PhD PROPOSAL PRESENTATION
BY
OYEWOBI, Luqman oyekunle
Department of Construction Economics & Management
University of Cape Town
Benchmarking framework for SMEs October 2012
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General overview of construction industry
◦ Nature- fragmented
◦ Stakeholders’ relationship
Construction Industry Development Board
 Construction companies
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◦ Large
◦ SMEs
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Performance Measurement System (PMS)
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Key Performance Indicators (KPI)
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Benchmarking
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Performance Measurement System
◦ approaches
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The accounting discipline- emphasis on cost efficiency
In the field of finance-Balanced Scorecards Model (BSCs)
In the marketing field- market share
According to management science tradition, corporate
performance measurement should be based on the principle of
Total Quality Management (TQM)
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Incongruities in the performance measurement approaches led to
emergence of multifaceted frameworks
◦ that lay emphasis on self-assessment systems such as
 Deming Prize ( Japan and Asia),
 Malcom Baldridge Award (USA),
 The European Foundation for Quality Management(EFQM)
◦ the systems that is designed to assist leaders/managers measure and
improve business such as
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Capability Maturity Matrices,
Performance Pyramid,
the Effective Progress and Performance Measurement (EP2M) and;
the Balance Scorecard (BSC
Wongrassmee, Gardiner and Simmons (2003)
Competitive business environment within the industry
Re-appraisal of ways of doing things
◦ Latham report (1994), Egan report (1998)
◦ The KPIs are developed generically and it has been criticised:
 to be a lagging measures that barely provide opportunity for
change (Beatham, et al., 2004).
 as a marketing tools rather than being part of the construction
business management
5 – Key Drivers
for change
4 – Key Project
Processes
Capital cost
Committed
leadership
Focus on the
customer
Product Team
Integration
Quality driven
agenda
Commitment
to people
7 – Target for
improvement
Product
Partnering
the supply
chain
development
Construction
time
Predictability
Defects
Project
implementati
on
Production
of
components
Benchmarking framework
Accidents
Productivity
Turnover &
Profit
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This is the essence of measurement. Let’s make sure
the concept of Key Performance Indicator is
understood.
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An “indicator” is a gauge or a measure that reports
information.
“Performance” is the result or activity we are looking
for that fits in to strategic goals.
“Key” means that this measure has been pinpointed so
carefully that management knows precisely what to do.
Measures are developed to capture both the input and
output elements of a business system.
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Benchmarking framework
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SMEs within this context mean small and medium-sized
construction enterprises.
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SMEs are pretty difficult to define due to many factors
involved and the incongruence that characterised their
nature (Hudson, 2001)
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Different countries have different definition for what SMEs
represent (Hudson, 2001; Wu, 2009; Thassanabanjong et
al., 2009; Mirbargkar, 2009)
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many adopt annual turnover, number of employees or asset
to define size for classification of firms.
Table 1: SMMEs CLASSIFICATION
Size
Full-time
Total
equivalent annual
of paid
turnover
employee (Million)
s
Medium
51-200
ZAR26.00
Small
21- 50
ZAR 6.00
Very small 6 - 20
ZAR 3.00
Micro
ZAR 0.20
1–5
Source: South Africa (2003)
 Small
and
medium
enterprises
(SMEs)
comprise 91% of all formal
business entities in the
South Africa,
 employ
61%
workforce and
of
the
 contribute between 52-57%
to GDP
Abor and Quartey (2010).
Benchmarking
Benchmarking
framework
framework
for SMEs October 2012
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Characteristics of SMEs as classified by Hudson (2001) and identified by Singh et al. (2008):
Competitive environment
Reliance on small number of customers
Lack of market influence
Reactive, fire fighting approach to issues
Quicker response to customer needs
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Organisational environment
Flat and flexible organisational structure that provide high potential for innovations
Severe resources limitation in term of manpower and finance
Skill wastage and lack of training
Short decision making chain with immediate feedback
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Management practices
High personalised management style
Lack of management expertise
Informal reactive strategies
Simple management system and procedure
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External Factors
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Limited access to finance
Poor market conditions
Strong competitiveness
Inadequate staff
Lack of institutional support
Internal Factors
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Lack of co-operation and networking
Obsolete technology and lack of innovation
Lack of entrepreneurial qualification
Poor management strategy and vision
Lack of performance review on a regular basis (Franco and
Haase,2010)
What is performance measurement?
According Baldrige Criteria:
 Performance refers to output results and their outcomes
obtained from processes, products, and services that permit
evaluation and comparison relative to goals, standards, past
results, and other organisations. Performance can be expressed
in non-financial and financial terms.
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Measurement refers to numerical information that quantifies
input, output, and performance dimensions of processes,
products, services, and the overall organisation (outcomes).
Performance measures might be simple (derived from one
measurement) or composite
How do you know your firm is performing and performing rightly ?
Take a balance of measures to link firm strategy to performance
BALANCE SCORECARDs
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Financial Perspective
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Customer Perspective
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Internal Process
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Learning and Growth
◦ Financial performance- profitability; growth and shareholders
◦ Identification of the customer segments and what they value (price, service ;
quality etc.)
◦ Work flow towards accomplishment of strategies- cycle time, productivity,
cost
◦ To achieve our vision, how must our firm learn and improve?
 The employees, organizational structure, capacity, and training and development
Benchmarking framework
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How do you know your actions are focused and deployed
appropriately to improve performance?
Evaluate your performance using Business Excellence Model
such:
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Baldrige Criteria for Performance Excellence(Leadership,
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EFQM Excellence Model Leadership, Policy and Strategy, People, Partnerships
Strategic
Planning, Customer & Market Focus ,Measurement, Analysis & Knowledge
Management, Workforce Focus, Process Management, Business Results)
and Resources, Processes, Customer Results, People Results, Society Results
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Singapore Quality Award Framework
Canadian Framework for Business Excellence
Australian Business Excellence Framework
Business Performance Improvement Resource Model
Overall Employee Rating:
 5 = Exceptional performance rarely achieved; precedent setting
results
 4.5 =Consistently exceeds all requirements & expectations work
highly valued
 4=Consistently exceeds position requirements and expectations;
work often noteworthy
 3.5 =Exceeds position requirements; successful in all objectives
 3=Meets position requirements and expectations; meets most or
all objectives; needs some development for quality
 2.5 =Falls below performance standards and expectations; has
performance deficiencies
 1.0-2.0 =Does not meet minimum requirements in critical aspects
of job
What is benchmark?
Benchmark is defined in the American Heritage
Dictionary of the English Language (2009) as;
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Noun: A standard by which something can be measured
or judged
Verb: To measure (a rival's product) according to
specified standards in order to compare it with
and improve one's own product.
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What is benchmarking?
Definitions: benchmarking has been defined severally by plethora of
researchers as:
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Camp's (1989), benchmarking is defined as the search for industry best
practices that lead to superior performance.
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The America Productivity & Quality Center in Houston defines
benchmarking as “the process of continuously comparing and measuring
an organization against business leaders anywhere in the world to gain
information that will help the organization take action to improve its
performance.” (p. 4)
Benchmarking focuses on “learning from the experience of others” and is
defined as "identifying, adapting, and implementing the practices that
produce the best performance results”
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Other relevant definitions of benchmarking were given by researchers and
practitioners such as (Zairi, 1994; Xerox, IBM cited in IMA, 1995; Zairi
and Ahmed, 1999; Maire, Bronet and Pillet, 2005)
 The
key items revealed from comparative examination
of the definitions of Benchmarking are:
A continuous or ongoing process and improvement tool
Measures, evaluates, searches and learns about product,
services, practices, performance using
quantitative and
qualitative analysis of business process
Compares with industry leader or the best-in-class
To achieve superior performance
acquisition and application
through
knowledge
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Satisfy customers' needs and expectations
Achieve superior performance and adapt best practices
Develop and stimulate strategic goals/planning
Stay informed on the state-of-the-art business practices
Encourage creative thinking - get out of the box and discover emerging
technologies
Ensure that internal and external performance data are normalised and
analysed using the correct data analysis tools to identify gaps and their
root causes
Create a system of financial and non-financial measures to monitor
continuing progress against internal and external benchmark-based
standards; and
Incorporate benchmarking as a key ingredient in the strategic planning
and firm’s corporate performance enhancement efforts.
Source: Institute of management accountants (IMA) (1995); U.S. Patent and
Trademark Office (2000)
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Management is looking for change.
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The organization is implementing a new process or operation.
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The dynamics of industry is changing and the changes will effect the organization.
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The organization is striving for performance excellence using continuous
improvement.
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A change is required in processes, products, or services to meet and exceed
customers needs and expectations.
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Re-engineering initiatives are being performed.
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The organization or business unit needs to re-invent themselves in order to survive
Source: Institute of management accountants (IMA) (1995); U.S. Patent and Trademark
Office (2000)
Benchmarking Classifications
Object of study
Process
benchmarking
Product
benchmarking
Type of partner
Internal benchmarking
Competitive
benchmarking
Functional benchmarking
Strategic Planning
Generic benchmarking
Informal Benchmarking
Formal Benchmarking
◦ Performance benchmarking
◦ Best practice benchmarking
Best practices can also be defined as the most efficient
(least amount of effort) and effective (best results) way of
accomplishing a task, based on repeatable procedures that
have proven themselves over time for large numbers of
people”
BENCHMARKING APPROACH
Traditional (Traditionalist)
Diagnostic (Modernist
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Gather data internally: -study and understand your own process
with the use PMS tools
Collect data externally: - this may be through data base, visit to
companies which are considered leaders in the industry
Compare internal and external data: to identify gaps between
current & best practice to develop framework to improve the
business process.
DIAGNOSTIC APPROACH
Develop overall model of the process involved and identify core business
to be benchmarked- Top-down approach (BSCs)
Focus on the major core business process- Bottom-down approach (BEM)
When carrying out self assessment or a benchmarking process- its
essential to develop metrics or measure of performance
Benchmarking framework
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Performance measurement within the South African
construction industry rely heavily on Construction Industry
Indicator (CII) using individual project performance as a
diagnostic tool in measuring the performance of the industry,
with little attention given to the performance of the firms
executing the projects and how the best practice exhibited by
the firms can be benchmarked.
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This accounts for high rate of firms’ liquidation and insolvency,
persistence decline in the contribution of the industry to GDP,
low productivity of construction firms and lack of optimal
performance.
RESEARCH QUESTIONS
MAIN RESEARCH QUESTION
Are there best practice indicators that can be used in developing a benchmarking
framework for measuring the corporate performance of SMEs in the South African
construction industry?
SUB-QUESTIONS
i.
What
SMEs
characteristics
affect
corporate
performance
measurement of SMEs in
the construction industry?
ii. What is the relationship
between
SMEs
strategic
objectives
(mission/objective
plan) and overall corporate
performance in the construction
industry?
iii. What are the measures
or indicators that SMEs
should measure that can
lead to best-practice?
iv. Can a best-practice benchmarking framework be established to measure the level of
performance and efficiency of SMEs in achieving their strategic objectives in the
construction industry?
Benchmarking framework
The research aim is to examine whether there are best
practice indicators that can be used in developing a
framework for measuring corporate performance of
SMEs in the South African construction industry.
Benchmarking framework
To achieve the aim of the study, the specific objectives to
be achieved are to:
i.
Identify and establish SMEs characteristics that affect
corporate performance of SMEs.
ii. Examine the relationship between SMEs strategic objectives
and firms overall corporate performance
iii. Identify and establish KPIs for measuring corporate
performance of SMEs
iv. Develop a best-practice benchmarking framework for
measuring corporate performance of SMEs
Benchmarking framework
Research
questions
Impact of SMEs
characteristics
On corporate
performance
Strategy to
identify
previous
evidence
Search engines (google scholar; SciVerse; EBSCOhost, Emerald Journals
Database, JSTOR Publications, HINARI database, LexisNexis Academics,
industrial trials, Unpublished studies, Primo UCT and proceedings and
conference papers on SMEs Performance, Benchmarking and PMS
Criteria to
select
evidence
SME's strategic
objectives
Main field: organisational management;
Strategic
management;
performance
measurement; SMEs
Included topic: PMS in SMEs; Strategic
management/planning; Benchmarking in
SMEs
Typology: conference proceedings, working
papers, fiscal documents
Research methodology: Empirical research
Adapted from Garengo, Biazzo and Bititci (2005)
KPIs of SMEs
Performance
Benchmarking of
SMEs
Main
field:
performance
measurement; Benchmarking
Included: PMS characteristics;
PMS
frameworks;
KPI;
Benchmarking theory, frameworks
and practice
Excluded topics: studies pre 1990s
Typology: Journals
Research
methodology:
descriptive and empirical
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Research philosophy
 It is essential for the research to consider paradigms and issues of
ontology and epistemology
The philosophical stance of this research will be based on interpretivist
position using inductive approach.
The researcher understand that there are many realities that make
performance measurement and its benchmarking difficult within
SMEs;
and we can only seek to understand the real-world phenomena
through in-depth study of those realities within the context in which
they occur.
Strategy- Survey ; case study; and archival research
triangulation- Data and methodological triangulations
Mixing method- sequential (inter-method)
Benchmarking framework
Research question
In-depth literature search
Research design
Research Approach
Research strategy
Research method
Research purpose
Mixed method (qua and qual)
Empirical and Delphi
Questionnaire survey
Archival data source
Case study (interview)
Data triangulation
Development of BM framework
Framework validation
Finalisation of BM framework
Benchmarking framework
Province /class of Civil
work
Engineering
General Building Total
Easter Cape
455
461
916
Free State
225
245
470
Gauteng
829
1075
1904
Kwazulu Natal
1320
117
1437
Limpopo
479
418
897
Mpumalanga
475
434
909
North West
188
346
534
Northern Cape
56
90
146
Western Cape
299
427
726
Total
4,326
3,613
7,939
Benchmarking framework
Benchmarking framework