The volume of residential construction loans increased by 2.4 percent in the third quarter of 2017.
Courtesy Adobe Stock

A large portion of SAI Consulting’s work, in and out of home building, has been about enabling clients to better structure themselves around their core-critical business processes. Business Process Improvement is the area of our practice for which we are most recognized; when it comes to the documentation, analysis, measurement, design/redesign, improvement, and management of operating and business processes, we are the industry’s leading expert, because we have done more of it, over longer periods of time, than any other consulting firm.

There is a very good reason for our focus on improving (and managing) business processes.

The most basic, most fundamental business premise a home building enterprise faces is this: the reason it exists is to make money; the way it makes money is by delivering value to its buyers and other stakeholders; that value can only be delivered through the work it performs, work that has to be performed in some manner of workflow; the most common form of workflow is work performed in processes.

Make money . . . by delivering value . . . through work performed . . . in processes.

From a business standpoint, processes are critically, centrally important; they exist–they matter–whether home builders are intentional about them or not. For home builders, improving the workflow in those processes rewards both sides of economic return; it drives both higher margins and higher velocity, drives a higher Return on Sales as much as it drives higher Asset Turn.

Consider:

The workflow in Start-to-Completion–the sub-process within Prospect-to-Closing that is the aorta of workflow in a home building company–is not, at its core, process management; it is multi-project management; it is project portfolio management, with embedded, surrounding, and supporting processes; it is workflow in which all of the non-supervisory work is performed by external resources (trades and suppliers).

Since it is not managed like a process, we don’t map it as a process.

Nonetheless, the outcomes from the dozens of process mapping engagements SAI has performed, over a span of decades, that don’t consider Start-to-Completion, indicate that 25% of all the work a home building company performs–the work that consumes its overhead–is completely non-value-adding.

Ponder that revelation for a moment.

If a home builder’s Operating Expense represents–meaning, it consumes–8% of revenue, it is throwing away $20,000 of every $1,000,000 in Revenue it generates.

The most visible element of Building Process Improvement (BPI), and Building Process Mapping (BPM) is the mapping of process workflows; however, process mapping involves far more than documenting–and confirming, accepting as-is–the current state of that workflow; it includes redesigning those workflows in ways that improve them, which invariably reveals other issues–the root causes, the core problems–that affect profitability and economic return.

Which makes understanding and improving workflow the means to a much more important end.

Business Process Improvement is the tip of the spear, the front-end of a continuous improvement methodology in which the activities and elements of workflow that add value are preserved, the ones that add no value are eliminated, and the ones that enable value are refined, to make the workflow clear, consistent, succinct, more streamlined, more connected, more fit for its intended, defined purpose.

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

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 long road on other improvement initiatives, before the process of continuous improvement moves anywhere else.

In addition to being the means to a more important end–and the front-end of a process of continuous improvement–BPI ushers in a new perspective.

It shifts the organizational view away from the internal structure of work performed in functions, towards the flow of work performed in processes; BPI shifts the perspective from vertical to horizontal; it turns a home building enterprise 90 degrees from vertical, lays the enterprise on its side, and aligns its workflow with the value it seeks to create.

It's about getting horizontal.

Lastly, processes are the centric element of the operating model that should form the strategic value discipline that serves to deliver exceptional levels of the specific and distinctive value demanded by a narrowly-defined, specifically chosen segment of home buyers.

In the strip-mining world that defines the production model of the vast majority of home builders, the work of external resources–trades and suppliers–is likewise performed in processes; they have the same internal challenges, same internal issues, same internal problems.

Only after builders have addressed the quality, capability, and capacity of their own embedded, surrounding, and supporting business processes will they have the credibility to insist that their trade partners do the same with their business processes, and only after builders have put their own houses in order will they have the ability to assist their trade partners in doing the same.

This was the sixth installment of a nine-part series on getting home builders to address–to deal with–the skilled labor shortage in residential building, by changing the way they do business.

Part I looked at building the internal understanding, desire, and resolve to deal with what is an external problem; it looked at Open-Book Management and Team-Based Performance Compensation, and how to build the type of savvy, motivated, mutually-accountable home building team required to address the skilled construction labor shortage.

Part II looked at restoring elegance and allusion to architectural design, in order to make homes faster, easier, and less expensive to build, while making them more livable, more distinctive, more storied, and more desirable; it looked at what happens to productivity when builders waste time, energy, and money building senseless, overdone, exaggerated illusions of architectural style.

Part III looked at how costs behave in relationship to what caused them to be incurred, and how to manage those costs in a way that diminishes the conflict that exacerbates the shortage of skilled construction labor.

Part IV looked–through the eyes, and in the words, of six industry experts – at how the process of planning, designing, fabricating, and assembling components at a location other than their final assembly-installation point partially answers the shortage of skilled construction labor.

Part V was skipped, because Jennifer Castenson's builderonline.com article about Building Information Modeling (BIM) said everything that needed to be said.

This installment (Part VI) looked at Business Process Improvement.

Next: Part VII: Epic Partnering™: Unifying the Value Stream: Program and Process