Archive for April, 2020

One Homebuilder’s Stress Test: Why We Map Processes

Posted April 26, 2020 By Fletcher Groves

(originally published on Escape from Averageness® in August 2010 under the same title;  re-edged and republished in June 2013, as part of our retrospective Above Average:  The Best of Escape from Averageness®, 2009-2012;  updated and re-posted here, as a reflection on the more recent, self-induced struggles of two other builders with their own business processes)

Business Process Improvement – the documentation, analysis, measurement, design and redesign, improvement, and management of operating and business processes – is the area for which SAI is most recognized.  We have done more pure work with processes – and done it longer – than anyone in the homebuilding industry.

Almost every consulting engagement we have ever accepted has involved structuring an enterprise (both in and out of the homebuilding industry) around its critical business processes.  There is a reason for the centrality of process workflow:  the only way an enterprise makes money is by creating value;  the only way it creates that value is through the work that it performs;  and the way that it performs most of this work is in processes.

Every other component of an enterprise’s operating model – it’s systems, its organizational structure, even its culture – needs to be subordinated to the processes that produce stakeholder value.

But, even that proposition and prioritization does not do it justice.  Process mapping is far more than documenting, analyzing, measuring, redesigning, and improving workflow;  it serves to connect work to operating performance, and operating performance to business outcomes.

In that sense, process mapping administers something of a stress test;  some pass the test, others don’t.

In 2006, we were engaged by a previous winner of the National Housing Quality (NHQ) award to map its business processes;  bear in mind, in order to be awarded this distinction, the company’s processes had been previously vetted and judged as part of the NHQ examination.

From the start, there were troubling indicators.

As the work unfolded, we pointed out discrepancies between stated operating performance and stated economic returns.  We explained the production physics, and questioned whether the stated performance could have possibly occurred.  We highlighted the declines in operating performance and business outcomes, to which they seemed oblivious.

From a process standpoint, we observed that this company had “a very iterative product design process exposed to an impulsive/compulsive design mentality”, that this was a process with 132 discrete process activities/steps – involving 33 handoffs, 19 reviews, eight approvals, 14 sections of activities where the work of one person or department was subsequently revised.  The project team was unwilling to self-classify a single one of these 132 activities as value-adding, but it classified almost 30% of them as completely non-value-adding.  This was a process that took upwards of 12 months to design a new plan.

New Plan Design was the poster-child for poor process design, but it was not a sclerotic aortal mess.  That would be their Start-to-Closing process, where we calculated cycle time at 279 days, and demonstrated that this process could not possibly be achieving the 5.2x asset turnover they asserted it was.

We stressed the need to establish a set of operating and business measures as the performance requirements for the new process designs, yet they failed to produce a comprehensive, connected set of operating and business outcomes.  The need for (or importance of) performance requirements did not strike a chord with either the executive group or the process teams.  Given the existing level of operating and business performance, we told them that we found “the level of disinterest – the lack of resolve – disturbing”.

This was a builder that had produced an ROA of only 4.7% in 2005;  in the Era of Homebuilder Entitlement, economic return should have been eight-times that level.  Moreover, this was an enterprise that six weeks earlier had been forced to take the gut-wrenching action of terminating the employment of 40 teammates.  We pointed out that the real situation was certainly much worse, that the indicated economic return of 4.7% overstated the company’s true performance, because a .9% Net Income Margin was being masked by the impossible-to-achieve 5.2x asset turn.

We told this homebuilding company that we had worked with builders of all shapes, sizes, rationales, and arguments, and that processes like theirs were not just badly-designed processes;  they were the outcome of flawed thinking on how to best understand and satisfy the requirements and expectations of their chosen market segment, and craft a solution that satisfies the requirements of all of their stakeholders.

We told this company that velocity was a lot of what this project was about.  It was about finding ways to design better, more productive processes, in order to increase productivity and reduce cycle time.  We told them that processes were the logical starting point, the first step in the quest toward a “more-for-less” mentality – more output, more revenue, for the same investment in WIP and production capacity.  We told them that – given their distressed condition – this project likely needed to be about both margin and velocity.

We told them “there is a long road ahead . . . the start of an effort that never really ends;  the process of continuous improvement means just that: a continuous process of improvement”.  We asked them the same questions we ask every other builder with whom we work:  “Does the world really need one more average homebuilding company?  Will ‘average’ performance – operating, business, or otherwise – be sufficient to sustain a homebuilding company in the future?”

We told them that they were not an average homebuilding company, in either intent or reputation, but they were significantly below-average, in terms of performance.  We told them, as John Kotter phrases it, that their situation required a sense of urgency.  We warned them of the consequences of failing to confront the root causes of the problem.

We told them this was only a start.  Whether it was a good start – whether it would be sustained, whether it would produce the results it was intended to produce – was up to them.

That was 2006.  By 2008, they had filed Chapter 11.

 

“Risen”

Posted April 12, 2020 By Fletcher Groves

(updated and reposted on Escape from Averageness® every year, on Easter morning)

The intrepid, results-based consultant reclined into the natural seat, at the back edge of one of the dry-eddy pools, where the beach, largely empty of people mandated in response to the COVID-19 pandemic, resumed its slope more steeply, toward the upper dunes.

Easter 2020, Ponte Vedra Beach, Florida

She dug the soles of her topsiders into the sand, still damp from the past night’s high tide.  It always felt good, unfailingly restorative, she thought.  Resting her arms on her knees, she gazed eastward into the grayness of the rain clouds on the horizon to the broken clouds and blue sky above.  The sun had finally made its first appearance above the rain clouds, on what would become a warm mid-April morning in northeast Florida.

She was totally in her element.  A seventh-generation Floridian, she loved the waters and land of her native state.  She wished she could have seen for herself, more of the Florida her father loves to talk about – the mid-twentieth century Florida of his youth, the Florida he loved, the Florida before air conditioning, interstate highways, and theme parks.

This was her routine, every year, on Easter morning.

She reflected on the words of John Eldredge and Brent Curtis, describing the silence, solitude, meditation, and simplicity of what they referred to as desert communion:  “We have come to the shores of heaven together, to the border of the region where our Christianity begins to move from a focus on doing, to one of communion with Christ.”

She reached over and removed her 35mm SLR from its backpack, and waited.  At the right time, she switched the mode to manual, adjusted the aperture and exposure, partially depressed the shutter and studied the image in her viewfinder.

She released the shutter, studied the image, and then set the camera aside.

The intrepid, results-based consultant turned her thoughts back more than two thousand years, to the pre-dawn darkness of the first Easter morning, as she tried to reconstruct what the now disillusioned and despairing friends and followers of Jesus of Nazareth must have been thinking and feeling for the better part of the past two days.

Prophecies notwithstanding, when they went to the grave site on the morning of the third day, what did they really expect to find?  By every rational explanation and every shred of evidence, this man of so much promise, in whom they had placed so much hope, was dead.

They had been eyewitnesses to His death, and the effects of the torture and humiliation that preceded it;  the term excruciating, she reminded herself, came from the Latin ex crucis, meaning literally, “out of the cross”;  Roman crucifixions left nothing to the imagination.

They had been witnesses to his burial, as well, and the unusually intense security of his tomb.

For the friends and followers of Jesus, this was certainly more than the physical death of one man;  for them, it was the death of all Hope.

Her thoughts eventually moved to another time not far removed from the darkness of the days following the death of Jesus, as Peter, and others, asserted, for everyone to hear, that not only had they witnessed His torture, crucifixion, and burial, but they had also been the eye-witnesses to His resurrection.

Rather than abandoning their faith and succumbing to hopelessness, Peter and the other apostles were now stating, publicly, for everyone to hear, that they were willing to live their lives – and to give their lives – for the lives of others, and for the Faith and the Hope that Jesus’ crucifixion, death and resurrection gave all of them.

In the words of the apostle Paul, penned later to the churches of Galatia, they were all saying, in essence, “I have been crucified with Christ.  It is no longer I who live, but Christ who lives in me.  And, the life I now live in the flesh, I live by faith in the Son of God, who loved me and gave Himself for me.”

That has been the experience of every Christian, ever since, she among them.

She smiled, and whispered.

“Risen”.

 

“God’s Kingdom had come, not at the end of time, but within time – and that had changed the texture of both time and history.  History continued, but those shaped by the Easter Effect became the people who knew how history was going to turn out.  Because of that, they could live differently.  The Easter Effect impelled them to bring a new standard of equality into the world and to embrace death – as martyrs, if necessary – because they knew, now, that death did not have the final word in the human story.”  (“The Easter Effect and How It Changed the World”, The Wall Street Journal, March 31, 2018)

Everything else – past, present, or future – either points toward, or proceeds from, the fact of the death and resurrection of Jesus Christ that we rejoice and celebrate every Easter.

 

In the broadest sense of the term, we want to see BuilderVelocity™ become an industry movement.

We want the members of this movement to be the forward-thinking participants in the homebuilding supply chain, the concerned, connected members of the new home construction value stream, coming together to unravel traditional industry best practices and challenge conventional industry thinking, in order to create sustainable competitive separation for their homebuilding enterprises.

In embracing BuilderVelocity™, there is an acknowledgement that sustainable competitive separation is achieved by doing what your competition will not do, what your competition cannot do, by doing things that are too tough, too forward, that require too much rigor, too much discipline, too much resolve;  sustainable competitive separation reached only by doing the hard work to achieve operational excellence on the velocity side of Return on Assets.

What is BuilderVelocity™?  Why is it relevant to builders?  Why is it essential?

BuilderVelocity™ is a way of thinking about production management;  it is a systems-focused thinking process for managing production.  It expresses the principles and disciplines of production management in terms that reflect the unique characteristics – and the particular requirements and context – of residential construction.  It is an industry-specific application of the universal principles and disciplines underlying production management, physics rooted in the laws that govern all production systems.  It is about using – merging when necessary – the production management tools that work for homebuilding, without regard to the consulting religion from which they come.

BuilderVelocity creates a visual image of homebuilding production that connects operating performance to business outcomes;  BuilderVelocity™ enables builders to “see” production from a different perspective, it enables builders to see production from a ”more-without-more” mental model, perhaps even a “more-for-less” mental model:  more revenue, more closings, in less time, with less work-in-process, and less overhead.

BuilderVelocity treats workflow associated with homebuilding for what it isproject portfolio management (multi-project management) with embedded, supporting, and surrounding processes and procedures.

BuilderVelocity™ addresses production management as a system, and it aims to increase the productivity of that system (not the size of the system) by maximizing the closings and Revenue it generates with a planned, finite, and controlled level of work-in-process and capacity, with less waste and less variation;  it establishes velocity accelerators – a set of actions that increase productivity.

BuilderVelocity™ flows from the best book on the subject.  The Pipeline: A Picture of Homebuilding Production, Second Edition© tells the story of how RB Builders learned the principles of homebuilding production in the turbulent years following the end of the halcyon period known as the Age of Homebuilder Entitlement®.  The Pipeline is a story told in the exchanges of dialog between RB Builders’ team members, senior management, and its trusted, results-based consultant.

BuilderVelocity™ is also the namesake of the event management website (www.buildervelocity.com) for the Pipeline workshops, the series of open, sponsored (and other channeled) two-day workshops and one-day seminars on production management developed by SAI Consulting, Inc.

Pipeline workshops™ are designed to transfer in-depth knowledge and create an intuitive, instinctive understanding of production principles and disciplines, focused specifically on homebuilding production management.  They are not a lecture series.  They make extensive use of a proprietary business case and management exercises.  The material is comprehensive, the learning is intense, the format is interactive and competitive.

Pipeline workshops™ use a progressive series of production scenarios, known as Pipeline games™, that simulate homebuilding production in the real business world, in an environment of variation and uncertainty, where operating decisions produce economic results – sometimes meeting expectations, rarely exceeding them, oft-times falling well short.

Pipeline games™ are both a production simulator and a business game;  the games are completely unique in the approach they use;  they significantly shorten the learning curve.

And, finally, BuilderVelocity™ is a LinkedIn forum.  It is a group for those charged with the responsibility of managing – or managing the interaction with – production as a system, at some level of a homebuilding enterprise.  It is a source of knowledge for those charged with driving results.  It is a group that asks builders to participate, to share knowledge, to challenge ideas, to ask questions, to use their voice.  It will be what its members make it.

Join the movement.  Join us at a Pipeline workshop™.  Read the book (it is always carried in-stock on amazon.com, and is usually available online from the other bookseller sites).  Join the BuilderVelocity™ group on LinkedIn;  contribute to the discussion.

Join.  Participate.  Learn.

Request to join the group:  BuilderVelocity on LinkedIn

Register for a workshop (when registration is open):  Pipeline Workshops at buildervelocity.com

Purchase the book on Amazon:  The Pipeline book