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Page 22 - June 2015 - BuildPerks •
www.buildperks.com By Charles C. Shinn, Jr., PhD., Builder Partnerships My charge to builders this month is to take time to analyze the management systems within your organization. As the industry goes through an uncertain time of growth, ensuring your systems are efficient and refined will allow you to react better to whatever the market throws at you. If you really take a look at the way your organization operates, you will find that there are a lot of inefficiencies, rework and dead ends in your systems. By reviewing your management systems, you will be able to find these and determine easy ways to increase efficiency, resulting in greater numbers on the bottom line. A few years ago at our Executive Summit, Sam Geist—author of Execute or Be Executed—shared a great article from the Harvard Business Review called “Staple Yourself to the Order” (https://hbr.org/2004/07/staple-yourself-to-an-order) that I think is as pertinent to the management of home building companies in this market as it was at the height of the boom times in 2007. As the management team, you should do this within your organization. Take a closer look at all of your processes. You may be surprised at what you will find. Things to look at within your organization: Evaluate the information systems: Not only do you need to evaluate how you are getting information, but you should also look at the information you are getting. • Integrate your information systems: Within many organizations, there is more than one information system for different parts of a process. Because of this, there are redundancies, the systems do not interact, and reported results do not match from source to source. Integrate your systems as much as possible, and you will cut out inefficiencies and increase accuracy. • Improve your management reports: Management teams waste a lot of time and effort reviewing the wrong results or diving into too much detail in their reviews. Only review what you need to in order to understand the status of your company and determine whether there are any red flags that need immediate attention. Develop a report card or two-minute reports that are updated on a regular basis with standard information that is easy to read and understand. Evaluate trends within your organization, benchmark to past performance, and review specific performance against preset goals. Chart approval process, workload and number of hand-offs: Take time to work with your team to chart the approval process in your organization. Who touches each part of the process? How many hand-offs do you have? Is all of that necessary? What changes can you make that will make your process more efficient and effective? Specifically, I would encourage you to start by evaluating the following: • Invoice approval • Contract approval • Purchasing procedures • Change order processing Analyze the Management Systems For more than 45 years, Charles C. Shinn, Jr., PhD, has been dedicated to improving the management standards and profitability of the homebuilding industry. He inspires hundreds of builders each year through his frequent speaking engagements and educational seminars. Chuck’s cutting edge knowledge and teaching methods have allowed many of the leading regional home builders to improve their systems, and thus significantly increase their bottom line. Chuck Shinn holds a BA in Economics, and an MBA and PhD in Business Administration from the College of Business Administration at American University in Washington, DC. Shinn who is often referred to as the Profit Doctor, aims to help increase the professionalism and management standards of the homebuilding industry. Through a variety of services, Shinn’s focus is to help builders improve performance of and maximize total profits. For more information, contact Builder Partnerships at 303-972-7666 or visit their website at www.builderpartnerships.com Best Practices Make sure you do not become top heavy: We have a tendency to hire to fill upper level department positions and tend to forget that we also need people to “do the work.” You need to make sure you have enough people in the trenches to get the jobs done and support the management team. • Invest in systems before hiring more staff: Although there is a large upfront cost associated with installing new systems, the benefits can far outweigh investments in staff. Systems will allow you to set a standard process that is done the same way each time. Over time, your investment will pay off by increasing the productivity of your staff. If you were to hire staff, you will permanently increase the fixed cost. • As many of you know and have experienced throughout this downturn, it is much easier to hire staff than it is to fire. Keep that in mind when you start building up your organization again. Only hire what you need. Do NOT over-departmentalize: Although sometimes it makes sense to create departments, you need to be careful not to create too many silos within your organization. While departmentalizing brings people who are doing similar jobs closer and can create some synergies, it also distances them from the rest of the company. Make sure you keep this in mind as you weigh your options. Some of the pitfalls to over- departmentalizing include: • Hinders communication • Tends to cause more bottlenecks • Can increase need for additional staffing The above list should provide you with a good starting point for analyzing your management systems. As you work through it, you will find cost savings measures you can immediately take advantage of and others that will take more time to implement. Start small and realize a few successes before taking on the larger projects to ensure you get buy in from your team. Then, keep a look out for other management systems you can analyze and improve. You will be surprised by how many inefficiencies you will find. One final thought, don’t bite off more than you can chew. Start by looking at one process at a time. If you try to attack all your systems at once, you and your team will get overwhelmed and this exercise will not have the impact you had hoped. Good luck to you!