By Isaac Heimbinder. Surveys of new-home buyers consistently indicate that purchasers are highly dissatisfied with delivery dates for their new homes. Why? Because the trust created in the contracting and construction stages quickly evaporates when a builder fails to meet the specified closing date. Buyers who are unhappy at closing not only generate more pre-closing items, but their dissatisfaction often lingers, generating increased warranty calls and fewer customer referrals.
It doesn't have to be this way. A truly customer-focused builder should measure performance not only as he sees it but also as the customer sees it.
Although part of the delivery date problem stems from failing to manage customer expectations, the main culprit is usually poor business processes--like incomplete contracts and allowing changes after a home is started--which prevent the builder from predicting, even by months, the delivery date.
When a builder develops a thorough understanding of the processes involved from sale to closing, he can prevent negative customer sentiment by implementing new ways to manage and control the construction process, eliminating unnecessary days between contracting and closing each home.
Find the reasons
It's important to remember that cycle-time initiatives are not synonymous with scheduling. To be successful, they must be more comprehensive, which is why they are hard to implement. If builders want to build homes better and faster, they must search for the root causes of elongated delivery times.
Photo: Simone Tieber
First, evaluate the processes relating to sales, customer selections, mortgage processing, plan preparation, scope of work for trade contractors, purchasing procedures, training, construction inspections, and construction schedules. Then determine the critical areas of performance and identify situations where extra steps, duplicate efforts, and construction mistakes are creating slowdowns or reworks.
Cycle-time initiatives must improve the total process of building and selling a home: delivering what you have promised, when you promised it, for the price it was promised (and for the cost budgeted), and most important, at the high level of quality promised. Fulfilling these pledges will ensure not only a profit on the home, but also growth in the market share of satisfied customers.
You can easily evaluate your delivery performance by breaking down the home building process into three broad phases:
The time between finalizing a contract and starting a home. This should generally take 30 to 60 days.
The time between starting a home and completing it. Depending on size, complexity, and product type (attached vs. detached), construction should be completed in 90 to 150 days.
The time between completing the home and closing it. A home should be closed within five to 15 days of its completion.
Once you have set goals for each of these areas, communicate them to the company and ensure they are met. Measuring performance in these areas will send a signal to the organization that these processes are important. (And it's generally true that what gets measured tends to stay on the top of employees' priority lists.)
Each of the three phases--finalizing the home's start, building the house, and closing it--is full of cycle-time pitfalls.
In the pre-start phase, builders will find typical problems, like incomplete paperwork at the sales office and design center, customers who are allowed to choose unlimited non-standard options, and poor management tracking of buyer selections, contract addendums, and purchase orders.
The top challenges in the construction phase are incomplete start information, plans that aren't finalized, change orders accepted after a home is started, poor communication with trades, and inadequate inspection of homes.
The biggest setback in the closing phase is when the customer is not ready to close within a few days of the home's completion.
Realizing the upsides
Solving these problems will have real benefits. The significant savings you will find from reducing cycle time will not merely be in improved customer satisfaction or interest savings. The process that improves cycle times also will improve your relationship with trades and the quality of your product.
Think that improving your cycle time sounds like too much work? Consider this: If you don't improve on the fundamental issues addressed in cycle-time initiatives, your business can only compete on price, which is always difficult and rarely successful.
Isaac Heimbinder is the vice chairman for Kimball Hill Homes in Rolling Meadows, Ill.
Cycling Through Best Practices in Cycle Time
While every home building company believes it is unique, each is actually similar in function and structure to other builders. These common qualities create an opportunity to review other companies' best practices and see what could fit comfortably within your organization.
Photo: Simone Tieber
Here are a few simple cycle-time practices adopted by builders: