Monitoring these five key areas in your construction business can help you measure its performance and adjust course to improve your results:

1. Cashflow monitoring
2. Performance management metrics
3. Workplace culture
4. Scenario planning
5. Digital solutions

The construction industry is facing many challenges in 2024 — including supply chain disruptions, a labour shortage, and shifts in customer demand. Additionally, high interest rates and the rising cost of materials is putting significant pressure on your bottom line. How can you improve the performance of your construction business to remain competitive in the current landscape?

It is vital to monitor five key areas in your business to understand how it is performing in today’s marketplace. This can help you identify areas where you excel — and areas where you may need to adjust course to improve your results.

Monitoring these five key areas in your construction business can help you measure its performance and successfully navigate today’s uncertain landscape:

Construction companies invest a lot of cash in buying land for development — however, it might take years before the land is developed. While its value might increase over time, this doesn’t contribute to your immediate cashflow. This situation leaves a lot of cash tied up in land or assets, reducing the amount of liquid cash your business has available to pay for materials, labour, and operations.

Monitoring your cashflow can help you gain insights into the financial performance of your business. It can also help you understand how much cash you have, how much cash you need to cover expenses, and when cash will come in through receipts or go out through spending.

This can help you pinpoint areas where you can make changes to improve your cashflow. For example, you may have unpaid invoices from customers. Following up to collect any payments owed can help improve your cashflow, ensuring your business has enough cash to pay for materials, labour, and other necessities.

To effectively monitor your cashflow, it is important to have the right systems and reporting capabilities in place. Assess the systems and performance reporting within your construction company and ask yourself questions such as:

• Do the financial reports provide the information and analysis you need to support decision making?
• Do you have easy access to real or near-time data when you need it?
• Are your financial reports accurate?
• Can you make confident decisions based on the information in your financial reports?

The answers to these questions can allow you to identify what is preventing you from effectively monitoring your cashflow. Consider how to modernize these systems if your current systems are not able to provide the timely, complete, and accurate financial reports you need.

Performance management metrics provide a comprehensive view into your construction company’s operations and projects. Monitoring individual project metrics such as budget versus actual costs, time to complete, and profit margin can help you understand the performance of each project. Company-level metrics including days to build, revenue, and customer experience score can help you assess the overall performance of your business in a competitive marketplace.

Regularly monitoring these metrics allows you to gain insights on where your business is performing well and where improvements can be made. For example, you may identify that your company takes more time to complete projects and review your operations to identify bottlenecks and improve processes. Monitoring this metric will help you understand if the changes you made are working successfully — or whether you need to make additional changes to improve performance.

Asking yourself the following questions can help you determine whether you have the right systems in place to monitor these metrics:

• Do your systems allow you to capture information and data points about key performance metrics across your operations?
• Do these systems allow you to see gaps, risks, impacts, and the implications of decisions?
• Do your systems and technology support cross-departmental collaboration?
• Are your systems integrated across key functions to allow for a more complete cross-department view of operational performance?

This can help you identify what barriers are preventing you from successfully monitoring these metrics. It is important to consider where your company can invest in these systems or improve its existing systems to effectively monitor its performance management metrics. This enables you to make informed decisions to streamline your operations, enhance efficiency, and improve performance.

The construction industry is facing a labour shortage — and it is important to monitor your workplace culture and make adjustments to increase employee recruitment and retention. Assess what opportunities you offer your employees to learn, grow, and develop their careers and how you keep them meaningfully engaged.

This can help reduce the cost of hiring and training new employees by increasing recruitment and retention. It can also help prevent your company from losing important organizational knowledge. Asking yourself these questions can help you identify how effectively your current systems enable you to monitor your workplace culture:

• Can you accurately track the progress and outcomes of employee training and development?
• Do you have a complete picture of employee turnover?
• How do you measure and monitor employee engagement and productivity?
• Does your data provide actionable insights to improve workplace culture?

While there are many ways to assess and measure employee engagement within your company, systems are one way to help you understand the current context, set a baseline, and monitor and track your progress. This can help you make informed decisions to improve the employee experience within your business.

Scenario planning can help you outline your next steps in the construction industry. If your goal is growth, it can help you evaluate your options and guide your decision making. If you determine growth by mergers and acquisitions is the best plan, scenario planning can help you understand what types of companies you should buy — and when to make those purchases.

It can also help you understand long-term risks to your construction business and make plans to mitigate those risks. What-if scenarios can analyze what might happen to your business if different variables change. Examples of these variables include a decrease in market demand for certain types of housing, an increase in the cost of concrete, or any other factor that might impact your business.

It can also help predict which trends will emerge in the industry and how those trends could impact your business. Scenario planning is a valuable tool to help you determine where to make investments and inform the strategy and future direction of your business.

Digital solutions enable you to achieve business objectives such as monitoring your cashflow, evaluating your performance management metrics, or improving your workplace culture. Solutions such as enterprise resource planning (ERP) platforms can integrate with your financial system to provide timely, complete, and accurate financial reporting. This allows you to monitor your cashflow and make informed decisions for your business.

ERP platforms can also provide important insights into your workplace culture. HRIS modules and/or integrated third-party solutions can measure employee engagement and track the impact of learning and development programs. HRIS capabilities provide insights that allow you to improve the employee experience to increase employee recruitment and retention.  

Project management solutions can help you monitor the progress of each construction project and make data-driven decisions to optimize your performance. These tools can help you track when subcontractors are scheduled to arrive onsite or when an inspection is occurring, which allows projects to run smoothly and prevents delays in development.

As new technology such as AI emerges in the business landscape, it is important to assess the state of digital maturity within your business. AI has the potential to affect how businesses operate, perform, and measure performance — such as by predicting costs, supporting scheduling, or managing contracts.

Digital maturity is about how effectively your business implements digital solutions to enable its business objectives. Digital maturity should be measured across all the key dimensions of your business — including people, process, technology, governance, data, and cybersecurity.

Asking yourself these questions can help you assess your company’s state of digital maturity:

• How well does your digital strategy align with your overall business goals and objectives?
• What digital tools and core technologies are currently in use and how integrated are they within your company?
• To what extent have you digitized your workflows and processes and streamlined them across core operational functions?
• Is your company responsive and agile in adopting new technologies that align with its business objectives?
• How effectively do you manage change when implementing new digital solutions?
• Do your solutions deliver timely, accurate, and complete reports that enable you to make confident decisions?

Technology is continuing to evolve — and plays a crucial role in achieving your business objectives in today’s marketplace. Implementing digital solutions to support your goals and continuously monitoring your state of digital maturity can help your business remain agile and adapt to a changing landscape.