Pipeline shows the value of process in home building margin improvement efforts

An overwhelming portion of SAI Consulting’s work among home builders has aimed to enable them to structure themselves around their core-critical business processes. Business Process Improvement (BPI) is the area of our practice for which we are most recognized.

There is a reason for our focus on business processes.

The most basic, most fundamental proposition in all of business is this: the reason an enterprise exists is to make money; the way an enterprise makes money is by delivering value to its customers and other stakeholders; that value is only delivered through the work that the enterprise performs; that work has to be performed in some manner of workflow; the most common form of that workflow is work performed in processes.

Make money . . . by delivering value . . . through the work you perform . . . in processes.

From a business standpoint, processes are critically, centrally important, and they exist, whether enterprises are intentional about them or not.

GE Capital gets the process mandate right, but are the benefits of BPI for an engineering and manufacturing enterprise, like Composite Horizons, the same as the benefits for a home building company? The benefit to Composite Horizon from mapping its processes was expressed in terms of improvements to operational performance that drive the velocity side of economic return–i.e., a doubling of production output, a 100% bump in efficiency.

Is the velocity side of ROA where the benefit of BPI rests among home builders?

No, not primarily.

It is a matter of the type of workflow. From a workflow standpoint, home building production is clearly not manufacturing production; home building production is project portfolio management with embedded and supporting processes.

What do those processes tend to support?

The workflow contained in a home building company’s processes mostly support matters that drive margin, not velocity; process workflow primarily supports the type of operating decisions that increase the value delivered to each buyer, to every buyer: more benefit, at less cost.

It primarily benefits margin.

The list is exhaustive, far-reaching: better plan designs; more accurate bills of material, job costs, job budgets, and purchase orders; better land positions; better design centers and models; higher sales conversion rates; Epic Partnering®; better vendor pricing; more coherent finish and options selections; more complete start packages; better recruiting, hiring, and teammate development; better supply chain management; more effective management of the relationship with the buyer; stronger warranty service; better accounting and financial management.

More work completed, at a lower cost, with fewer resources, with less waste, less redundancy, fewer errors, less rework, less paper, fewer approval levels, fewer decision-making layers, less frustration and cynicism.

You name it.

Process mapping involves far more than documenting the current workflow; it also includes redesigning workflows, which invariably reveals other issues. Because it is so foundational, it is impossible to overstate the importance of understanding and improving the way work is performed, before starting down the road on other improvement initiatives.

For us, understanding workflow is the means to a more important end. It is the front-end of an improvement methodology, in which we eliminate the workflow elements that add no value and refine the remaining value-adding activities (to make the process more clear, more consistent, more connected), then find the best opportunities to productively redeploy the newly-liberated resource capacity.

The analogy from our Pipeline workshops is that we want a shorter, straighter pipe.

Understanding workflow tends to clarify underlying problems and issues. And, when process workflows are connected to performance measures–to existing performance and targeted performance–builders can start to understand the requirements and necessary conditions that have to exist for the process to be improved.

Just what is process mapping? What does it look like?

We view the current (AS-IS) state of a process through the lens of cross-functional flowcharting teams, comprised of the people who actually perform the work in the process; management only knows how a process is supposed to work.

AS-IS process map is a work flowchart.

In the past, we would also use the same approach to redesign the process to reflect its desired future (SHOULD-BE) state; using the same methodology made comparisons between previous and redesigned states of a process more insightful; it made the difference between AS-IS and SHOULD-BE more stark.

We like the starkness. Now, however, we get to the point more quickly, by using IDEF process modeling and notation in the design/redesign and documentation phases. For the sake of continuity, and to take advantage of the insight gained mapping the current state, we use the same cross-functional teams for the SHOULD-BE that we used in the AS-IS; we just use a different methodology.

A 'Should-Be' flow chart using IDEF framework for process improvement.

The advantage of IDEF0 lies in the ability of its hierarchical structure of graphic diagrams and supporting text diagrams to gradually and infinitely reveal greater levels of process detail. Hierarchy is what sets IDEF apart from other types of process documentation; IDEF does not impose process detail at a single level; the level of detail is whatever is necessary to create understanding.

As a result, IDEF0 presents a far better learning/training outcome.

There is a lot more to the subject than can be discussed here. After a process has been redesigned, improved, and documented, it still has to be managed. There are a lot of choices to be made, about management technology, organizational structure, culture. But – you get the idea.

I never plug SAI on the pages of Builder and Big Builder; I will make an exception here.

SAI has done more work with processes, and done it longer, than anyone in the home building industry. Before the creation of the National Housing Quality (NHQ) Award, we were already assisting Malcolm Baldrige National Quality Award winners in their efforts to refocus, restructure, and redesign their business operations around their processes. Before there was any serious interest in the home building industry in the documentation and management of business and operating processes, we were already recognized experts in that field.

Our process toolbox is the best in the industry. We pioneered the development of many of the tools and techniques we use in this area. We use one of the most advanced process flowcharting and modeling software applications on the market (iGrafx Process); we participated in a portion of its development; we are an iGrafx North American consulting partner.

We come from the home building industry; we are process experts; we speak process in a language home builders understand.

We know what we are talking about. We would be glad to answer your questions, and shed more light on the subject.