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Literature Review

Causal Relationship of Critical Success Factors (CSF’s) and Key Performance


Indicators (KPI’s) of Pakistani Construction Projects
Hafiz Shahid Hussain SALAMAT, BS, MBA, PMP
(Studying M.Phil Project Management in SZABIST, Islamabad – Pakistan)

Introduction:

Construction Industry is at its boom in many developing economies and the challenges faced by
construction project managers are of immense importance to understand and manage. Hence sky-
scrappers come into existence from paper drawings.

A construction project maybe called successful when there is an adequate management effort to
coordinate skills of changing participants & processes in a constantly dynamic environment. (Paek and
Joongwha, 1993)

The key factors underlying success of a construction project consist of many sub factors. These
factors may be called as critical success factors (CSF’s), which predict success of projects (Sanvido et al.,
1992). Critical success factors as a term was first used by Rockart (1982) in Changing Role of the
Information System Executive in project management’s perspective.

Overview

Critical Success Factors (CSF). CSF is defined in number of ways by engineering and
management literature. One of the most frequently cited definitions is by Rockart (1979) as “the limited
number of areas in which results, if they are satisfactory, will ensure successful competitive performance
for the organization”. Rockart (1979) also stresses, that these particular areas of activity should be
constantly and carefully (or critically) managed by a company.

Bruno and Leidecker (1984) define CSF as “those characteristics, conditions or variables that,
when properly sustained, maintained, or managed, can have a significant impact on the success of a firm
competing in particular industry”, whereas Pinto and Slevin (1987) explain CSF as “factors which, if
addressed, significantly improve project implementation chances”.

1 Causal Relationship of Critical Success Factors (CSF’s) and Key Performance Indicators (KPI’s)
of Pakistani Construction Projects
Literature Review

In order to analyze the applicability of the CSF’s in Pakistani Construction Industry, Saqib,
Farooqui and Lodi (2008) have highlighted 77 CSF’s categorized in 7 groups for construction projects in
Pakistan and then used their research to rank the CSF categories (Table 1) and top 10 CSF’s (Table 2) in
order of importance and criticality.

Categories of Critical Success Factors Mean Criticality


Criticality Ranking
Index

Contractor-Related Factors 8.91 1


Project Manager Related Factors 8.57 2
Procurement Related Factors 8.39 3
Design Team-Related Factors 8.22 4
Project Management Factors 7.97 5
Business and Work Environment Related Factors 7.67 6
Client Related Factors 7.65 7
Table 1. Critical Success Factors categories with their criticality in Pakistani market

Moreover following are the top 10 Critical Success Factors in order of their importance based on
Pakistani market (Saqib, Farooqui and Lodi, 2008):

Critical Success Factor Criticality Criticality


Score Ranking
(max 10)

Decision making effectiveness 9.44 1


Project Manager’s experience 9.33 2
Contractor’s cash flow 9.32 3
Contractor experience 9.22 4
Timely decision by owner/ owner’s representative 9.17 5
Site management 9.11 6
Supervision 9.06 7
Planning effort 9.05 8
Prior project management experience 9.00 9
Client’s ability to make decision 9.00 10
Table 2. Critical Success Factors with their criticality score and ranking

2 Causal Relationship of Critical Success Factors (CSF’s) and Key Performance Indicators (KPI’s)
of Pakistani Construction Projects
Literature Review

Key Performance Indicators. From the viewpoint of project management, the success of
construction projects can be determined based on their delivery:

1. on time
2. to budget
3. to technical specifications
4. to meet client satisfaction

(Baker et al., 1983; Slevin and Pinto, 1986; Morris and Hough, 1987; Turner, 1993)

If Stakeholder’s performance, evaluation of their contribution and understanding of their


expectations (Atkinson et al., 1997; Wateridge, 1998) is incorporated in the above benchmarks, a
reasonable idea of successful project can be deduced. The indicators determining project success are
called Key Performance Indicators.

The UK working groups on Key Performance Indicators (KPI’s) have listed 10 benchmarking
parameters. Seven 07 of those contain Key Performance Indicators (Takim and Akintoye, 2002):

1. construction cost
2. construction time
3. cost predictability
4. time predictability
5. defects
6. client satisfaction with the product
7. client satisfaction with the service

and remaining three 03 Company Performance Indicators (CPI’s), namely:

1. safety
2. profitability and
3. productivity

Microsoft promoted the following nine 09 KPI’s from view point of construction project
managers (Sabine and Nick for Microsoft Dynamics):

1. liquidity
2. cash flow
3. labor productivity
4. schedule variance
5. margin variance

3 Causal Relationship of Critical Success Factors (CSF’s) and Key Performance Indicators (KPI’s)
of Pakistani Construction Projects
Literature Review

6. unapproved change orders


7. committed cost
8. backlog
9. Customer satisfaction

Our study aims to validate and rank above KPI’s in Pakistani construction projects and find out if
there is (are) any other Indicator(s) from local perspective to impact success in construction projects.
Moreover we will try to develop a causal relationship between the CSF’s and KPI’s.

Objective:

• To validate and measure Pakistani Construction projects success through Key Performance
Indicators (KPI’s).
• To find out if there is (are) any other Indicator(s) from local perspective impacting project
success.
• To determine causal relationship between Critical Success Factors (CSF) and Key Performance
Indicators (KPI).

Future Direction:

This study will give basis to develop models and strategies to focus on desired CSF’s to enhance
the relevant KPI’s thereby increasing probability of successful Construction Projects. This will be an
effective knowledge addition and can help improve overall Projects Success rate in Pakistan besides
supporting further research projects.

4 Causal Relationship of Critical Success Factors (CSF’s) and Key Performance Indicators (KPI’s)
of Pakistani Construction Projects
Literature Review

References
2
Atkinson, A.A., Waterhouse, J.H., and Wells, R.B. (1997). A stakeholder approach to strategic
performance measurement. Sloan Management Review; Cambridge, 38 (3) pp 25-37

2
Baker, B.N., Murphy, D.C., and Fisher, D. (1983). Factors affecting project success. D.I. Cleland, (ed.)
Project Management handbook. New York: Van Nostrand Reinhold

2
Bruno, A. and Leidecker, J. (1984). Identifying and Using Critical Success Factors. Long Range
Planning, 17(1), 23-32
2
Morris, P.W.G. and Hough, G.H. (1987). The Anatomy of Major Projects: A study of the reality of
project management. Chichester: John Wiley & Sons

1
Paek and Joongwha, 1993, Analyzing competitive position in the construction markets of Eastern
Europe. Journal of Management in Engineering, 9(1), 38 – 51, American Society of Civil
Engineers
2
Pinto, J. and Slevin, D. (1987). Critical Factors in Successful Project Implementation. IEEE Transactions
on Engineering Management, 34(1), 22-27
2
Rockart, J. (1979). Chief Executives Define Their Own Information Needs. Harvard Business Review,
March/April 1979, 81-92
2
Rockart, J. F. (1982). "The changing role of the information systems executive: A critical success factors
perspective." Sloan Mgmt. Review, 24(1), 3-13
2
Sanvido, V., Grobler, F., Pariff, K., Guvents, M., and Coyle, M. (1992), Critical success factors for
construction projects. Journal of Construction Engineering and Management, 118(1), 94 –111
1
Sabine and Nick, 9 KPIs successful construction firms should monitor,
http://www.microsoft.com/en-us/dynamics/industries/construction-erp.aspx

1
Saqib, Farooqui and Lodi (2008), Assessment of Critical Success Factors for Construction Projects
in Pakistan. First International Conference on Construction In Developing Countries
(ICCIDC–I) August 4-5, 2008, Karachi, Pakistan
2
Slevin, D.P. and Pinto, J.K. (1986). The Project Implementation Profile: a new tool for project managers.
Project Management Journal, 17 (4) 57 -70

5 Causal Relationship of Critical Success Factors (CSF’s) and Key Performance Indicators (KPI’s)
of Pakistani Construction Projects
Literature Review

1
Takim, R and Akintoye, A (2002) Performance indicators for successful construction project
performance. Greenwood, D (Ed.), 18th Annual ARCOM Conference, 2-4 September 2002

2
Turner, R.J. (1993). The Handbook of Project-Based Management. London: McGraw-Hill Companies.
Wang, T. H. (1994). The Malaysian Construction Industry, its trend of growth-past, present &
future. The Master Builders Journal, pp 3-7

2
Wateridge, J. (1998). How can IS/IT projects be measured for success. International Journal of Project
Management, 16 (1), pp 59-63

Note: Primary Literature Source1

Secondary Literature Source, picked from Primary Source and researched but could not get to
download the reference2

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of Pakistani Construction Projects