Few builders adequately manage or measure this critical part of the home building process
Most builders are eager to reduce the time it takes to build a home and hunt for tips on ways to make the hard cycle go more quickly. This is a worthy pursuit, as most builders intuitively understand that tightening the production schedule allows them to build more homes in a year without adding operating cost. Assuming a fixed number of superintendents, along with a fixed average number of homes that any one super can carry at a time, the most cost effective way to increase their production is to add more turns in a year.
If a builder takes 120 calendar days to build a home and has four superintendents who can each carry 15 homes at a time, the organization’s capacity is about 180 units per year. If that same builder reduced the schedule to three months instead of four, their capacity climbs to 240 — not a soul added.
In an improving market, there are [literally] millions of reasons that this pursuit is truly worth it and as an organization, we strongly encourage this effort. However, another critically important cycle also offers ample opportunities to cut costs and increase capacity. This is the “soft cycle,” the time between contract and release to production, a period laden with down time and delays.
While every production home builder has superintendents who oversee the hard cycle, builders rarely designate a person who is held accountable to see the job through the arduous soft cycle and ensure that no days are wasted. So many teams have their hands in this process, jobs can be adrift for days that easily turn into weeks.
For companies that work to solve this, a common solution is a weekly meeting of the team leaders who are involved in the process – sales, selections, drafting, permitting, and estimating. While this meeting is better than nothing, it is a costly affair. In addition, the tendency of these participants is to focus on the processing of the work right before the meeting or right after; rarely does the full-court press last throughout the week. So the delays may be reduced, but they are not eliminated.
Get control by measuring results
Human beings adjust behavior based on the metrics they’re held against, wrote Duke University professor of psychology and behavior economics Dan Ariely in a column for Harvard Business Review. “Anything you measure will impel a person to optimize his score on that metric,” he wrote. “What you measure is what you’ll get. Period.”
The key in getting the desired results is to measure. The reason production schedules can be analyzed and accelerated is because they are measured. Companies create elaborate schedules from sophisticated platforms because speed matters. They care to plan, organize, and measure their construction schedules because they understand what it means to their team but completely neglect to measure the weeks — or months — that lead up to the home being released.
Without measuring the soft cycle, it continues to drag on. If questioned, the team can come up with every reason necessary to deflect accountability in this area. Municipalities are slow, financial institutions don’t approve mortgages quickly, the engineers take forever, etc.
The implication is the timeframe is controlled by outside entities and, thereby, cannot be managed. While this is partly true, it begs the question, isn’t the entirety of the production schedule controlled by “outside entities”? Yet we’ve learned to lead the trades and suppliers to conform to our production schedules. So isn’t it reasonable to think that we could do the same to our soft cycle schedule? Do we even have a soft cycle schedule?
The challenge to you is this: Determine what your soft cycle is and begin to measure it. Create a process map and determine what you can control; it is often more than most would consider.
Consider which process chains can run in parallel and stop the waiting.
Talk to your contacts at the municipalities about how you can work together to reduce the time required to get a permit. Consider how much information is necessary to submit a permit and do it earlier than you are currently. Add additional resources or bring the engineering in house; they work for you just like all the other trades.
Select a person to own the soft cycle like you require the superintendent to own the production schedule; do this instead of the costly meetings and get better results. Ultimately, press the soft cycle with the same fervor as you do the hard cycle and continue to increase your capacity and your net profitability as a result. Remember, you get what you measure and so measure what matters.