“You have to own it.”

Posted May 8, 2021 By Fletcher Groves

I have now been a consultant with SAI Consulting for going on 27 years.  Before that, I was a commercial bank officer and lender.  Between my banking career and my consulting career, I was a licensed homebuilder and real estate broker.  There was a highly-valued (and much-appreciated) stint with Arthur Rutenberg Homes, but the majority of my time as a homebuilder coincided with my role as an in-fill residential developer.

As a developer and builder, the driving force – the focus of my energy and interest – was residential architecture;  residential architecture, broadly and generally, but, particularly and specifically, the residential architecture of my native state of Florida and of the South.

I came to realize that an energy and interest in architecture is not enough to be a full-time, long-term homebuilder or run a homebuilding business, and I am fine with it;  my avocation does not need to be my vocation (I continue to build my own houses anytime I like).

The move to SAI was the right move made at the right time;  I wanted to use my business background to make a meaningful difference in the homebuilding industry, on the velocity side of Return on Assets, on behalf of the homebuilding enterprises engaged in it.  And, after all of these years, I continue to enjoy the consulting work that I do, and I especially appreciate the fact that the vast majority of my client portfolio still consists of homebuilding companies.  I doubt that I would have enjoyed consulting in any other vertical space.

When I joined what was then known as the Service and Administrative Institute, it was very much a decision to work where I lived, not live where I work.  Cort Dondero, the then-owner and CEO of the Ponte Vedra Beach, Florida-based firm, listened to what I wanted to do.  The industry vertical in which I wanted to consult bore no resemblance to the bulk transportation and logistics, TQM-based consulting firm he owned and managed.

Cort nevertheless allowed me the freedom to choose the path I wanted, and he put me into engagements in which I could learn the tools, notably how to map and improve business processes.  I think Cort based his decision on the ides that I was willing to completely own my consulting practice – to come up with the consulting model, blend the improvement methodologies and tools, develop the deliverables, sell the client engagements, manage my clients and the work product, publish my work, achieve solvency, manage the cash flow, and forgo any draw or salary.

For my part, I was looking to start a consulting practice, not find a consulting job.

Some of the other consultants then with Service and Administrative Institute helped immensely – friends like Kent Steen, Joe Kinsey, the late Steve Hollwarth, and Bob Pues.  Hoyt Lowder, retired now from the Fails Management Institute (FMI), was a valued resource.  All of the writers and thinkers that I attributed in The Pipeline: A Picture of Homebuilding Production© played a significant role in my development as a management consultant.  Clients contributed to my development, in ways they will never know.

A few years after I joined the firm, Service and Administrative Institute was sold to Trimac, a Canadian bulk transport company, and cobbled together with other Trimac interests into Trimac Logistics.  A few of us took over the general management consulting work and renamed the firm SAI Consulting, Inc.

SAI is now a much smaller, but far better developed and far more focused consulting practice than when I joined the firm.  It has a lot of resources to offer – to make available to – a consultant who would consider joining us.  Understand, however:  we are not looking for staff consultants or analysts;  we are looking for professionals that are willing to fully-own their consulting practice from the start, and eventually become principals willing to fully-own a share of SAI Consulting.

Interested?

 

   

Deliverables: Results-Based Consulting

Posted May 1, 2021 By Fletcher Groves

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

SAI Consulting is afforded the opportunity to serve our clients’ needs, because of our management experience related to a specific industry, matched with our ability to focus a distinctive constraints-based problem-solving approach to their specific circumstances.  We have a firm grasp of the operational performance issues that affect our clients;  we focus their efforts on solutions that they should be able – should be able – to translate into increased profitability, improved cash flow, and higher economic return.

By necessity or resignation, we deliver most of our consulting work in engagements that operate under a conventional, fee-for-service approach;  “by necessity or resignation” expresses the reality that the value-driven, results-based consulting we favor imposes requirements that cannot be met, that simply do not fit within convention, do not fit within accepted rules.

The conventional approach defines projects in terms of work product, not business outcomes;  the client’s willingness and capability to implement the change is rarely considered;  the client’s commitment is not gauged;  there is no insistence that clients learn and become responsible for performing the work themselves;  there is no connection between what a project costs, and the results – the value, the benefit in excess of cost – that it delivers.

We would prefer to work with clients – and be compensated – purely on the basis of the value we help create – value defined by the results we help achieve, measured in terms of improvements to operating and business outcomes.  In our view, consultants should provide more than expertise;  consultants need to obtain results, they need to share accountability for those results, and – in terms of compensation – they need to share in those results.

Defining a project in terms of shared responsibility for the financial outcome is only one element of how a results-based consulting model should work.

Other elements are that it should not be a solution in search of a problem;  it should apply the best solution to a range of problems and constraints.  The scope of the project should be based on the client’s capability and willingness to change.  It should break projects into phases that deliver rapid results, without losing sight of the long-term goal.  It should require that clients and consultants work and learn together, in full partnership mode.  It should leverage the consultants’ resources and capabilities, not make the client increasingly, unendingly dependent upon them.

This type of high-yield, value-driven, results-based consulting requires more than a traditional consulting approach can provide – a host of requirements that make low-yield, fee-for-service consulting problematic for its consultants:  greater comprehension, longer project timeframes, more agility, higher working capital commitment.

So – what is required in a results-based consulting arrangement?

First, the client has to agree to a focused process of continuous improvement, defined as a prioritized series of initiatives conducted in consecutive order with short durations, aimed at achieving targeted, defined, measurable results.

Second, the client needs to accept a variable costing approach to managerial accounting;  it needs to embrace Cost-Volume-Profit (CVP) decision-making, and prepare its internal financial reports on a Contribution Income Statement format.  It needs to embrace targeted increases in Gross Income as the unifying business outcome;  Gross Income is targeted because it is a border crossing, the demarcation point at which its pricing and cost issues meet its productivity issues.

Third, the client has to end the practice of bonusing individual job performance, and adopt a team-based performance compensation plan, within the tenets of Open Book Management.  It has to agree to a plan that provides a self-funding, progressively-weighted series of milestones that will distribute the team’s portion of a Gross Income Reserve, which is the residual created from a Gross Income Target achieved in excess of a Gross Income Baseline.

Fourth, all other improvement initiatives must be subordinated to the overall improvement process described in the first requirement;  the initiatives have to be integrated – unified – into the overall plan, and they have to contribute to the targeted results.

Lastly, the consultant has to be satisfied with his share of the Gross Income Reserve as the only compensation he will receive for his participation in an extended consulting engagement, an engagement in which he cannot limit or restrict his involvement.

Results-Based Consulting is not an approach that will succeed for every company;  consequently, it will never fully replace traditional consulting.  But – this is the basis for how we would prefer to work with clients.

Want to learn more?

   

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