Pipeline Workshops™: Come. Participate. Learn.

Posted November 19, 2017 By Fletcher Groves

In the weeks leading up to a Pipeline workshop™, we explain to builders what they are about to encounter.  We describe the tools that they will have to learn to use, the facts of the business case they will confront, the knowledge they will take away from it, what they should expect to see.

We explain the challenging, disruptive, competitive nature of the learning – the degree of interaction, the level of intensity – they will experience.

At a Pipeline workshop™, it is learn-by-doing, applying production principles and disciplines to production simulation, and measuring the resulting operating performance and economic return.  We communicate our expectation that builders come prepared to learn that way, that there is no place to hide.  Nevertheless, many attendees tell us afterward they should have studied more, they should have prepared harder, in advance of the workshop.

Clark Ellis and I make no apologies for the extraordinarily demanding nature of a Pipeline workshop™.  It is intended to not just inform your thinking, but also to reform – and to re-form – it.  It is designed to challenge your thinking, to change the way you think.  It is intended to test your understanding of how production systems work and how daily operating decisions drive business outcomes.

We constantly remind builders: there is a big difference between being in the home building business, and being in the business of building homes.

So – you have to come to a Pipeline workshop™ prepared for what is going to be thrown at you.

For example, exploiting the RB Builders: Lessons from the Pipeline© business case study, revised and used at every Pipeline workshop™, requires the use of certain financial tools like Breakeven (CVP Analysis), the DuPont identity (ROA), and the Cost of Variation.  It requires an understanding of operational measures, like Little’s Law* (cycle time).  It requires the application of various improvement methodologies, like Theory of Constraints, Lean Production, and Six Sigma.

You can read the book.  The Pipeline: A Picture of Homebuilding Production, Second Edition© is carried in stock on amazon.com;  it is also available directly from the publisher’s bookstore (virtualbookworm.com).

But — if you want it all handed to you, don’t bother to attend.  If all you want is binder material you can underline and highlight, and put on your bookshelf, don’t come.  If you aren’t willing to own what you take away from it, a Pipeline workshop™ is not for you.  If you believe improving the margin side of Return on Assets is the only game in town, a Pipeline workshop™ is about a different game.

But, if you are determined to create sustainable competitive separation, by thriving on the velocity side of Return on Assets®, by excelling at a discipline other builders find too difficult, too rigorous, too daunting, then a Pipeline workshop™ is precisely the right place for you to be.

 

Come.  Participate.  Learn.

The next Pipeline workshop™ will be held at the Ponte Vedra Inn and Club, Ponte Vedra Beach, Florida, on February 28 – March 1, 2018.  The cost is $895.00;  the cost during early registration, open through December 31, 2017, is $750.00;  for team pricing, inquire here (flgroves@saiconsulting.com).

Sponsored by BUILDER and BuilderMT.

For more details:  www.buildervelocity.com

 

*We will help you out a bit on Little’s Law.  Consider this scenario:  C/T=120 days;  WIP=80;  Closings=240.  Little’s Law says:  CT = (WIP ÷ C) x 360;  WIP = (CT x C) ÷ 360;  C = (WIP ÷ CT) x 360.  Therefore:  CT = (80 ÷ 240) x 360 = 120 days;  WIP = (120 x 240) ÷ 360 = 80 units;  C = (80 ÷ 120) x 360 = 240 closings.

 

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Pipeline Workshop™ No. 9: Save the Date

Posted November 12, 2017 By Fletcher Groves

Pipeline Workshop™ No. 9 will be held February 28 – March 1, 2018, at the Ponte Vedra Inn and Club in Ponte Vedra Beach, Florida.  The latest in the series of production management workshops in the open, sponsored Pipeline channel, it is sponsored, once again, by BUILDER and BuilderMT.

“The Pipeline workshop™ was really effective in showing how operational decisions affect business outcomes and how risky a ‘more for more’ approach to growing a home building company really is.  The Pipeline games™ were not only fun, but they were super-effective in showing how unbalancing the production system, managing the constraint resource, and managing the right amount of WIP, creates predictable operational results and maximizes financial outcomes.

“At the end of the day, running a successful business is about how much money you make on the amount of money you invest.  The Pipeline workshop™ helped me understand this better than any workshop or seminar I’ve ever attended.

“I highly recommend it.”  (Charles Roberts, VP – Operations, Providence Homes, Jacksonville, Florida)

Welcome to the most intense, demanding, interactive, and challenging homebuilding production management learning experience on the planet.

And – it just keeps getting better.

In recent workshops, we lengthened the schedule, enabling us to do more with the deeper-dive velocity accelerators;  for Pipeline Workshop™ No. 9, the five velocity accelerators are Business Process Improvement, Epic Partnering™, Business Information Modeling, Critical Chain Project Management, and OBM/Team-Based Performance Compensation – a good mix of immediately available velocity acceleration, currently possible velocity acceleration, and the future of velocity acceleration.

We continue to refine the scenarios in the Pipeline game™, which is both a production simulator and a business game.  Over the course of all the Pipeline workshops™, we have:  (1) made the game shorter, faster, and easier and quicker to grasp;  (2) switched to an operating statement format that mirrors the attributes of homebuilding operations;  and (3) found ways to transfer the learning and knowledge with fewer games.

Pipeline workshops™ are unlike any other homebuilding conference.

The learning split is 70% simulation/business case, 30% lecture;  the format is intense, interactive and competitive;  the Pipeline game™ production simulations and the RB Builders: Lessons from the Pipeline© business case test attendees’ understanding of production management and challenge their ability to solve production problems.

Pipeline workshops™ build an intuitive, instinctive understanding of production principles and disciplines, and they draw the subtle-yet-crucial distinction between being in the homebuilding business, and being in the business of building homes.

Moreover – we make it all incredibly fun:  the Ponte Vedra Inn and Club is a terrific AAA Five Diamond oceanfront resort venue;  there is a great reception at the end of the first day;  recommendations on outstanding local dining;  plenty of opportunity for networking.

Creating a visual image of homebuilding production;  establishing the connection between operating decisions and business outcomes;  building a new way of thinking systemically towards solving core problems and managing constraints;  managing limited capacity and resources, doing more with less;  dealing with variation;  managing homebuilding production as the multi-project type of workflow that it truly is;  placing the emphasis on the actions that accelerate velocity.

The fundamental proposition of a Pipeline workshop™ is this:  thriving on the velocity side of economic return – thriving on the velocity side of Return on Assets – is the best way to create sustainable competitive separation.

Registration for Pipeline Workshop™ No. 9 opens November 15, 2017.

Come.  Participate.  Learn.

 

In advance of registration, here is the link to the website:  www.buildervelocity.com  When registration opens, so will the event registration and hotel reservation links.

The site also provides information about the workshop, provides reviews from builders who have attended previous workshops, and provides a downloadable Adobe PDF file with detailed information about the venue, agenda, and schedule.

The cost is $895.00 per person;  the cost during early registration (opens November 15, 2017, runs through December 31, 2017) is $750.00;  for team pricing, inquire here (flgroves@saiconsulting.com).

Sponsored by BUILDER and BuilderMT. 

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If you are attending the 2018 International Builders Show in January, Scott Jagoe, Trent Cragun, Doug French and Fletcher Groves III hope you will make the time in your schedules to attend this IBS education session, and learn why improved workflow is so vital to a homebuilding enterprise.

 

Wednesday, January 10 | 10:30 – 11:30 AM

Location: OCCC – West Concourse, Level 3, Room W 304 A

Format: Building Knowledge Session  Level of Content: Advanced

Who Should Attend: Single Family – All, 55+ Housing Builders & Developers

Track: Business Management & Operations

Speaker(s): Trent Cragun, Lifestyle Homes, Logan, Utah | Doug French, Stylecraft Builders, College Station, Texas | Scott Jagoe, Jagoe Homes, Inc, Owensboro, Kentucky | Fletcher Groves, SAI Consulting, Inc., Ponte Vedra Beach, Florida

 

What The Session Is About:

It is the most fundamental proposition in all of business:  As a builder, you make money by delivering value to stakeholders, principally to your buyers;  that value is created by the work you perform through some means of workflow;  the workflow in homebuilding is essentially project portfolio management enabled by embedded, surrounding, and supporting processes.

In order to deliver more value, you have to improve the workflow;  you improve the workflow by removing the non-value adding steps and making the remaining value-adding steps flow more smoothly and effectively.

In order to improve the workflow, you have to know how to redesign it, document it, implement it, and manage it.  You have to know how to put workflow in the proper strategic and operational perspective, so that it creates sustainable competitive separation.  You have to be able to disseminate the knowledge.

That is what this session does.

 

What You Will Learn:

  1. Learn to incorporate the design and role of processes into your company’s overall strategic design and operating model.
  1. Learn to document the existing state, and then the redesigned and improved state, of every process in your building operation in navigable, teachable process models.
  1. From a panel of three established builders who have been through BPI, learn what attributes, characteristics, and design elements make good processes.
  1. See a demonstration of one of the most capable and usable process flowcharting and process modeling apps.

This presentation has two segments:

  1. An explanation of Business Process Improvement, in terms of how understanding and improving workflow fits into the larger picture of a builder’s strategic value proposition/discipline and its operating model (structure, systems, culture, teammates); further, an explanation of how BPI moves from workflow performed by typically undefined means in a little known current state, to a highly-developed state of faster, more productive, more effective, more value-generating processes; finally, how those processes support everything a builder does.  The presentation provides a demonstration of the iGrafx Origins app that is used to create the cross-functional flowcharts and process models documenting workflow.
  1. A panel of three very successful builders that have been through Business Process Improvement, and can share their insights into their experiences with BPI, and the benefits they derived.

 

Why You Should Attend:

Do you understand the cost of tolerating the current state of process workflow?

Most of the workflow in a builder’s Start-to-Completion (STC) process is project portfolio management performed by external resources (trade partners), included in Cost of Sales.  STC, however, has workflow performed in embedded processes by internal resources (teammates) included in Operating Expense, and there is all the internal workflow performed in surrounding and supporting processes.

The results, from dozens of SAI BPI engagements over two decades, show there is one problem identified for every two process steps, there is one non-value-adding characteristic for every four to ten process steps, and 25% of the all the work performed adds no value whatsoever.

This means that 25% of a builder’s overhead is being wasted;  even a builder with a very manageable 12% overhead is losing 3% to his bottom-line every year, $30,000 in lost Net Income per $1.0 million in Revenue.

That is exactly why we map processes.

 

More:  https://www.buildersshow.com/Search/EducationSession.aspx?id=554799

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“Plain Vanilla a No-Go.”

Posted November 4, 2017 By Fletcher Groves

An article by John McManus in builderonline.com in 2015, updated and reproduced here.

2014 Housing Leadership Summit (Hanley Wood Media)

“Fletcher Groves is a North Florida-based business advisor some of you know.  He’s worked with home builders–mostly private companies–for decades, enough time to see lots of firms come and go.

“Fletcher uses a lot of the same words everybody else does when it comes to talking about operations, work in process, starts, completions, cycle time, even-flow, and, importantly, margins.  When you listen to him, though, you realize that he doesn’t use those terms in the same sense—broadly and roughly—that we hear in the field as a rule.

“Precision, obsessive attention to meanings and intentions, and rigorous discovery are how Fletcher’s sentences and questions tend to flow.  With regard to whom he’s speaking, his train of thought and language form a dynamic double-helix model of critically chained project timelines with economic principals.  Descriptive terms such as good, effective, fast, accurate, skilled, fair, dependable, bold or any other quality take on meaning only insofar as they add to or subtract from a business’s principal purpose, to make money sustainably.

“Listen to Groves, and what happens when you do is that the way you think of tasks that get done and the costs of doing them—in duration and forward-motion and outcome, in resources and in cash, each with an appropriately assigned and measurable taxonomy of value—changes.  By pulling apart, and closely looking at the interplay of complexly orchestrated manufacturing processes and economics, Groves disrupts hardwired biases that tilt us into the habit of instinct, intuition, and guesswork that bedevil the continuous improvement effort of every level of home building operations.

“His challenges all sound at first like trick questions.  The answer is either too easy, or would take all day to calculate, or is so arcane as to cause an apathetic shrug in response.  Unless your thinking changes.

“Groves is known, too, for a question line that sticks with you, and one that ties all of this together.  It seems to mean more now than it ever has before:  ‘Does the world really need one more average home builder right now?’  And the world, for what that term is worth as a measure of sustaining business viability, has its own unique way of making home builders it doesn’t need know it in excruciatingly clear and collaterally painful ways.  And it will do that now.

“If you want to ensure that you’re doing everything you can to be exceptional in discipline, perspective, context, and focus, you ought to consider checking out Fletcher, live and in the flesh at the upcoming Housing Leadership Summit”

“Here, at the near mid-point of another year, one mystery is, will the full year 2015 act like another in a series of first-half vs. back-half studies in contrast—one six-month period feeding the optimists, and the other serving to validate those who’re sure the bottom is about to fall out of the-little-recovery-that-couldn’t?  Or, instead, will countless arrhythmic, geographically scattered, choppy, and tentative improvements at sub-market level and zip-plus-six cohere into a story of slowly evolving momentum for the year?

“We don’t know.

“We do know many home building company leaders are preoccupied with the question of whether the gains in volume achieved 2014—the power of attraction among 200 home building organizations to sell and deliver $80 billion worth of new homes in the 12 months from January to December—will translate into well-deserved opportunity or equally possible risk.  Will new neighborhood openings absorb overhead costs at the just-right level, with each home unit above break-even, or will those volume gains leave profits ‘in the ground’.

“Margins are the ‘keep-me-awake-at-night’ issue of many home building company strategist, as materials, labor, and land costs take turns sending up red flag warning.  Now that ‘the machine’ has kicked into gear, it needs constant feeding and ongoing recalibration.  Many of the land deals that brought lots online through and into the past 12 months had favorable, early recovery price-tags on them, and the next round is going to be where ‘deep market knowledge’ will either pay off big or run people quickly into trouble.  Liquidity and lending is moving into ‘risk on’ mode.  Risk on means what it says.  The next gear in volume, and the next tier down in pricing is where gains pile up fast, or losses can iterate you into a big hole.

“This is no time for average.  Ordinary won’t make it.  Plain vanilla will be a death knell.  The kind of tide that’s rising now is not one that will lift all ships;  rather, it will swamp a good many, even as it provides swift, helping winds, and steady currents for a few.

“Commonly, builders sense that they’re better than the rest.  That’s what you’re going to have to be.”

 

The next Pipeline workshop™ is February 28 – March 1, 2018, at the Ponte Vedra Inn and Club, in Ponte Vedra Beach, Florida.  Registration will open later this month:

www.buildervelocity.com

 

      

The Modern Builder Welfare State

Posted November 3, 2017 By Fletcher Groves

This post was originally published on Escape from Averageness in August 2011, under the same title.  Updated and republished here, as part of our retrospective Above Average:  The Best of Escape from Averageness, 2009-2012.

It seems appropriate to re-post it, because it is as true now as it was then.

Hanley Wood Media

In early 2009, the very first entry to SAI’s Escape from Averageness weblog asked this question:  “Does the world really need one more average homebuilding company?”  Prior to 2006, during the roughly ten-year, halcyon period that I describe as The Age of Homebuilder Entitlement, the answer may not have been a resounding “yes”, but there was acquiescence to that fact.  There was a sense of entitlement to volumes and margins that were too easy to achieve;  builders did not have to be good, they just had to be there.

At the time [August 2011], John Caulfield’s well-written, well-researched feature in Builder (“Debt-Ridden Nation Takes a More Skeptical Look at Its Investment in Promoting Homeownership”) had clarified the positions we had witnessed this industry taking, aptly described by the term “entitlement”.

It is a sense of entitlement now characterized by an obsession with maintaining government support of homeownership, and – by extension – the homebuilding industry.  The industry’s position on everything is filtered through the obsession.

Somehow, the federal government, directly or indirectly, was supposed to assure, insure, provide, or otherwise be responsible for any number laws, regulations, and policies, including a continuation of an affordable 30 year fixed rate residential mortgage instrument, a QRM standard with few requirements, a viable secondary market for mortgage securities, higher conforming loan limits, a continuation of the current system of public housing finance, five-year loss carrybacks, mortgage restructuring assistance, homebuyer tax credits, continuation of the mortgage interest deduction, foreclosure mitigation.

And, it all worked so well for us, didn’t it?  With yet more to come.  It remains, at its core, an unreliable dependency – a dependency that takes the form of feudalism;  we are vassals dependent on our lords, except that our lords are ineffective, incompetent, misguided, and overreaching, with nothing ever at risk.

As an industry, do we not think we can do better than this?

Here’s a different approach:  The homebuilding industry collectively tells its trade organization, its lobbyists, its members of Congress, and the White House that we don’t want the modern builder welfare state.  Any of it.  Get rid of it.

In its place, give us:  significant, permanent reductions in marginal personal income tax rates, and an elimination of most of the deductions;  a simple personal federal income tax structure that requires every wage earner to pay some income tax;  lower tax rates on capital gains;  elimination of the corporate income tax;  dramatically lower levels of government spending, including meaningful, effective, and fair entitlement reform;  minimal government involvement in housing finance;  a wholesale reduction in business regulation.

There is a natural, sustainable demand for what we do – developing new communities, selling and building new homes – if there is a viable, growing economy in which to do it.  Our government needs to get out of the way.  It needs to give us an economy that will grow and be globally competitive.  It needs to give us back market forces – in prices, in interest rates, in risk, in mortgage terms, in securitization.  It needs to let the secondary mortgage market correct, heal, and restore itself.

It needs to give us a simple, elegant, non-conflicting set of rules.

We will figure the rest out on our own.

There will be yet more pain.  The landscape of residential mortgage lending will change.  We will wish we had done it sooner.  But, if we don’t do it, we continue to be at risk of losing far more than our entitled existence.

The comfort of entitlement is an illusion.