Pipeline Workshop™ No. 16: Save the Date

Posted March 21, 2021 By Fletcher Groves

Pipeline Workshop™ No. 16 will be held October 14-15, 2021, at the Ponte Vedra Inn and Club in Ponte Vedra Beach, Florida.

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

“This is my second attendance to the Pipeline Workshops™.  All I can simply say is WOW!  Fletcher and his team strive to improve the workshops and make [them] even more relevant.  I especially enjoyed playing the Pipeline Game™ again and learning about [the] Velocity Accelerators®.  I look forward to attending in the future!”  (Carlos Alvarez, President, Alvarez Homes, Baton Rouge, LA)

“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)

“The Pipeline Workshop™ completely changed my approach to meeting my company’s productivity and profitability goals.  I came away with several actionable items that I was able to implement right away.  Any homebuilder with an open mind, who is willing to challenge the traditional ways of thinking that our industry has grown comfortable with, will benefit greatly by attending.”   (Ryan Band, Unbridled Homes, Louisville, KY)

Pipeline workshops™ are now concluding their eighth consecutive year, and we have worked constantly to enhance and improve it.  Over the years, we have:

(1) improved the best production simulator and business game in the industry (the Pipeline Game™), made it faster to play, easier to understand;

(2) introduced an operating statement format to the game that mirrors the particular characteristics of homebuilding operations;

(3) found ways to transfer the learning faster, to make the connection between operating decisions and business outcomes clearer, quicker, more direct;

(4) started to examine areas of disruptive innovation (for example, outsourced building models that become integrated building models);

(5) introduced an MBA-level business case (RB Builders: Lessons from the Pipeline©);

(6) emphasized important and emerging areas we call Velocity Accelerators®.

Pipeline workshops™ are unique, completely unlike any other homebuilding conference (and, under current COVID-19 restrictions, they are the industry’s only significant event that is conducted live, not virtually).

The learning split is 70% simulation/business case, only 30% lecture;  the format is intense, interactive, and competitive;  the Pipeline game™ production simulations and the RB Builders: Lessons from the Pipeline© business case rigorously test attendees’ correct understanding of production management principles and disciplines, 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 simply being in the business of building homes.

Our venue, the Ponte Vedra Inn and Club, is a terrific AAA Five Diamond oceanfront golf and tennis resort dating back to 1928;  we provide a relaxing and enjoyable reception on the Historic Inn’s putting green at the end of the first day;  we offer recommendations on outstanding local dining;  there are abundant opportunities 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 without more, hopefully doing more with less;  dealing with variation;  managing homebuilding production as the type of workflow that it really is – multi-project management with surrounding, supporting, and embedded-processes;  placing the emphasis on actions that accelerate production 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. 16 opens June 14, 2021.  The regular attendance fee is $895.00

Come.  Participate.  Learn.

 

Here is the permanent link to the website:  www.buildervelocity.com

The link provides information about the workshop, reviews from builders who have attended previous workshops, and a downloadable Adobe PDF file with detailed information about the venue, agenda, and schedule.  All of this information, as well as the event registration and hotel reservations link will be updated before registration opens.

 

      

In the spring of 2020, at the outbreak of this global pandemic, we made the rational, reasonable decision to cancel Pipeline Workshop™ No. 13;  at the time, no one knew what to expect or how to deal with the disease;  more importantly, our long-standing venue, the Ponte Vedra Inn and Club, was being forced to temporarily shut down anyway.

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In the fall of 2020, when Pipeline Workshop™ No. 14 turned out to be a resounding, resurgent success, we presumed that it marked a return to business-as-usual for arranging and facilitating what is, by its nature and design, the most intense, demanding, interactive, and challenging homebuilding production management learning experience on the planet.

Apparently not.

We have cancelled Pipeline Workshop™ No. 15, scheduled for March 17-18, 2021, because under COVID rules and behaviors, we have not been able to form enough teams to produce the type and level of learning Pipeline workshops™ are known for delivering.  This, despite adjusting the event pricing to reflect the circumstances, and making it possible for almost everyone to attend without charge.

In the end, what we can offer in incentives and safety is not enough to offset the caution and concern this disease has created, and continues to maintain, about travel and public gatherings.

We will move registered attendees to Pipeline Workshop™ No. 16, which is already scheduled for October 14-15, 2021, at the Ponte Vedra Inn and Club in Ponte Vedra Beach, Florida, and we will provide the same pricing they had for Pipeline Workshop™ No. 15.

Despite the circumstances, Pipeline workshops™ have been one of the homebuilding industry’s few public events conducted live;  Hanley Wood-BUILDER finally conducted its 2020 BUILDER 100 Summit virtually, and NAHB conducted the International Builders Show virtually.  Yes, during this pandemic, we have conducted live private Pipeline workshops™ for builders large enough to have the event in-house, but those are not public events.

A virtual approach is not feasible for an interactive, team-based event like a Pipeline workshop™, which stands in sharp contrast to almost any other conference.  With the benefit of the technology available today, conventional conferences can be conducted virtually as a series of presentations or lectures, even involving a virtual panel, even involving limited Q&A.

Pipeline workshops™ are more like the situation facing a consultant that has to help a client extract and process information and thought, especially when it involves a cross-functional team dealing with complex, cause-and-effect issues.

It can’t be done.

We want to thank the Ponte Vedra Inn and Club for understanding the situation and continuing their support of this series of workshops.  We want to thank our registered attendees that will now need to adjust their schedules to attend the next workshop.

The Pipeline Experience® moves forward.

See you in October.

www.buildervelocity.com

 

      

(published on EFA® every year since 2012, coinciding with the NAHB International Builders Show;  updated as necessary, incorporated, and republished here, as the last in a five-part series) 

Back in April 2012, I had this exchange with Shinn Consulting’s Emma Shinn, on the BUILDER LinkedIn group, on the subject of whether the costs on the NAHB Chart of Accounts Income Statement, for financial management purposes, should be allocated according to the rules of absorption costing, or according to the rules of variable costing.

Almost nine years later, the discussion remains entirely relevant.

The matter of how the NAHB Income Statement Income Statement allocates costs was the subject of an April 2009 post on Escape from Averageness®.  It was also the subject of a series of posts in January 2012, summarizing the results of a CFO survey we conducted on the NAHB Income Statement, preceding the 2012 International Builders Show.

Here is the exchange in its entirety, unredacted, edited only for clarity:

Emma:  “I do respectfully disagree with your assessment of the NAHB Chart of Accounts – the purpose of the [Chart of Accounts] is to provide a structure for collecting financial information in an organized and meaningful way.  It provides builders the capabilities to produce reports that are meaningful and that will guide them in their decision-making process.

“In no way does it deter or hinder the contribution margin analysis you talk about.  In fact, it facilitates such analysis as it provides the classification of cost and expenses in a way that facilitates the identification of the variable and fixed components.

“The contribution margin analysis does not deter from the analysis of the traditional income statement and the valuable information it provides to the builders.  The contribution margin analysis does provide an expanded view and I agree with you in that builders can benefit from also looking at the income statement from this point of view as it refines further the behavior of fixed vs. variable cost and expenses.

“However, your assessment of the NAHB Chart of Accounts is unfounded and could not be farther away from the reality of what the purpose of the [Chart of Accounts] is set up to be.”

Fletcher:  “Emma, you don’t have to take my word for it. As part of the survey, we asked CFOs for their insight related to the structure of the NAHB Income Statement (i.e., line item accounts in series 300-900), as it relates to cost allocation (variable v. absorption) and management tools (breakeven, CVP, etc.).

“This an excerpt from one CFO:

“’I am intimately familiar with both the strengths and weaknesses of the NAHB Chart of Accounts.  It was a great tool for benchmarking our performance with other builders and to industry standards.  It was interesting to benchmark our company, but the statements produced utilizing the NAHB Chart of Accounts were of no use when it came to making pricing decisions.’

“The thoughtful examination of any managerial accounting or cost accounting textbook validates this CFO’s statements.”

Emma:  “Once again, I respectfully disagree with that assessment.  There is nothing in the chart of accounts that prevents a company from preparing a statement utilizing other analytical tools.  The income statement you call the ‘NAHB Income Statement’ is the standard income statement presented in any accounting principles class.

“If you want to do further analysis for specific managerial considerations, that is always highly encouraged.  However, I again say the NAHB Chart of Accounts vs. the charts of accounts I normally encounter in my reviews of builders’ operations facilitates further analysis;  it does not preclude the analysis.

“Accounting, in my view, is primarily a management tool and we continue to encourage builders to view it as a very powerful means to help direct their management decisions.  That is not to take away the role accounting also plays in reporting results to third parties, such as lenders and investors.”

Fletcher:  “Emma, the NAHB COA Income Statement has a lot of attributes.  However, there is a difference between what something ‘does not deter or hinder’ or ‘does not preclude’, on the one hand, and what it positively, proactively enables, on the other.

“That may be all our differing views are about.  However, here are two of the specific points made on the matter, posted on SAI’s Escape from Averageness® weblog in April 2009:

“’The NAHB COA Income Statement treats Indirect Construction Cost as one of the costs that is deducted from Revenue to determine Gross Profit (the only difference between Gross Margin and Gross Profit is the inclusion of Indirect Construction Cost).  But – do Indirect Construction Costs vary according to Revenue?  Probably not.  For the most part, they are non-variable costs that will most likely be incurred regardless of the Revenue produced.

‘The NAHB COA Income Statement treats Selling Expenses (including Real Estate Commissions) as an Operating Expense, as a part of overhead.  Anything allocated to Selling Expense, therefore, should be a non-variable cost.  Is that the case?  No.  The bulk of Selling Expense is a variable cost.’

“Emma – some of the CFOs in the survey were very out-spoken on this issue, and the shortcomings of absorption costing are well-documented.”

 

(variable costing and the Contribution Income Statement format are considered as a part of every Pipeline workshop™.  Learn more here:  buildervelocity.com or saiconsulting.com/buildervelocity-pipeline-workshops)

 

      

(published on Escape from Averageness® every year since 2012, coinciding with the NAHB International Builders Show;  updated as necessary, incorporated, and republished here, as the fourth in a five-part series)

“The NAHB Chart of Accounts is designed for historical financial reporting.  It is not a managerial accounting tool.  NAHB would do its members a great service by developing guidance on cost and managerial accounting.

“In my roles as both a CFO and a President of a homebuilding company, I am intimately familiar with both the strengths and weaknesses of the NAHB Chart of Accounts.  It was a great tool for benchmarking our performance with other builders and to industry standards.  It was interesting to benchmark our company, but the statements produced utilizing the NAHB Chart of Accounts were of no use when it came to making pricing decisions.”

So said, in part, one of the CFOs participating in SAI’s survey regarding the format and the utilization of their company’s particular Income Statement in relation to the NAHB Chart of Accounts Income Statement.

The thoughtful examination of any managerial accounting or cost accounting textbook validates this CFO’s statements.

To cite one:

“Financial accounting is mainly concerned with the historical aspects of external reporting . . . governed by generally-accepted accounting principles (GAAP).  Management accounting, on the other hand, is concerned primarily with providing information to internal managers . . . charged with planning and controlling the operations of the firm . . . not subject to GAAP . . . one thing is clear from the NAA definition of management accounting:

“The major function of cost accounting is cost accumulation for inventory valuation and income determination.  Management accounting, however, emphasizes the use of the cost data for planning, control, and decision-making purposes.”

Accounting Handbook, Barron’s, J. Siegel and J. Shim, 1990.

To cite another:

“Although an Income Statement prepared in the functional format may be useful for external reporting purposes, it has serious limitations when used for internal purposes . . . the Contribution Income Statement emphasizes the behavior of costs, and therefore, is extremely helpful to a manager in judging the impact on profits, of changes in price, cost, or volume.”

Managerial Accounting, 10th Ed., McGraw-Hill Irwin, R. Garrison and E. Noreen, 2003.  

To cite yet another, directed towards resolving the need for a company to prepare multiple sets of financial information:

“For companies committed to maintaining variable contribution information, there are two choices available . . . 1. maintain their accounting system on a full-absorption GAAP basis, with separate calculations and analysis of variable contribution information [or] 2. maintain their accounting systems on a variable contribution basis with a monthly reconciliation to GAAP . . . if the only real reason for maintaining full-absorption accounting is to satisfy external requirements, doesn’t it make more sense to use option 2 and perform simple month-end reconciliation to GAAP?”

The Measurement Nightmare: How the Theory of Constraints Can Resolve Conflicting Strategies, Policies, and Measures, APICS series, The St. Lucie Press, D. Smith, 2000.

The last of the preceding excerpts is consistent with the others;  in fairness, it comes from Throughput Accounting (the emergent cost accounting methodology supporting Theory of Constraints), which places it outside the mainstream.  Throughput Accounting uses a profit and loss statement that is an outlier to even a Contribution Margin P&L, by refusing to assign costs to inventory, and expensing product costs immediately;  literally, it has no internal use for GAAP compliance.

In the similarly nascent and outlying world of cost accounting methods that aim to support Lean Production, in its broadest sense, as a management system – as a business strategy, as an operating philosophy – the advice is more obtuse;  Lean Accounting sees no conflict with GAAP, uses an operating statement that clearly mixes variable and non-variable costs, but nevertheless states these among its Lean Accounting Concepts and Principles:  “2. Do not confuse a fixed cost for a variable cost” and “3. Eliminate absorption accounting for manufacturing transactions.”

The Real Numbers: Management Accounting in a Lean Organization, Managing Times Press, J. E. Cunningham, O. J. Fiume, E. Adams, 2003.

At best, comparison with “industry best practices” promotes a satisfaction with some sort of competitive equality, a settling for the expediency of the ideas of someone else.  The real problem with best practices is that it stifles creativity and innovation, works against creating competitive advantage, and creates the illusion of continuous improvement.

GAAP-for-the-sake-of-GAAP?  Compliance-for-the-sake-of-compliance?  If you are a builder, you manage every day;  you only report periodically.  You are not in the business of complying with generally-accepted accounting principles;  you are in the business of making money.

Emphasizing compliance is a case of the tail wagging the dog.

Bottom-line:  the two arguable attributes of the NAHB Chart of Accounts Income Statement – comparativeness-driven conformity and reporting-driven compliance – might be desirable, and to a degree necessary, but they are not a justification to sacrifice sound managerial accounting.  You cannot properly and effectively manage a homebuilding operation using the cost allocations recommended in the NAHB Chart of Accounts Income Statement.

Next:  Part V:  Groves and Shinn:  The Debate Over Costing

 

(variable costing and the Contribution Income Statement format are considered as a part of every Pipeline workshop™.  Learn more here:  buildervelocity.com or saiconsulting.com/buildervelocity-pipeline-workshops)

 

      

Pipeline workshops™ are an intense, interactive, size-limited immersion into the principles and disciplines that drive homebuilding production.

Over the eight consecutive years they have been offered, we have made a number of additions and changes that improve the learning that Pipeline workshops™ deliver, most notably, adding the RB Builders: Lessons from the Pipeline© business case, with its challenging set of problem-solving exercises, several of which are used with another added component, what we call the Velocity Accelerators®.

Despite these additions and changes, most attendees and observers will tell you that the most compelling part of a Pipeline workshop™ remains the Pipeline game™, a progression of production scenarios that also produce business outcomes;  Pipeline games™ are a production simulator, played by attendees grouped into teams, that reveals both the home building business and the business of building homes.

It is the same Pipeline game™ we have used at Housing Leadership Summits (now the Builder 100 Summit), at CertainTeed Builder Advisory Groups, with NAHB Builder 20 Groups, at the many Pipeline workshops™ we have held privately for larger builders, and at other industry gatherings.

Pipeline Games™ reinforce the production principles taught in a Pipeline workshop™, such as the effect of variation on a production system, pull scheduling according to the capacity of a constraint resource, and the importance of connecting operating decisions – made on matters like flow, cycle time, capacity utilization, and the level of workinprocess – to the critical business outcomes of profitability and return on assets.

Look at the results from any previous workshop;  the results never lie.  For example, consider this set of results.  In every category – from Revenue, to the levels of work-in-process, to Inventory Turns, to Cycle Time, to Net Income, to Return on Invested Assets – the teams made remarkable progress towards targeted performance, often exceeding expectations.

Look at the results, and you will see something else:  the teams rarely started out that way.

The game has changed, so the metrics have changed.  And, you clearly have to play the Pipeline game™ – see the measures and calculate the results for yourself – in order to fully comprehend what the axis values mean;  instead, focus on the performance trends (y-axis), as the games in this workshop progressed (x-axis).

This was Revenue . . . higher . . .

This was inventory turn . . . faster . . .

This was cycle time, expressed in days . . . shorter . . .

This was Net Income Margin . . . better . . .

This was Return on Assets, a reflection of its co-equal components:  Net Income Margin (margin) and inventory turn (velocity) . . . higher . . .

After the initial shock of shattered instincts, every metric was in precisely the direction you would want, precisely the direction you would expect, if the underlying production principles are true, if those principles are being applied, and if real progress is being made.

Like most of the builders attending a Pipeline workshop™, the builders attending this workshop clearly learned from their participation.

They learned the principles and disciplines of homebuilding production.

Pipeline games™ teach builders to “see” production;  they simulate the environment – fast-paced, rapidly-changing, filled with uncertainty, risk, and variation – in which homebuilding production decisions must be made.  It is learning based on experience and action, not lectures.

Pipeline games™ compress the learning curve.

In a Pipeline workshop™, the progression of the games mirrors the progression of the learning.  In the book that gave rise to the workshops (The Pipeline: A Picture of Homebuilding Production, Second Edition©), this is how they were described:

“Change is a necessary condition to any improvement effort, but change is difficult, disruptive, time-consuming, and costly;  the effort can fail to produce the desired – the intended – result.  Learning needs to occur without so much cost, disruption, and risk.  Managing production and improving operating and financial performance becomes intuitive and simple, but there is much to understand.  It is counter to what is taught, therefore, difficult to grasp;  it must be learned, and that is harsh when it occurs at the cost of real operating performance and actual business outcomes.”

Come.  Participate.  Learn.

 

Pipeline workshop™ No. 15 will be held March 17-18, 2021, at the Ponte Vedra Inn and Club, in Ponte Vedra Beach, Florida.  The stated attendance fee is still $895.00.  However, the first fifteen (15) attendees will be registered at no charge, and the next fifteen (15) attendees will be registered at a reduced $395.00 per person;  all that is required is proof of room reservations (two nights, single occupancy) at the Ponte Vedra Inn and Club).

Attendance will be capped at only 30 attendees, so everyone attends at a significantly reduced cost;  there is no early registration;  there is no team pricing.

Details:  www.buildervelocity.com