Image: Maggie Goldstone
Image: Maggie Goldstone

If you are serious about dealing with the shortage of skilled construction labor--dealing with it--then having a savvy, motivated, and mutually-accountable home building team of your own helps.

And, you might be asking, “What in the world does the understanding and motivation of internal resources have to do with solving the shortage of a skilled but external resource?"

Why does the presence of a savvy, motivated, mutually-accountable home building team rise to this level of importance?”

Just stay with me.

In the introduction to this series, I said the linked span of solutions for builders to consider in dealing with the skilled labor shortage covers a wide range, and--because we live in a world of systems, with cause-and-effect relationships and constraints on finite capacity . . . a world rooted in the way things work . . . rooted in the way problems are solved . . . rooted in the ordered behavior of the environment in which we must operate--the order of solutions will not be the same for every builder.

To which I would add, the order, importance, and priority of solutions might not appear obvious to every builder, either.

I said the recurring--and continuous--process of improving operating and business performance can be stated in very simple and straightforward terms:   

What are the core problems? What is the simple, practical--the elegant--solution? How do we get there from here?

The answers to those questions require a context and business logic – an understanding of the circumstances or facts that surround it (context) and an understanding of the basis or foundation (logic) of it.

So, there is an underlying context--an underlying business logic--to everything we teach, including what we call the Pipeline workshops™.

For a long time--because the focus of the workshop is on the principles and disciplines of home building production--we did not give that context or that business logic the attention it deserved; the “what” and the ‘how-to” received more attention than the “why” and the “want-to”.

Yet, it is just that--the “why” and the “want-to”--that creates the determination and resolve to deal with something like a skilled labor shortage. Without that determination and resolve, there will likely be no savvy, motivated, mutually-accountable home building team to deal with it.

There will be no underlying context or business logic.

And, so, without this context and underlying business logic, whatever so-called “team” a builder has put in place is likely to look at the skilled labor shortage, and conclude that this situation involves outside trades (the cost of which is a direct, variable expense associated with Cost of Sales), conclude that they don’t have a stake in the outcome of improving the situation, and further conclude that this is really the owners’ problem – and, yes – leave it to them to deal with.

Strategy, initiatives, and action plans will not overcome it.

The efforts of a home building company to improve operating performance and business outcomes will not come close to achieving what it could, if it does not first create a home building team that strives together toward achieving commonly-held and commonly understood business goals. That is in contrast to a collection of so-called teammates working toward individual goals. 

In short, you need to become a company of business-people.

The role of Open-Book Management is to provide the underlying business logic that forms the necessary context for understanding everything else.

OBM is necessary, but it is not sufficient.

Yes--to become the kind of savvy, motivated, mutually-accountable home building team required to compete effectively in the business world, everyone on the team has to learn the “business” of home building, they have to accept their individual responsibilities as part of the overall team, and they have to understand what is at stake.

But, not just understand the business outcome that is at stake; teammates have to care about the outcome; they must each have a personal stake in that business outcome.  That is the role of Team-Based Performance Compensation.

Open Book Management flows from the work Jack Stack did in the 1980’s as CEO at Springfield Remanufacturing Corporation to rescue this former International Harvester (Navistar) division from almost certain bankruptcy.  Following a 99% leveraged employee buyout, Stack said he had no other answer; he opened the company’s books and made it everyone’s business to survive, by improving performance.

Stack recounted that effort in two books (The Great Game of Business and A Stake in the Outcome); John Case reported on open-book thinking in other industries and companies, in his two books (Open Book Management and The Open Book Experience).

Then, in Open Book Management, Case described how Steve Wilson developed the basics of OBM-inspired Team-Based Performance Compensation at Mid-States Technical Staffing Services (now part of Modis); Wilson subsequently described this work in The Bucket Bonus Plan.

We take a specific approach in our application of the principles of Open Book Management and Team-Based Performance Compensation.

We advise our clients to be transparent (open) and to demonstrate candor (the courage to tell and hear the truth) in the constant internal disclosure of operating and financial data, whether in meetings, or through dashboards and heads-up displays. We advise our clients to impart business literacy (understanding) to teammates, so that they understand the business of home building, not just the home building business;  we do it through the joint teaching of business and production principles.

We further advise our clients to adopt a team-based approach to performance compensation, by way of a progressively-weighted milestone plan based on achieving targeted performance above a baseline in a specific business outcome, one that is impacted by the actions of every single teammate.

We recommend an approach that is simple, easy to understand; one that is visible, transparent; an approach that is compelling, that promises fast and frequent payouts; one that is designed to be self-funding, paid from income the company would not have achieved by any other means; an approach based on achieving a target above a baseline.

In terms of compensation--it should be significant, meaningful. In terms of participation--it should be all-inclusive. It should weigh the use of Employee Stock Ownership Plans (ESOPs).

Team-Based Performance Compensation should provide only for the possibility of winners or losers, not winners and losers.  It should give the right to lead and demand results; it should create the desire to be lead and to deliver results.

If you want to deal with the skilled labor shortage – if you want to deal with it – then start with building a savvy, motivated, mutually-accountable home building team that understands the problem, cares about the consequences of the problem, and sees it as their problem to solve.

Savvy. Motivated. Mutually-Accountable. Team.

Next: Part II: Architecture: Restoring Elegance of Design