Archive for September, 2015

WIP Gone Wild

Posted September 20, 2015 By Fletcher Groves

Earlier this year, Clark Ellis (Principal, Continuum Advisory Group) and I had the privilege of leading “HLS Boot Camp: Operations”, one of the four breakout sessions building executives could attend at the 2015 Housing Leadership Summit in Turnberry Isle, Florida.

(there is a connection:  the Housing Leadership Summit is a Hanley Wood event;  BUILDER and Continuum Advisory Group are Pipeline workshop™ sponsors)

WIP 2015 HLS (capture)

For the second consecutive summit, we had attendees in this breakout session run the Pipeline game™, which is both a simulation of home building production and a business game;  played in teams, the Pipeline game™ is a feature at Pipeline workshops™, which teach builders the principles and disciplines of home building production.

In a full workshop, the Pipeline game™ reinforces the lecture, business case studies, and team exercises;  the game gives attendees the opportunity to see how the visual image, the connection of operating decisions to business outcomes, the systems-thinking, the changes in perspective incorporated into what we call the mental models, and the velocity accelerators unfold and play-out in the production management world that confronts homebuilding.

Contrast a full Pipeline workshop™ to the HLS breakout session, in which attendees are thrown directly into a production management situation, with little opportunity to develop insight into what the image means, how the connection is made, what the workflow model in home building truly represents, how the thinking and new perspectives work – what it all means, and how it all comes together.

Teams are simply shown what the image and connections are, given the game terminology, provided sufficient capacity, adequate inventory, and acceptable margins, and then told that they have to be profitable and have to generate an acceptable rate of economic return (Return on Assets).

In an HLS breakout session, teams are left to their collective instinct, and to their long-accepted and long-held ways of thinking, to make operating decisions that produce those results.

They start with what they know.

And, this was the result:

To varying degrees, each team – every team – defaulted to a typical mindset of starting their game with higher-than-necessary levels of inventory, in order to protect their ability to generate closings;  as the game progressed, they “pushed” additional work-in-process into the system, without regard to the rate at which they were completing work.

They all struggled to operate effectively, in direct proportion to the excessive levels of work-in-process they decided to carry in their production system.  They struggled with variation in a production system that was designed to have sufficient and balanced capacity.

The higher the level of work-in-process, the greater the toll that variation and uncertainty exacted on the system, and the longer the cycle times became.

Some teams never adjusted their tactic, continuing to add work-in-process;  other teams seemed to realize that excess inventory was not necessarily their friend, and began to pare back their work-in-process.

In the end – and despite the very brief timeframe for the session – every team seemed to begin to understand some of the key concepts, such as:  “more work-in-process = more problems”, and “grow revenue through higher productivity, not through higher inventory and more capacity”.

More-for-Less, not More-for-More.

Going in, every team understood and agreed that they were being handed a production system in which there was every expectation they would be able to generate a 3x inventory turn, achieve a 120 day cycle time, produce an 8.3% Net Income Margin, and generate a 25% Return on Assets.  These are reasonable results in a homebuilding environment.

Coming out, every team realized just how difficult that production system is to manage, and just how difficult those operating measures and business outcomes are to achieve.

Here is an example, certainly not the worst performance among the teams:  instead of a 3x inventory turn, this team managed only a 1.2x turn;  cycle time (the reciprocal of inventory turn) was 300 days, instead of the expected 120 days;  because they could not produce sufficient closings being burdened with so much inventory, they produced a Net Income Margin of only 2.8%, instead of the projected 8.3%.

As a result, economic return suffered:  the 2.8% Return on Sales combined with the 1.2x Asset Turn to produce a Return on Assets of 3.4%, not the expected 25%.

As we say, economic return is margin times velocity.

It should be noted that Housing Leadership Summits typically attract a serious and experienced crowd of homebuilding executives;  nevertheless, all of the builders attending this breakout session were initially put off-balance;  a number were perplexed;  in the end, most were intrigued, excited to learn more.

 

Come.  Participate.  Learn.

The next Pipeline workshop™ will be held at the Ponte Vedra Inn and Club, Ponte Vedra Beach, Florida, on October 14-15, 2015.  Cost is $795.00.

Sponsored by BUILDER and Continuum Advisory Group.

For more details:  www.buildervelocity.com

 

Pipeline Workshops™: Compressing the Learning Curve

Posted September 14, 2015 By Fletcher Groves

The intrepid, results-based consultant clicked the embedded video in her PowerPoint presentation.  “I want you to watch this short video clip some of my colleagues masterfully produced”, she said, smiling.

“I told them they shouldn’t quit their day jobs.”

 

HD Pipeline Game Video TRAILER from Fletcher Groves III on Vimeo.

 

As the video trailer played, she opened the portfolio, removed a set of game boards, leaned them against the conference room wall, and then opened her notebook carryall, removed the zippered pouches containing the poker chips and sets of six-sided dice and placed them on conference room table.

When the video was done, she handed the game boards to a member of each team, and said, “I need you to clear space on your tables for these boards.”

As those tasks were being completed, she explained what was about to happen.

“Change is a necessary condition to any continuous improvement effort.  You can’t expect to get different results by doing the same things the same way.  However, change is difficult, disruptive, time-consuming, and costly;  moreover, the effort can fail to produce the intended result.  We need to be able to figure-out production management, without the cost, disruption, and risk of failure associated with doing it in real life.

“We need to compress the learning curve.”

“The new approach that you will use to manage production – and thereby improve operating and financial performance – becomes intuitive and simple in practice, but initially there is a lot to understand.

“It is an approach that is counter to what most of you have been taught”, she said.  “You will need to fight your natural tendencies, challenge your paradigms, begin to think systemically.  It can be hard to initially grasp.

“It must be learned.

“That kind of learning is a harsh teacher when it occurs at the cost of real operating performance and actual business outcomes.

“So – we are going to simulate the environment in which production decisions must be made, and we are going to measure the outcome of those decisions, in terms of both operating performance and economic return.  It’s going to be competitive, the pace is going to be fast, the situation will change rapidly.  There will be uncertainty, risk, and variation;  you will have to learn how to reduce it, and then, how to manage it.

“The purpose is to create learning based on what you experience and do, not simply what you hear and read.  The objective is to compress the learning curve.  The production situations you are going to encounter in these simulations reflect the circumstances you encounter in the real world of homebuilding.  We will modify them and run them until we learn to see, until we understand how to apply the principles.”

Addressing no one in particular, but having a particular person in mind, the intrepid, results-based consultant added, “You need to shut-up, and quit acting like you already know everything.  Entiendes?”

Satisfied, she continued.

“Here, we have a homebuilding production system,” she explained, gesturing to the game board.  “The board represents the resources and tasks necessary to complete each job, which are your houses.  As you know, a production system manages a portfolio of jobs, not a single job;  the chips represent the system’s work-in-process – the jobs/houses at various stages of completion, as they flow through the system.

“Variation is reflected by the probability in the dice rolls.  The tasks in each resource phase take the same amount of effort on every job, so there isn’t any variation in the amount of work, only in the length of time required to complete it.  We find comfort in the false security of achieving an ‘average duration’, and this game reflects that tendency.

“Each game represents a full year of operations and results;  each round represents a one-month time period in that year.  Before the game ever starts, you have to make some decisions about resources and work-in-process, which will, in turn, enable you to project operating performance – completions, work-in-process, capacity, etc. – and to budget financial performance – Revenue, Cost of Sales, Gross Margin, Operating Expense, Net Income, Return on Assets.

“All that stuff goes on the scorecard, before the game starts.

“As the game progresses, the scorecards also accept all of the data for each round – resource work rate, work-in-process, and completions;  at the end of the game, you have to calculate the actual operating performance – cycle time, productivity, inventory turn;  then you have to calculate the actual business outcome – Return on Invested Assets, and Net Income.”

“Put the money in the bank”, said one of the superintendents, looking toward the Vice President of Sales.  “Start making it rain, Chief.”

The intrepid, results-based consultant smiled.  She had heard it all before.

 

(modified excerpts from ‘The Game’ chapter of The Pipeline©)

The Pipeline: A Picture of Homebuilding Production© is available on the publisher website (virtualbookworm.com), as well as through the major booksellers (amazon.com, barnesandnoble.com, and booksamillion.com).

The next Pipeline workshop™  will be held at the Ponte Vedra Inn and Club, Ponte Vedra Beach, Florida, on October 14-15, 2015.  Cost is $795.00.

 

Delivered by SAI Consulting.  Sponsored by BUILDER and Continuum Advisory Group.

 

For more details:  www.buildervelocity.com

 

“I told her we were gonna kill ’em all.”

Posted September 10, 2015 By Fletcher Groves

(previously posted with the title “I remember where I was . . . I remember who I was with”;  an updated version of this entry has been posted on Escape from Averageness® every year, approaching the anniversary of the 9/11 attacks)

EFA - 9-11

On Tuesday morning, September 11, 2001, I was in the offices of Fidelity Homes, in Venice, Florida, commencing a process mapping engagement to give this start-up homebuilding company a state-of-the-art set of business processes.  SAI Consulting’s involvement was part of a large pro bono effort, sponsored by Professional Builder, that included a number of top consultants then serving the homebuilding industry.

I was the Process Architect for Fidelity Homes.

Sitting across the table were David Hunihan and Todd Menke, two young builders, eager to take their experience in homebuilding and pursue a National Housing Quality award.  We had barely started, when David was pulled away by a telephone call.  It was his wife, Lauren, asking if he was aware of what was going on in New York City.

As the events continued to unfold, in New York City, in Washington DC, in western Pennsylvania, we finally decided that it was impossible to focus on mapping workflow, and whatever we were doing did not seem all that important, anyway.  We cancelled everything for the rest of the day, and, in our own ways, watched and tried to process what was happening.

Bill Lurz, then a senior editor at Professional Builder, joined us the following day.  We finished the project two days later, and I drove back to my family in Ponte Vedra Beach through a tropical storm.  The embraces had particular conviction.

The article was written and published in Professional Builder.  The full story of Fidelity Homes was told in a six-part series on Escape from Averageness in 2011, coinciding with the tenth anniversary of the 9/11 attack.

I still consider the events of 9/11 to be a matter of unfinished business for this country.  Time has only increased my feelings about it.  We were attacked, fourteen years ago, because of who we were, and because of who we unapologetically remain.  Our enemy sees it as unfinished business, as well.

Evil remains the enemy of good, and that evil has an ever-more-radical face.  In the presence of that evil, we have failed to clearly state what war is;  we have dismissed the understanding of war as the utter and complete destruction of an enemy.

It doesn’t matter what we think of issues like American Exceptionalism, our place in the world, the tradeoff between national security and the constitutional rights to privacy of US citizens, the still-unaddressed murder of US diplomats and security personnel in Benghazi, the ramifications of decisions not to intervene in Iran and Syria, the emergence of ISIS, or the question of what happens when Iran becomes a terrorist regime with nuclear weapons.

The discussions on all of those matters miss the point.

The discussions miss the point, because they don’t address the root cause of the problem.  The core problem is not the threat of future terrorist attacks.

The problem is the terrorists, and their sponsors.

And, the solution is not attrition, or containment, or control, or minimization, or dismantlement of the threat, or mounting an international coalition against terror, or imposing sanctions, or providing more humanitarian aid, or granting political asylum, or creating deeper understanding, or negotiating peace, or peace, itself.

Yes – the One, True God, in His righteousness and omnipotence, may decide to impart His justice on this situation.

However – absent divine intervention – we cannot afford the “problem of conjecture”, as Henry Kissinger described it.  We have now assured ourselves that there will be a war;  if not a nuclear war, then certainly a war over who will have nuclear weapons.  We are now in a far more dangerous, more deadly situation than we were in the aftermath of 9/11.

“Fleury.  Tell me what you whispered to Janet, in the briefing, to get her to stop crying about Fran, you know, before all this, before we even got airborne.  What’d you say to her?  You remember?”

“I told her we were gonna kill ’em all.”

(The Kingdom, Universal Pictures, 2007)