Here is Philip Crosby’s first rule of quality management (Quality Without Tears) paraphrased. The First Absolute of Continuous Improvement: Improvement is defined as results achieved towards a goal, not as goodness.

Improvement is not about goodness; it is not obligatory. It is about results, and creating a sense of urgency towards achieving them. Before a home building enterprise embarks on any initiative that has “improvement” associated with it, questions need to be answered.

Results for whom? Achieved by what means? Measured as what?

The composite becomes the demarcation point for a focused process of continuous improvement: a series of initiatives conducted in consecutive order with short durations, aimed at achieving targeted, measurable improvements to a specific economic outcome, produced by a savvy, motivated, mutually-accountable team with a financial stake in achieving it.

It is an approach deeply-rooted in an understanding of business-as-systems: how they work, how they are improved. It is about improving the performance of the system, not about the performance of its parts–any of the parts, some of the parts, all of the parts, independent of one another. It is root cause analysis directed at identifying core problems and the constraints to the business outcome being sought.

The business environment in which a home building enterprise operates is a system that does not provide unlimited capacity, resources, capital, and opportunities; improvement has to be prioritized, focused.

As an example, here is a summary of the initial projects and schedule we recommended on a mid-recession (2011) consulting engagement. This case paints a picture of an urgent, focused, rapid-results start to a process of continuous improvement.

These recommendations flowed from an assessment—before the engagement--of our client’s current situation–from “current reality”, as we term it. This happened to be a mid-size semi-production builder that starts a lot of inventory homes, and has lot positions across a number of communities in which it is the only builder; the recommendations reflect that specific business model; improvement initiatives are specific to the situation, but principles don’t change.

In this particular situation, there was little time with which to work; less than 60 days, from the point when current reality was pegged, until the team-based performance compensation plan kicked-off; most of the projects had to be completed before the start of that compensation arrangement.

They are:

P-1: Produce a Contribution Income Statement and breakeven analysis on every community; shelve the communities that are unviable in the current situation; shelve the less-viable communities that rob more-viable communities of resources; reassign the available resources; set aggressive new sales targets fueled by lower sales prices. Do it Cortes’-like, burn the ships in the harbor; make it do-or-die; drop prices in advance of demonstrated improvements in margin or velocity.

Timeframe: 14 days.

P-2: Refine the plan portfolio. Cull the product portfolio to remove the plans that do not sell; fix the budget errors in the remaining plans; start extracting more value, by finding ways to generate higher Gross Margin on reduced prices.

Prerequisite: P-1 complete.

Timeframe: 42 days.

P-3: Begin to drive significantly higher levels of traffic, conversion, and sales, without spending more money.

Prerequisite: P-1 complete.

Timeframe: 49 days.

P-4: Revamp the front-end of the Contract-to-Start process, to increase capacity and reduce duration.

Prerequisite: P-2 complete.

Timeframe: 7 days.

P-5: Attack velocity in the Start-to-Completion process. Set more aggressive schedules with shorter cycle times; generate a higher rate of closings with a planned, finite, controlled level of inventory and capacity.

Prerequisite: P-2 complete.

Timeframe: 92 days.

Five projects. Four and one-half months. The start–just the start–of an ongoing process of continuous improvement.

At stake? The difference between baseline and target budgets that had created an anticipated Gross Income Reserve of almost $2.3 million, to be paid-out over the coming year, upon the achievement of progressive GI milestones, equally-divided between distributions to owners, increases in retained earnings, and performance bonuses to every teammate.

If it was a different client under different economic circumstances, the situation would have required a different plan. But–regardless of circumstances–this is a picture of the urgency continuous improvement needs to foster.