Performance measurement and improvement model for small and medium contractors in developing countries

Measuring performance enables managers to understand, manage, and improve their business operations. Existing performance measurement models, however, are predominantly designed for large contractors who operate in developed economies and focus on the relationships between their organisational variables and performance without considering environmental dynamism. Little is known about how small and medium (S&M) contractors, who operate in developing countries, can measure and improve their performance in a changing business environment. To address this gap, this research adopts an integrated approach, combining a resource-based view (RBV) with contingency theory to develop a performance measurement and improvement (PM&I) model for S&M contractors operating in the Jordanian construction industry. The objectives are to: (i) explore key performance indicators (KPIs) for assessing S&M contractors' overall project and business performance; (ii) identify the key intra-organisational (enablers) and extra-organisational (external environment) variables for performance measurement and improvement of S&M contractors; (iii) model the relationships between the intra- and extra-organisational variables and the overall project and business performance of S&M contractors; (iv) model the moderating effect of extra-organisational variables on the relationship between intra-organisational variables and overall project performance of S&M contractors and (v) validate the robustness of the constructed predictive mathematical models.A structured questionnaire was administered in the Jordanian construction industry, and 231 responses were received from construction professionals. The data were analysed using Relative Importance Indexing (RII), classical construct validation procedures, and Partial Least Squares Structural Equation Modelling (PLS-SEM). The findings revealed that: (1) contractors' overall project performance can be structured as a multi-dimensional higher-order construct, with six lower-order constructs (LOCs) of project cost, time, quality, health and safety, environmental sustainability, and socio-economic performance with LOCs consisting of a set of KPIs; (2) contractors' overall business performance can be measured by three KPIs which can assess their profitability, client satisfaction and consultant satisfaction; (3) contractors' intra-organisational variables (i.e. , leadership, management capabilities, resources, technical capabilities and processes) have significant direct and indirect impacts on their overall project and business performance, respectively and (4) the extra-organisational variables (i.e. , stakeholders' performance and external attributes) have no significant moderating interactions on the relationship between contractors' intra-organisational variables and their overall project performance, although the direct impact of extra-organisational variables on contractors' overall project performance is significant. The performance measurement and improvement model designed in this research integrates two main areas of enablers and results, linking the overall performance results (i.e. , project and business) of contractors to their intra-organisational variables while considering the impact of their extra-organisational variables. It can assist with identifying key performance result areas while keeping a balance between the intra- and extra-organisational variables affecting contractors' overall project and business performance. This model is unique because it integrates both intra- and extra-organisational variables that affect S&M contractors' overall performance and concerns the context of a developing country. It expands the knowledge base by introducing multi-dimensional KPIs for performance measurement at both project and business levels. This research confirms that viewing contractors' performance measurement and improvement from the integrated approach of RBV and contingency theory is useful in identifying organisational–environmental–performance relationships. The findings of this thesis have several implications for practice. First, S&M contractors operating in developing countries can use the relevant identified set of KPIs to self-assess and improve their project and business performance. The findings may also be used by clients or consultants to select the most suitable contractor for a project based not only on the lowest tender price but on performance and capabilities. Finally, the findings may contribute to a country’s socio-economic development by improving construction contractors' performances and thereby the overall performance of the entire construction industry.