Benchmarking in Real Estate, Institutional and Commercial Construction: Why It Matters and How to Implement It
In the dynamic sectors of real estate, institutional and commercial construction, staying competitive and ensuring project success require more than just meeting deadlines and budgets. Benchmarking, a powerful tool for continuous improvement, plays a crucial role in these industries by providing a clear understanding of where a project or organization stands relative to its peers and identifying areas for enhancement.
What is Benchmarking?
Benchmarking is defined in the Juran Quality Handbook as “a systematic and continuous process that facilitates the measurement and comparison of performance and the identification of best practices that enable superior performance.” It involves comparing the performance of your projects, operations, or processes against industry standards, internal or external best practices, or competitors. The ultimate goal is to identify gaps, optimize processes, and adopt best practices that lead to superior project outcomes and operational excellence.
Why Benchmarking is Important
Improving Project Performance: In commercial construction and real estate development, asset management, benchmarking helps identify underperforming areas in project planning and execution, such as delays, cost overruns, and project organizational inefficiencies. By comparing these metrics against industry standards, project executives can implement corrective actions to enhance future project performance.
Staying Competitive: The real estate, and construction markets are highly competitive. Benchmarking enables companies to keep pace with industry trends and innovations, ensuring they offer services and project outcomes that meet or exceed market expectations. This competitive edge can lead to increased client satisfaction and business growth.
Driving Strategic Decision-Making: By providing data-driven insights, benchmarking supports informed decision-making. Whether it’s choosing materials, selecting contractors, or planning budgets, understanding how these choices compare to industry standards can lead to better strategic outcomes.
How to Implement Benchmarking for Your Projects
Identify Key Performance Indicators (KPIs): Start by determining which KPIs are most relevant to your projects. In real estate and construction, these might include metrics like cost estimate accuracy, budget variance at completion, or tenant satisfaction.
Identify Project Categories and Cost Drivers: Use expert judgment or in-house resources to define project categories, subcategories, and key cost drivers. For instance, under the category of tenant improvement projects, you might include office renovations, shell & core fit-outs, and more, with cost drivers such as cost per square foot and cost per full-time equivalent (FTE). For infrastructure projects, categories could include roofing, HVAC, or generator installations.
Collect Data: Gather data on your current projects from internal reports, or project management software. Ensure the data is accurate, up-to-date, and comprehensive. Additionally, data breakdowns are important; for example, design costs, construction costs, and fixtures, furniture, and equipment (FF&E) costs should be considered.
Compare Against Industry Standards and set Targets: Utilize industry benchmarks or best practices to evaluate your performance. This could involve comparing your data with industry reports, peer organizations, or standards set by industry associations. This can help to set target objectives for the next quarter or next year.
Analyze Gaps and Opportunities: Identify areas where your performance lags behind the benchmarks. These gaps present opportunities for improvement. Conversely, areas where you excel can be leveraged as competitive advantages or best practices within your organization. For example, your program's budget variance at completion should ideally be less than 30%; if not, gaps need to be identified and addressed.
Develop and Implement Action Plans: Based on your analysis, create action plans to address performance gaps. This could involve adopting new technologies, developing cost-estimating tools, improving processes, updating policies, or retraining staff. Ensure these plans are actionable, with clear timelines and responsibilities.
Monitor Progress and Adjust: Benchmarking is not a one-time activity. Continuously monitor your KPIs and compare them against the benchmarks. Adjust your strategies as needed to ensure ongoing improvement and adaptation to industry changes.
In the real estate and commercial construction industries, benchmarking is a critical tool for achieving excellence. By systematically comparing performance against industry standards, organizations can identify weaknesses, capitalize on strengths, and continuously improve their project outcomes and operations. Implementing a robust benchmarking process ensures that your projects not only meet current demands but also set the standard for future success.
Looking to elevate your next construction project?
Reach out to Xenofan Consultants Constructions today and see how our expertise in benchmarking can turn your vision into reality. From planning to execution, your project delivery experience is our priority.
Reference
Juran, Joseph M., and Joseph A. De Feo. Juran’s Quality Handbook. 6th ed. New York: McGraw-Hill, 2010.