**2. Survey of existing performance measurement systems**

Performance management, which examines and manages whether projects, implemented by either individuals or organizations, are effectively executed, has four components: duty, strategy goal, performance goal, and performance index. A strategy goal is a major policy direction that promotes specific duties including the goal, value, and function of an organization. A performance goal is subordinate to the strategy goal and shows major projects planned in a particular year or a specific goal covering multiple aspects of a business group.

A performance index is a scale to measure the level of achievement of the performance goal. It is important to identify quantitative measures of the goals pursued in the project. The development of a performance index enables the efficiency of the project to be measured by comparing and evaluating quantitatively the achievement and level of the performance goal.

This chapter surveyed three methodologies of performance measurement systems used in existing construction businesses: EVMS, BSC, and KPI.

#### **2.1 EVMS**

The Earned Value Management System (EVMS) is the most widely used performance measurement system in construction businesses. The United States Department of Defense

Risk Performance Index and Measurement System 229

establish performance indexes in construction businesses throughout the world. The BSC is a financial index that represents the results of the project execution and customer satisfaction and that shows operational activities, internal management, and operational

Although it has the advantage that it performs its management processes strategically by measuring nonfinancial aspects, the BSC's financial and nonfinancial approaches comprehensively differ from traditional measurement methods. During the strategy establishment process, it can be difficult to reach an agreement on should be measured because organizations differ in their strategies, visions, and goals. The balanced performance table is a scale that evaluates the business management. It has certain limitations in the evaluation of the satisfaction level of a project, even though it is useful for evaluating the business management, because it only evaluates the management strategy

Key performance indicators (KPIs) are a representative performance measurement system established in Britain based on the construction renovation movement called "Rethinking Construction". The system, which was first promoted in 1998, was intended to improve productivity in construction businesses. It can be used to measure not only construction performance, such as construction cost and duration reduction, but also the performance of

The construction renovation movement can be classified into seven major performance indexes: duration, cost, quality, customer satisfaction, design change, project performance, health and safety for the construction culture, recognition, production method, and production system. Performance can be measured based on these classifications and the results are applied to plan the efficiency and productivity of the construction business. It also establishes a partnership between the government, owner, and construction businesses and promotes best practices. It has been shown to improve project performance and cost

**3. Need for risk performance measurement system related to construction** 

In recent years, the main trend in urban regeneration projects and large-scale development projects throughout the world has been the development of three-dimensional mixed-use spaces that include such functions as residential, commercial, business, public, cultural, and

Although this type of development has the advantage of providing all the facilities required in a specific area, thus simultaneously maximizing the usability of the space, it involves many risks throughout the project, such as complicated interests in the major subjects, mixed development areas dominated by the civil and public spheres, operation and maintenance, and property management. In addition, there have been few studies on performance management for construction businesses because conventional performance

a business in terms of profits and productivity (The KPI Working Group, 2000).

effectiveness by removing inefficiencies and unproductive factors.

leisure and that arrange these in horizontal and vertical spaces.

indexes for learning and growing.

focused on operational effectiveness.

**2.3 KPIs** 

**processes** 

(2008) has described it as "a performance-based management system for measuring actual progress against the criteria configuration for the cost, schedule, and performance goals in projects". Fleming and Koppleman (1996) defined the EVMS as "a continuous measurement for practical works under precisely managed work schedules and a management method that estimates the final cost and schedule in a project through this measurement".

The performance measurement applied by using the EVMS integrates cost and schedule. It helps identify how any difference between the planned budget and the actual cost influences the project, by comparing and managing the performance vs plan and estimating the reduction or delay in the schedule from the earned value to the completion of the project and the excess of the budget. As shown in Table 1, the elements of the EVMS can be classified as plan, performance measurement, measurement for management analysis, and analysis elements.


Table 1. EVMS Terminologies.

#### **2.2 BCS**

The Balanced Score Card (BSC) is another representative performance measurement system. The BSC method, proposed by Kaplan and Norton (1993), is a strategic management method that uses traditional financial or accounting measurements to overcome the limits and problems of performance measurement in the short term, and provides a way to establish performance measurement for a general project in the long term. It is widely used to establish performance indexes in construction businesses throughout the world. The BSC is a financial index that represents the results of the project execution and customer satisfaction and that shows operational activities, internal management, and operational indexes for learning and growing.

Although it has the advantage that it performs its management processes strategically by measuring nonfinancial aspects, the BSC's financial and nonfinancial approaches comprehensively differ from traditional measurement methods. During the strategy establishment process, it can be difficult to reach an agreement on should be measured because organizations differ in their strategies, visions, and goals. The balanced performance table is a scale that evaluates the business management. It has certain limitations in the evaluation of the satisfaction level of a project, even though it is useful for evaluating the business management, because it only evaluates the management strategy focused on operational effectiveness.
