Prologue to a Pipeline

(excerpted from The Pipeline)

 

As this story is being told, it is the end of 2007, and RB Builders is embarking on a long journey to radically improve operating performance and the resulting business outcomes;  at the end of 2007, the beginning of 2008, the company could not have known the depth and duration of the housing and economic recession they had entered.

The plan was to achieve targeted increases in Gross Income above a currently-achievable baseline, by driving continuous improvement in operating performance through a series of short duration initiatives with targeted, measurable results, complemented by a team-based performance compensation plan that gave every teammate a financial stake in the achievement of that business outcome.

Very early in this effort, the company had concluded (with the help of its intrepid, results-based consultant) that – among its other, not-so-insignificant problems, and despite its considerable experience and past success – it actually knew surprisingly little about the principles and disciplines that relate to homebuilding production.  Moreover, RB Builders really didn’t have a picture of what production should look like.

In the past, RB Builders tended to sell as many homes as it could, start them whenever it wanted, and finish them whenever it could.  In the company’s collective mindset, production was the sum of a thousand independent decisions, made without regard for production as a system subject to – and affected by – events of dependency or relationships of cause-and-effect.

From a production standpoint, the company had always endured long cycle times (upwards of 180 days), low inventory turns, and an uneven rate of sales, starts, and closings.  In the final, halcyon years of “The Age of Homebuilder Entitlement”, closing dates came and went, while RB Builders’ sales managers spoke proudly of six month “contract backlogs”, as if that were some kind of virtue.  The contract backlogs were now a thing of the past, but, strangely, the other consequences of RB Builders’ production practices remained.

The internal production constraint of previous years had been replaced with an ominous external market constraint, but RB Builders’ trade partners still complained about jobs that weren’t ready as promised, all the while being tugged in different directions, as the company’s superintendents (focused on protecting their individual bonuses) fought for resource availability.

 

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