Tuesday, June 24, 2008

Reader Comments

at 6/27/2008 10:29:15 AM, F. Groves said:
Willy: You’re right – it is disappointing, and it is not a surprise. Reflecting on this, I have three observations. One regarding competitive separation, one regarding the sheer difficulty in implementing initiatives like TQM in a homebuilding environment, and one regarding the failure of consultants. First – in the current housing market, there is very little interest in the higher productivity that initiatives like TQM offer. Arguably, there is excess unused capacity, and that becomes the focus of cost-cutting. But, if you look at any equation that measures economic return, it is always a function of margin and velocity. The homebuilding industry does a better job on the margin side than the velocity side, but it is velocity (productivity) that offers builders the most sustainable competitive separation, because it is the hardest advantage to achieve and the most difficult to duplicate. Second – there is a tendency to implement the principles of TQM (more likely, Lean Production) blindly in the homebuilding industry. You could take any of the principles, but let’s just take one. Consider the challenge of achieving continuous flow with a totally outsourced labor force, in a fragmented value stream, with as many production plants as we have communities. Moreover, TQM and Lean are cultures, and the requirements of those cultures clash with what I characterize as the ‘deal-driven mentality’ of the homebuilding industry. Finally – as a consultant, I have grown weary of just doing my job, and then watching our clients struggle with implementation, struggle with internal capabilities, struggle with results, and be powerless to do anything about it, because of the way our consulting arrangements have been structured. At SAI, we like to say that our knowledge, experience, capabilities, expertise, and commitment set us apart from other consulting firms. But – you can’t tell that from the outcomes our consulting has generated. In terms of project results, out of dozens of clients, I can count on the fingers of one hand the number that have really leveraged the investment in our expertise and work product the way they should have. It is a self-indictment I would extend to the vast majority of the industry’s consultants. The conventional approach to consulting – defining projects in terms of what we give a client (not measurable outcomes and solutions to core problems), ignoring a client’s willingness and capability to implement the changes, failing to gauge client commitment, not insisting that a client learn and become responsible for doing the work themselves – isn’t working. The homebuilding industry doesn’t need more look-alike, better-than-average consulting firms, anymore than the new home-buying market needs more look-alike, better-than-average homebuilding companies. So – we have fundamentally changed the way we offer to work with individual clients. It may take some time, given the current state of the housing market, but we intend to only work with individual clients (and be compensated) on the basis of the value that we help create, through the results we help them achieve, measured in terms of improvements to a client’s operating and business outcomes. But – it’s about more. This type of value-driven, results-based consulting imposes requirements that simply do not fit within a traditional (or conventional) consulting approach. Consultants should make a difference, their consulting should contribute value (in the form of benefits that exceed their costs), and the consultant-client relationship should be based on partnering that produces meaningful results (not on intent or meeting work product specifications – the ‘deliverable’, in consultant-speak). Consultants need to provide more than expertise. Consultants need to get results, they need to share accountability for those results, and – in terms of compensation – they need to share in those results. Defining a project in terms of shared responsibility for the outcome is only one element of how a consulting model should work. It should also be broad enough and flexible enough to attack the core problems that are the client’s true constraint. The scope of the project should be based on the client’s capability and willingness to change. It should break projects into phases that deliver rapid results, without losing sight of the long-term goal. It should require that clients and consultants work and learn together, in full partnership mode. It should leverage the consultants’ resources and capabilities – not make the client increasingly (and unendingly) dependent upon them. This type of high-yield, value-driven, results-based consulting requires more than traditional consulting can provide – a whole host of requirements that make low-yield, traditional, fee-for-service consulting problematic. More flexibility, a more comprehensive approach, longer timeframes, more attention to capabilities, more risk tolerance, more working capital, and a willingness to wean clients off a dependency on the consultant. God knows, it’s a business arrangement that requires more resolve, more determination, and more courage than what’s out there now.

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