Risk and reward: mining data to avoid problems

In Insights, Lantern Posts, Musings by Marc Krichman

Say the word “risk” to a construction professional and many will think first of personal safety. When measured by risk of fatal injury, the Bureau of Labor Statistics consistently ranks a number of construction trades among the top 25 riskiest jobs. (Please take care, roofers!)

The risk of personal safety is real. But pros know the construction business is exposed to many other kinds of risk, as well.

  • Risk of falling behind schedule
  • Risk of going over the budget.
  • Risk of violating codes, best practices, or other forms of compliance
  • Risk of working from the wrong plans

What are the equivalents of hardhats and safety harnesses for these business and operational risks?

The good news

The good news is, the software systems you’re using now—your financial software, your materials inventories, your personnel files and more—contain precious data to help you expose and manage those risks. That data can be your protection.

The trick is to (1) mine that data and (2) present it in forms you can use. This is what we’re talking about when we talk about business intelligence, or BI.

For example, you probably have processes in place to mine data and put it in front of the people who need it. Consider WIP schedules, a vital indicator of project progress.

It’s common for companies to devote a day or two a month to preparing work in process reports (also known as “work in hand” or “work in progress” schedules). WIP reports are one way to spot problems before they escalate.

What’s more, a good WIP schedule will point to the source of the risk, whether it’s related to a subcontractor, equipment, deliveries, compliance or something else you can manage.

There’s a hitch

A typical WIP schedule will combine financial data with project management data to compare funds expended to progress on the project. It shows earnings to date. That’s why they’re used by bankers, bonding agents, and surety underwriters.

All things being equal, if you are 50 percent of the way through your budget and 50 percent of the way through the project, that’s a good sign.

But generating WIP schedules only once a month gives your project lots of time—up to four weeks!—to go sideways before you have hard data to alert you. If your business runs on many short-duration projects, monthly WIPs are next to useless.

Using data to manage risks requires this key

If you’re going to manage risks before they escalate, you have to catch them early. But how early can you spot WIP-related risks if you’re only generating a report once a month?

It’s hard to generate frequent reports if you’re paying someone to pull data from different systems and organize that data in a spreadsheet. It takes time and skill to navigate the different software systems, then sift, sort, and match data.

So one key to successful business intelligence is to see reports often. We have clients who’ve gone from monthly WIP reports to daily reports.

That’s right. I said daily.

And there’s another hitch

Some companies are viewing data on dashboards provided by their different systems, whether it’s a financial dashboard, a project management dashboard, or a scheduling dashboard. One shortcoming of this approach is that those dashboards are limited to the data in that one system.

Really informative reporting, like the WIP example above, combines data from different systems.

So, what’s the solution?

The cool thing about digital data is that you can automate it

Your data resides in software systems, and one of the cool things about software is that it can be made to work with other software.

At Lantern Data Systems, we have developed software that pulls data from construction systems and presents it in ways you can use, whether it’s a something visual like a dashboard, an in-depth spreadsheet, or a quick email with main points.

How we do it is the topic of another blog post. But suffice to say, your data can warn you when your business is subject to schedule risk, compliance risk, financial risk, and even worker safety risk! They trick is to (1) mine that data and (2) see it in the proper form.