Fletcher Groves is a North Florida-based business advisor some of you know. He’s worked with home builders--mostly private companies--for decades, enough time to see lots of firms come and go.
Fletcher uses a lot of the same words every body else does when it comes to talking about operations, work in process, starts, completions, cycle time, even-flow, and, importantly, margins. When you listen to him, though, you realize that he doesn’t use those terms in the same sense—broadly and roughly—that we hear in the field as a rule.
Precision, obsessive attention to meanings and intentions, and rigorous discovery are how Fletcher’s sentences and questions tend to flow. With regard to whom he’s speaking, his train of thought and language form a dynamic double-helix model of critically chained project timelines with economic principals. Descriptive terms such as good, effective, fast, accurate, skilled, fair, dependable, bold or any other quality take on meaning only insofar as they add to or subtract from a business’s principal purpose, to make money sustainably.
Listen to Groves, and what happens when you do is that the way you think of tasks that get done and the costs of doing them—in duration and forward-motion and outcome, in resources and in cash, each with an appropriately assigned and measurable taxonomy of value—changes. By pulling apart, and closely looking at the interplay of complexly orchestrated manufacturing processes and economics, Groves disrupts hardwired biases that tilt us into the habit of instinct, intuition, and guesswork that bedevil the continuous improvement effort of every level of home building operations.
His challenges all sound at first like trick questions. The answer is either too easy, or would take all day to calculate, or is so arcane as to cause an apathetic shrug in response. Unless your thinking changes.
Groves is known, too, for a line that sticks with you, and one that ties all of this together. It seems to mean more now than it ever has before: “the world does not need one more average home builder right now.” And the world, for what that term is worth as a measure of sustaining business viability, has its own unique way of making home builders it doesn’t need know it in excruciatingly clear and collaterally painful ways. And it will do that now.
If you want to ensure that you're doing everything you can to be exceptional in discipline, perspective, context, and focus, you ought to consider checking out Fletcher, live and in the flesh at the upcoming Housing Leadership Summit, May 11-13. Register here.
Here, at the near mid-point of another year, one mystery is, will the full year 2015 act like another in a series of first-half vs. back-half studies in contrast—one six-month period feeding the optimists, and the other serving to validate those who’re sure the bottom is about to fall out of the-little-recovery-that-couldn’t? Or, instead, will countless arrhythmic, geographically scattered, choppy, and tentative improvements at submarket level and zip-plus-six cohere into a story of slowly evolving momentum for the year?
We don’t know.
We do know many home building company leaders are preoccupied with the question of whether the gains in volume achieved 2014—the power of attraction among 200 home building organizations to sell and deliver $80 billion worth of new homes in the 12 months from January to December—will translate into well-deserved opportunity or equally possible risk. Will new neighborhood openings absorb overhead costs at the just-right level, with each home unit above break-even, or will those volume gains leave profits “in the ground.”
Margins are the “keep-me-awake-at-night” issue of many home building company strategist, as materials, labor, and land costs take turns sending up red flag warning. Now that “the machine” has kicked into gear, it needs constant feeding and ongoing recalibration. Many of the land deals that brought lots online through and into the past 12 months had favorable, early recovery price-tags on them, and the next round is going to be where “deep market knowledge” will either pay off big or run people quickly into trouble. Liquidity and lending is moving into “risk on” mode. Risk on means what it says. The next gear in volume, and the next tier down in pricing is where gains pile up fast, or losses can iterate you into a big hole.
This is no time for average. Ordinary won’t make it. Plain vanilla will be a death knell. The kind of tide that’s rising now is not one that will lift all ships; rather, it will swamp a good many, even as it provides swift, helping winds, and steady currents for a few.
Commonly, builders sense that they’re better than the rest. That’s what you’re going to have to be.