ATLANTA (12/01/20)–Contractors will get the most benefit out of analytics platforms if they ask tough questions about what to measure, advises Bruce Orr, founder and Chief Data Scientist of ProNovos, in a column for Construction Business Owner.
“Analytics dashboards continue to grow in popularity among contractors, but the discussion can omit an important consideration—metrics that are useful to one company can be meaningless to another,” writes Orr, whose Atlanta-based firm creates data-warehousing, analytics and operations-management solutions for construction contractors.
The column (“How to Determine the Data That Matters to Your Firm”) appears in the Strategy section of CBO’s website, as well as in its November print edition.
While certain financial yardsticks are universal, Orr writes, the relevance of other key performance indicators (KPIs) depends on many factors, such as how large the company is, what it builds, who its customers are and how long its projects take to complete.
A contractor with 15 or 20 customers, for instance, could discover some surprise standouts by ranking them according to project profitability over time—and then targeting bids accordingly. For others, though, such a high-level ranking may have less utility.
Orr cites the example of a stucco contractor that does most of its work for two dominant GCs in a limited geographic area—one in which the top five GCs handle 85 percent of all major projects.
“The pool of customers is small, and the stucco contractor already knows which clients are the most profitable,” Orr notes. “In fact, the consistent volume of work provided by those two primary GCs may be an overriding consideration: Even if their projects are less lucrative, they translate into more work overall.”
And what if another contractor’s customer list is actually an ever-shifting jumble of complex, one-off LLCs and joint ventures? “Many of these investors and developers may have never worked together before and will never do so again,” Orr writes. “You could rank them, but would that be useful?”
Other examples in the piece illustrate how KPI relevance can be affected by factors like project duration, size and complexity.
“On complex projects, GCs may want to pay close attention to reporting and analysis around the closeout process,” Orr notes. “The goal should be to avoid situations where, having formally closed out the job, the GC learns that it has lost track of work completed by its subs and now must go back to the customer, hat in hand, with unexpected bills.”
In addition, the data scientist points to the potential utility of tracking and analyzing payment trends among repeat customers. In a dashboard for accounts receivable, for example, construction data visualizations could help a contractor understand multiple dimensions of the accounts receivable process in one glance.
“Similar data visualizations can be used to track payments during the course of a single, long-term project,” Orr writes. “However, such measurements may be of little use to contractors that finish projects quickly.”
In the conclusion of the piece, Orr encourages contractors to continually question whether they truly understand the story being told by the data.
“If it’s a 100-hour job and the crew has already logged 50 hours, that may seem to suggest that the project is halfway done,” he writes. “But introduce production quantities and you may learn that only 25 cubic meters of concrete, out of a required 100, have actually been poured… Nearly any KPI can sound like it would add to your understanding, but by looking at the specifics at your own company, you can better determine which metrics will serve you best.”
To read the full column at Construction Business Owner, visit: