Summary: As a builder, it is important for me to understand HOW I frame or structure my management systems (geography, team leadership, training and process flows) will greatly impact my results.
Many times in my journeys around the US, I run into the most creative ways to screw up a good thing! It is amazing to me how much time is spent discussing strategy and tactics without regard to the very structure an organization has in place to execute the necessary tasks. After resting in the shade for few summer weekends I am back in action, writing about great ways to run your businesses better...
Let's begin with us all being on the same page, like my conversation with Rudy in the Mid 2000's, right when it was hitting the fan. "OMG Rudy what are you doing? You have layers on layers of people with no one getting much done!!." I said.
"Well Noelle, we were burning through the lots so fast we just threw people at the demand. I guess that got you here. It isn't working." he noted sheepishly.
"First have you ever heard of an audible? Omaha Omaha.. Peyton Manning etc. ?? Wow do we have some restructuring and downsizing to do, your team is tripping over each other and your revenue per employee is $500k, my goodness, I am used to $800 to $1.2 m minimum. You are burning through your hard earned dollars!!This so pisses me off because builders work so hard and take such risks but yet here we are with an inefficient structure. My boss at Toll always said, stop the entire operation for two solid weeks if needed to reset the operations. Most builders are too proud to do such a thing, but we are close to a Hard Stop as John McManus would say in the media business. "
"I get it Noelle, I am in extreme state of NO FUN AT ALL RIGHT NOW." Rudy admitted.
We then put our heads together to look at the best way to deliver homes on time, with high quality, and on budget with fewer people.
We started with the basics, DRIVE TIME. His gas bill was huge, double of most companies, he was having the entire team drive the entire market in some form every day, windshield times that were as high as 45 minutes ONE WAY." Rudy what is your theory on this ??"
He said, " Well our team could only handle simple aspects of the build so we had to break it up, foundation super, rough supers and finish supers and then warranty specialists." "Whoa, whoa, so all the folks are crossing back and forth all day long between your 25 communities??"
"Rudy, Have you ever considered that training is far less costly then a large team running back and forth among communities?" I smiled. "MMMMM...good point." he replied. To start, Rudy recognized that we had to bite the bullet, took a deep breath. Then we restructured the construction team and put training in place for the team members that needed it to expand their breadth of building skills.
Rudy was looking pensive, and he said, "How did I get so off track with this and the other structural issues we have?". "Don't feel bad, we are fixing it now, but many times we try to solve one problem in management and we create another unknowingly." I said. "It is the unintended consequences scenario".
"The one thing that it is truly discouraging is the opportunity lost of my robust margins, we took a 2 to 5% hit in a high risk business, it sucks!!" Rudy lamented.
"Rudy, I have been a busy consultant since the 90's for a reason, we go through high and low cycles with many folks learning a lot and getting nailed. It is an easy busy to get into but a tough one to make consistently great returns."
The moral of the story is if you take the road less traveled, you may learn to regret it. That is my story and I am sticking to it. NLT
Home builders and developers are the backbone of this country. They work hard, take risks, and create more wealth for society than any other sector of the economy. If you are a home builder and concerned about your results - you can do better! If you want to find out more, call me at 303.525.4944 or email me at firstname.lastname@example.org and LinkedIn is a great place to find out more about my credentials, background, and references.
My first three questions when you call are usually:
1) How many units do you sell per year?
2) What is your average sale price range?
3) What is your projected net income for the current year?