Archive for April, 2021

Deliverables: Open Book Management

Posted April 24, 2021 By Fletcher Groves

(initially published on Escape from Averageness® in October 2014 as the fifth in a six-part series;  updated and republished here as part of our latest retrospective, “Still Above Average: The Best of Escape from Averageness®, 2009-2021”)

Building a Savvy, Motivated, Mutually-Accountable Homebuilding Team

For more than a quarter century, SAI has worked with homebuilding companies committed to improving their operating performance and resulting business outcomes.  We advise them that the key to success lies in getting the job done – viewing the issue, sustaining the effort, and obtaining results – in three critical dimensions we call discipline, context, and perspective.

Discipline:  Focusing the business model on delivering exceptional levels of the distinctive value demanded by a narrow segment of homebuyers.  Perspective:  Viewing everything that matters through the lens of the natural, horizontal, process-centered manner in which work is performed and value is created on behalf of homebuyers and other stakeholders.  Context Transmitting an underlying business logic and transparency to everyone on the team.

Creating that context – that underlying logic and transparency – is what Open Book Management is about.

Open Book Management flows from the work that Jack Stack did in the 1980’s as the CEO at Springfield Remanufacturing Corporation, in order to rescue the former International Harvester (Navistar) division from certain bankruptcy.  Following a last-ditch, 99% leveraged employee buyout, Stack chose to open the company’s books and make it everyone’s business to improve performance.

Stack recounted the effort in two books (The Great Game of Business and A Stake in the Outcome);  shortly afterward, John Case reported on open-book thinking in other industries and companies (Open Book Management and The Open Book Experience), including insight into how Steve Wilson developed the basics of OBM-inspired team-based performance compensation at Mid-States Technical Staffing Services (The Bucket Bonus Plan).

At SAI, we are specific in our application of the principles of Open Book Management.

  1. We push our clients towards transparency (openness) and candor (the courage to tell and hear the truth) in the internal disclosure of operating and financial data, in meetings specifically for that purpose, and through the use of dashboards and heads-up displays.
  1. We push our clients towards imparting business literacy (understanding) to everyone, so that they understand the business of homebuilding, not just homebuilding as a business; we do it through the linked teaching of business and production principles.
  1. We push our clients towards a team-based approach to performance compensation, via an inclusive, self-funding, progressively-weighted milestone plan based on achieving targeted performance above a baseline in a specific business outcome; it is precisely the type of performance compensation plan we would expect to participate in, under a results-based approach to delivering consulting services.

The essential deliverable of Open Book Management is a savvy, mutually-accountable, motivated homebuilding team.

Next:  Deliverables:  Results-Based Consulting:  Continuous Improvement, Urgency, and Results

Want to learn more?

Deliverables: Current Reality Assessment®

Posted April 17, 2021 By Fletcher Groves

(initially published on Escape from Averageness® in October 2014 as the fourth in a six-part series;  republished here as part of our latest retrospective, “Still Above Average: The Best of Escape from Averageness®, 2009-2021”)

A process of continuous improvement is just what the term describes – it is a constant, never-ending quest for improvements in operating performance and business outcomes.

But – what do we improve, and in what order?

For a homebuilding company setting out on this journey – and it is a journey – these questions need to be the first ones asked and the first ones answered, before anything else is considered, before any other decision is made.

Every situation is different, and situations can change, but you always start an improvement process with an understanding of where you are right now;  you start with an understanding of current reality.  You start with an objective analysis of your specific current condition, with an objective assessment of your current performance, resources, and capabilities.

To be clear, SAI performs two different types of assessments:  a Competitive Assessment and a Current Reality Assessment®.  Both involve looking at outcomes, checking facts, and drawing conclusions, but a Current Reality Assessment® is specifically designed to be the demarcation point for a focused process of continuous improvementa series of initiatives conducted in consecutive order with short durations, aimed at producing targeted, measurable improvements to a specific economic outcome.

It is the same type of rapid-cycle improvement program we use in our Results-Based Consulting® arrangements.  It is also tailor-made for use with an RB-C®’s recommended team-based approach to performance compensation.

Sometimes involving interviews and surveys, and always involving a working group, a Current Reality Assessment® focuses and prioritizes your improvement effort, and establishes the baseline for continuously improving your operating and business performance.  In doing so, a CRA® draws conclusions about the order and priority of initiatives, based on dependencies, based relationships of cause-and-effect.

It is an assessment deeply-rooted in an understanding of how systems work and how they are improved.  It is root-cause analysis directed at identifying core problems and identifying the limitations – identifying the constraints – to the business outcome being sought.

Systems-thinking is about improving the performance of the entire system;  it is not about improving the performance of a system’s pieces or parts  – not any of the parts, not some of the parts, not even all of the parts, independent of one another.  The way you improve a system is by focusing the improvement efforts on identifying and resolving the problems that limit the performance of the entire system.

It would be a mistake to look at the facts and measures from a picture of your current reality and conclude that these are a set of equally-important-yet-independent, related-yet-isolated measures.  It would be a mistake to conclude that the best way to improve your current reality is to spend time and effort improving the outcome of each and every part of it, whether one-at-a-time or all-at-once.

You cannot improve everything, everywhere, all at the same time;  you cannot treat everything as the problem.  If you do, you will spend most of your time and effort treating what amounts to the symptoms of the problem, without ever resolving its cause.

If you are fortunate, you might succeed in improving performance in some areas, and you might relieve the symptoms and effects of some of the problems.  But – you will likely never solve the one problem that right now is preventing your company from achieving the outcome it seeks, and the unintended consequences of separate actions on different parts will likely make the situation worse.

The business environment in which you must operate does not provide you with unlimited capacity and resources, unrestricted capital, or limitless opportunities, which means that any effort at overall improvement has to be prioritized, has to be focused.

It means that solving some problems, exploiting some opportunities, must wait until more important problems are solved, until better opportunities are exploited.

What comes out of a Current Reality Assessment® is a plan:

“This is where we are, right now.  These are the problems, and this is the priority in which they will be addressed.  We will attack them in this order, and only in this order.  With the first initiative, we will likely be able to eliminate the following additional issues, because we have established their cause-and-effect relationships, tied it back to the most important factor.

“We have x-days to get this first initiative done;  we will work on no other initiative until this one is finished.  We are going to assign the right people and resources to this initiative;  in the meantime, everyone else focus on doing your jobs.

“When we are done with the first initiative, this will be our second initiative.”

And so on.


Next:  Deliverables:  Team-Based Performance Compensation

Want to learn more?


Deliverables: Business Process Improvement

Posted April 10, 2021 By Fletcher Groves

(initially published on Escape from Averageness® in October 2014 as the third in a six-part series;  republished here as part of our latest retrospective, “Still Above Average: The Best of Escape from Averageness®, 2009-2021”)

An overwhelming portion of SAI Consulting’s work, in and out of homebuilding, has been about enabling clients to structure themselves around their core-critical business processes;  Business Process Improvement is the area of our practice for which we are most recognized.

GE Capital had the process mandate right.  There is a reason for our focus on business processes.

It is the most basic, most fundamental proposition in all of business:  the reason an enterprise exists is to make money;  the way an enterprise makes money is by delivering value to its customers and other stakeholders;  that value is only delivered through the work that the enterprise performs;  that work has to be performed in some manner of workflow;  the most common form of that workflow is work performed in processes.

Make money . . . by delivering value . . . through work performed . . . in processes.

From a business standpoint, processes are critically, centrally important;  processes exist, whether enterprises are intentional about them or not.

Process mapping involves far more than simply documenting – merely gaining an understanding of – the current workflow;  mapping processes also includes redesigning those workflows, which invariably reveals other issues.  Because it is so foundational, it is impossible to overstate the importance of understanding and improving the way work is performed, before starting down the road on other improvement initiatives.

For us, understanding workflow is the means to a more important end.  It is the front-end of the entire improvement method, in which we eliminate the workflow elements that add no value and refine the remaining value-adding activities (to make the process more clear, more consistent, more connected), then find the best opportunities to productively redeploy the newly-liberated resource capacity.

The analogy from our Pipeline workshops™ is that we want a shorter, straighter pipe.

Understanding workflow tends to clarify the underlying problems and issues.  And, when process workflows are connected to existing and targeted performance measures, builders can start to understand the requirements and necessary conditions that must exist in order for the process to be improved.

Just what is process mapping?  What does it look like?

We view the current (AS-IS) state of a process through the lens of cross-functional flowcharting teams, comprised of the people who actually perform the work in the process (hint: management only knows how it wants the process to work).

In the past, we would also use cross-functional flowcharting teams to redesign the process to reflect its desired future (SHOULD-BE) state;  using the same approach for both made comparisons between previous and redesigned states of a process more insightful;  it made the difference between the AS-IS and the SHOULD-BE more stark.

We like the starkness.  Now, however, we get to the point more quickly, by using IDEF process modeling and notation in the design/redesign and future documentation phases.  For the sake of continuity, and to take advantage of the insight gained mapping the current state, we use the same cross-functional teams for the SHOULD-BE that we used in the AS-IS;  we simply use a different methodology.

The advantage of IDEF0 lies in the ability of its hierarchical structure of graphic diagrams and supporting text diagrams to gradually reveal increasing levels of process detail.  Where IDEF0 process modeling differs from cross-functional flowcharting, SIPOC charts, or value stream mapping, is that IDEF does not impose a single level of process detail;  the level of detail is whatever is necessary to provide the understanding.

As a result, IDEF0 presents a far better learning/training outcome.

There are additional advantages in using IDEF0 to design and document the desired future state of a process.  Unlike other methods, IDEF0 establishes the parameters and outcomes as part of the process design.  More importantly, IDEF0 does not carry the legacy – the burden – of the current state, as other methods tend to do.

After a process has been redesigned, improved, and documented, it still has to be managed.  In a homebuilding environment, process management is largely about visibility, notifications, and follow-up;  the benefit of truly automating processes is of less importance in homebuilding than it is in industries that have high-transaction volumes and high-IT components.  Moreover, the true nature of workflow in homebuilding is not solely process management;  it is project portfolio management with embedded, surrounding, and supporting processes.

We would prefer to have automation built into the operating system – into the management technology system – that supports the process workflow, not the other way around.

Business Process Modeling and Notation (BPMN) is an emerging standard, one that extends process design, improvement, and documentation into process management and automation.  It automates and manages process steps through execution language, which involves code writing.  The current version of BPMN (version 2.0) is more open source and supported by OMG;  the common execution languages that it uses are BPEL, XPDL, and XML.  Like IDEF, BPMN uses a hierarchical, parent-child structure of processes and embedded sub-processes.

I rarely plug SAI on the pages of Escape from Averageness®;  this case merits an exception.

SAI Consulting has done more work with business processes, and done it longer, than any consulting firm in the homebuilding industry.  Before the creation of the National Housing Quality (NHQ) Award, we were already assisting Malcolm Baldrige National Quality Award winners in their efforts to refocus, restructure, and redesign their business operations around their processes.  Before there was any serious interest in the homebuilding industry on the documentation and management of business processes, we were already recognized experts in that field.

SAI’s process toolbox is the best in the industry.  We pioneered the development of many of the tools and techniques we use in this area.  We use one of the most advanced process flowcharting and modeling software applications on the market (iGrafx Flowcharter w/ IDEF0);  we participated in a portion of its development;  we are an iGrafx North American consulting partner.

We are adept at every form of process documentation:  cross-functional flowcharting, value stream mapping, and IDEF0 process modeling;  all of the notation languages, and all of the methodologies (Total Quality Management, Lean-Six Sigma, Theory of Constraints, Lean/TPS) that act upon them.

We come from the homebuilding industry;  we are process experts;  we speak process in a language homebuilders understand.

We know what we are talking about.

For additional information:

Next:  Deliverables:  Current Reality Assessment

Deliverables: Competitive Assessment®

Posted April 6, 2021 By Fletcher Groves

(initially published on Escape from Averageness® in October 2014 as the second in a six-part series;  republished here as part of our latest retrospective, “Still Above Average: The Best of Escape from Averageness®, 2009-2021”)

One of the hallmarks of SAI’s consulting work over the past fifteen or so years has been the Competitive Assessment®.  Somewhat like a balanced scorecard, this in-depth report provides an objective analysis of the capabilities and performance a builder has exhibited during its previous fiscal year, based on a predetermined set of measures the builder agrees are its key performance indicators, its so-called KPIs;  a Competitive Assessment® provides a standard comparative platform for performance measurement.

It is about results produced against expectations.

As a management tool, a Competitive Assessment® has a lot of central uses.

As an analysis of previous performance, it can be designed to relate to the predictive, real-time performance measures in a heads-up display and dashboard, and collectively constitute a builder’s performance measurement system;  it can be used to support a team-based performance compensation arrangement, one tied to targeted enterprise performance achieved above a baseline, regarding a single business outcome;  it can provide the forensics for a focused, targeted, measurable process of continuous improvement.

What a Competitive Assessment® delivers to a builder is broad, objective, unfiltered input into how well it is satisfying stakeholder requirements, while continuously improving operational capabilities and business performance.  It enables a builder to improve performance, shape its budget and operating plan, and make decisions about how it will manage the enterprise.

To give you a sense of how a Competitive Assessment® has worked in actual situations, take a look at the structure of a report we did for one of our clients over a multi-year period, a few years before the end of the Age of Homebuilder Entitlement®.

For this client, we provided a numeric rating of its capabilities and performance on a total of 25 key performance measures, classified into four sections:

  1. Measures of Success [Core Business Performance Measures]
  2. Supporting Business Performance Measures
  3. Operating Performance Measures
  4. Risk and Control Index

This builder’s actual performance was graded against its expected performance.  The numeric ratings ranged from 1.0 (lowest) to 4.0 (highest).  The rating for each measure was analogous to the grade received on a particular test, the rating for each section to the grade for a class, the overall rating to the overall grade point average.

The section indexes were a composite reading of their component measures;  there were several composite indexes within sections.

The first section (Measures of Success) was derived from the client’s foundational belief that the enterprise’s success was dependent upon meeting three basic requirements:  (1) earned loyalty from its stakeholders (including its buyers, its trade partners, and its teammates);  (2) sufficient cash generated from operations;  and, (3) a maximized return on invested capital.

Those requirements were considered the ultimate expressions – the ultimate measures – of success in their system, and this is how they appeared on the Competitive Assessment Scorecard®:

  • Measures of Success (‘Success Index’)
  • Cash Generation
  • Return on Invested Assets
  • Net Income
  • Invested Asset Turnover
  • Stakeholder Loyalty
  • Customer Satisfaction
  • Warranty Satisfaction
  • Teammate Satisfaction
  • Building Partner Satisfaction
  • Market Partner Satisfaction

The second section (Supporting Business Performance Measures) wrapped up the “outcomes” portion of the Competitive Assessment®, and included the following two measures on the scorecard:

  • Gross Margin
  • Operating Expense

Unlike the first two sections, the third section (Operating Performance Measures) contained operational measures that were considered “drivers” of business performance.  A lengthier section, the scorecard included the following measures:

  • Forward Land Position
  • Unsold Late-Stage (Stage 8-10) Inventory
  • Sales (sufficiency)
  • Start Buffer
  • Starts (sufficiency)
  • Closings (sufficiency)
  • Work-in-Process (necessary v. actual)
  • Cycle Time
  • Job Budget (Variance Purchase Orders)
  • Job Budget (slippage)
  • Top-grading
  • Warranty Service

The fourth section was a Risk and Control Index.  Unlike the earlier sections of the assessment, responsibility for this index belonged to the business partners (owners and investors), who were required to adopt and maintain a conservative and disciplined approach to investment and financial management, to make business and operating decisions within the controls established to manage risk, and to productively utilize a planned, finite, and controlled amount of capital resources.

  • Cash Balance
  • Debt-to-Equity Ratio

We advised this client not to regard the components of the assessment as a set of equally-important-but-independent, related-but-isolated measures, and not to conclude that the best way to improve the overall outcome was to spend an equal amount of time and effort improving the outcome of each and every measure.

Our point:  these 25 measures did not reflect a loose collection of independent and unrelated parts – a set of processes, departments, systems, resources, policies, and other isolated pieces of a whole.

It reflected a system.

The description of what goes into every measure is too involved to explain in this space, but these are image captures of the scorecard showing three years of assessment in all four sections for one of their operating companies, with points of concern highlighted in red:

Want to learn more?


Next:  Deliverables:  Business Process Improvement



Posted April 4, 2021 By Fletcher Groves

(the intrepid, results-based consultant is the main character in both editions of The Pipeline: A Picture of Homebuilding Production©;  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 resumed its slope more steeply, toward the upper dunes.

Easter 2021, Ponte Vedra Beach, Florida

She dug the soles of her topsiders into the sand, still damp from the last high tide.  It always felt good, unfailingly restorative, she thought.  Resting her arms on her knees, she gazed eastward, where the sun was just beginning to rise into a brightening sky with only a few clouds, on what was an unseasonably cool early-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 reached over and removed her 35mm SLR from its backpack;  vintage digital, she mused, recalling how she learned photography old-school, at her father’s insistence, with a manual 35mm and Kodak film.  She waited until the time was right, and then 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 and confirmed the image.  She took several more photos as the sun rose a bit higher, 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 their 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 moved to another time not far removed from the darkness 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 three days later.

Rather than abandoning their faith and succumbing to hopelessness, Peter and the other apostles were now stating, publicly, authoritatively, for everyone to hear, that they were willing to live their lives – 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, “He is 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 – past, present, future – points toward, or proceeds from, the fact of the death and resurrection of Jesus Christ.

And, it is the event in which we rejoice, and for which we celebrate, every Easter.