Soft Push

It takes Olthof Homes six fewer days to close a house now than it did last June. But the St. John, Ind.–based builder didn't find that time in the sticks and bricks of its homes. It shaved the days from its “soft cycle,” the time between when the buyer signs the contract and the builder breaks ground on the house.

One change in particular has made a significant difference. At the contract signing, home buyers now receive coupons to pick up the design center's catalog. The coupons usually draw them into the design center that day, where they can set up their design appointment for about a week later. “Within a couple of hours of having the purchase agreement signed, we have the ball rolling in terms of the selections for the home,” says production manager Fritz Olthof.

Controlling the options selections process is just one way of reining in a builder's soft cycle. Builders who have cut days out of their soft schedules have studied—and tried to improve—everything they do leading up to construction, from setting customer expectations to working with local jurisdictions.

Frequently, builders that are trying to shorten this part of the process will rush through the pre-construction period in an effort to start construction more quickly, says Emma Shinn, vice president of the Lee Evans Group and Shinn Consulting. But in that hurry, they're prone to miss or foul up important steps. “A rush to construction shortens the starting cycle and does nothing but lengthen the construction cycle,” she says. “You need to stop rushing and figure out what you're doing before you can start to improve it.”

Bigelow Homes, based in Aurora, Ill., began examining its soft cycle about 12 years ago when it moved to slot scheduling, which prescribes a specific timetable for starts and closings. Process mapping its soft cycle helped the company make its goal of closing homes within eight months of a signed contract, says Tony Spano, Bigelow's vice president of operations.

The mapping exercise included creating a path through the company for each document in a home's start package, including the sales contract and architectural plans. It was a time-intensive effort—it required interviews with every person who touched a document—but it enabled the company to see where a person was handling one item twice or who didn't need to be included in the path.

Bigelow will be repeating the exercise in the next few months as it considers expanding geographically. “We want to be able to replicate what we're doing outside Chicago, but we won't be able to unless we have the processes streamlined and documented clearly,” he says.

Process mapping also helped Exton, Pa.–based builder Rouse/Chamberlin Homes cut more than a week from its soft cycle, says company president David England. The production builder pre-qualifies each of its buyers and allows little customization, a combination of factors that allowed the company to separate the flow of legal documents—notably, the sales contract—from the data needed to design the home.

Now, at the time of a sale, the salesperson e-mails the lot number and structural options the buyer has chosen to the project manager. The project manager notifies the purchasing department, which in turn starts issuing purchase orders. “If we sell a house on Sunday, we might already be processing the start order by 11 a.m. Monday,” England says. “The permit may already be submitted before I even see the agreement of sale.”

Bigelow Homes has brought its approach toward process mapping to some of the 200-plus municipalities it works with during the permitting process. The towns, cities, and counties can take anywhere from two weeks to six months to issue permits, Spano says.

When the company served last year as a general contractor building affordable housing for the city of Chicago, it worked with each department to cut time from the permitting process. Many meetings with the mayor's staff later, the builder helped reduce the time frame from six months to two weeks.

Miller and Smith, based in McLean, Va., takes a somewhat different approach to shaving time from the permitting process. The company builds in nine jurisdictions within three states in the Washington market, and it allows for slightly different soft cycles in each of those areas, depending on how long it takes to issue permits.

The builder doesn't work directly with the cities and counties, though; it pays other companies to do that work. It uses five permit expediting services, whose employees—known as “permit runners”—essentially are paid for their relationships with the jurisdictions and their ability to get around bureaucratic roadblocks quickly, says Jerelyn Walters, the company's project coordinator.

Similar to interactions builders have with cities and counties, there's often room for improvement in the buyer-builder relationship that can result in shorter soft cycles. Builders tend to give buyers too much latitude to make late changes, says Emma Shinn. “But typically, the buyer has in mind a closing date. Play on that,” she suggests.

That means setting, and sticking to, clear customer expectations from the time of the sale. This may be difficult for builders unaccustomed to taking a hard line with buyers, but some builders say it has actually improved customer satisfaction, while at the same time cutting time from their cycles.

After Olthof Homes' buyers make their options selections—generally in one sitting, thanks to their earlier visits to the design gallery—they have a week to make changes, or they incur a $200 late-change fee. That rule is clearly explained during the company's new-home seminar, during which every department explains what will happen during the entire home building process. “Our real goal in this was getting customer satisfaction levels to increase,” says Olthof. “We wanted to make our system more efficient so customers knew what to expect, and we could deliver on the expectations we set.”

Builders report that their soft cycle improvement efforts have generated enthusiasm among employees, too. Ideal Homes, based in Norman, Okla., used to work off a 36-day soft cycle for all of its five product lines, but it was able to shave as many as 12 days off the soft schedule for its less complex, smaller homes.

The revised soft schedules evened out work in the back office, says Russ Gammill, Ideal's purchasing director. “It cleared up what work had to be done on a priority basis. Prior to this, there was a lot more discretion about what work had to be done that day. Now everyone in the office knows which deadlines are coming up.”

Olthof bases some bonuses on cycle time, but the company found employees ready to make changes regardless of their pay. “With a market that might be softening, we want to make sure we're the best. That's all we had to say,” Olthof recalls.

Builders can save time and money in the preconstruction phase. Here's how a few did it:

Olthof Homes, St. John, Ind.

Bigelow Homes, Aurora, Ill.

Ideal Homes, Norman, Okla.

Rouse/Chamberlin Homes, Exton, Pa.