied on 3 indicators • Cost, Time and Quality • Kumaraswamy and Thrope, 1996 • Client satisfaction, Project team satisfaction, Technology, Environment friendliness, Health & safety • KPI working group in 2000 • Time, Cost, Quality, Client Satisfaction, Change Orders, Business Performance, Health & Safety

14. Performance in VM Studies • Previous Measurements • Focus on reducing the cost and enhancing the function • Mostly talks about money • Highway & Transportation Department: • ROI of $121 for every $ spent on VM programs • Identifying CSFs of VM studies is critical

15. Performance in VM Studies Cont.. • Shen & Liu (2003) highlighted 15 CSF’s in 4 clusters • VM team requirements • Clients influence • Facilitator Competence • Relevant Departments impact • Did not identify KPIs to link these CSFs to an operational level

16. Performance in VM Studies Cont.. • Benchmarking • Male et al. (1998) • Client satisfaction good indication of the performance of VM process • Data on the project after the application of the VM studies overall indication of the performance of VM studies • No indication on how the performance was achieved and how to improve the performance

17. Considerations • Each VM study is unique • Calls for flexible measurements • Prompt and cost efficient because of the time and resource limitation of the VM programs • No such method which incorporates the 3 requirements without reducing the accuracy

18. Possibilities • BSC • Not comprehensive • 4 perspectives are insufficient for VM programs • BSC focuses on strategic perspectives, not sufficient for VM studies that last only a few days • BSC is developed at strategic, rather than operational level, different for different organizations

19. Possibilities • European Foundation for Quality Management (EFQM) Model • Provides perspective to Integrate result areas and organization areas in one model • But fixed criteria

21. KPI FrameWork

22. Possibilities • KPI Framework • Lacks holistic viewpoint on the relationship between the various indicators • No measurement of suppliers • Doesn’t address the innovation and learning perspective

23. Desired Features • System that measures not only the financial outcomes, but also the VM process • Data collection and processing methods should be prompt and easy to provide timely feedback for corrective measures • Indicators like client satisfaction, improved communication between stakeholders etc should be included in the framework