In a recent study rework costs (including labor, materials, equipment and subcontractors) can run from 2% to 20% of a project's total contract amount according to the Construction Industry Institute. These costs are of course eventually passed on to the customer as profitability shrinks. The questions raised by this are: What is your cost of rework? and What quality tools are you using to reduce those costs?
Some things to consider when evaluating your trade partners and creating a scorecard include the following:
In a recent study the following quality tools were found to be the most commonly and successfully used: Identification and leverage of core competencies Process improvement Strategic planning Balanced scorecards Benchmarking Customer relationship management Of course using and linking all of these together in a coordinated manner creates the greatest leverage.
This study provides further evidence that that integrating quality tools and methods into green building creates greater leverage! In this study they found specifically that using the Baldrige Criteria helped to manage the LEED projects better. The National Housing Quality Award (NHQA) is aligned with the Baldrige Criteria.
In a new study on Six Sigma the savings to cost ratio ranged from 2.6 : 1 through to 2 : 1. As for cost savings as a percentage of revenues, the average was 1.7%. This study showed clearly the impact of Six Sigma and its ROI. As a rule of thumb a company with $100 million in sales could expect $1.5 million of direct savings per year of implementation. (Costs and Savings of Six Sigma Programs: An Empirical Study, Quality Management Journal, October, 2012)
Where to start with trying to address improvement. Here is a high level approach.
Richard Dugas, the CEO of PulteGroup, did not want to throw cold water on the party, but he deserves credit for at least pointing out that housing still faces a number of regulatory and financial obstacles as the market recovery begins to get traction. Such was the tidal wave of positive energy and good news at a recent housing investor conference that even a slight note of caution, from Dugas (whose firm just delivered very positive quarterly results), stood in sharp contrast to other commentary that day.
We all know that teamwork is an important ingredient in building great homes and great relationships with our customers. This importance is substantiated by Woodland, O'Brien & Scott studies showing that a builder's teamwork rating is a good predictor of future referral sales. Given the importance of teamwork, particularly as we head into a busier year end construction and closing season, the following teamwork fable may be helpful.In the days before civilization, out on the prairie, lived four oxen: Randy, Todd, Scott and Chuck.
For the last several years Scott Sedam and I have been spreading the word about Lean design. Lean design is based on creating home designs that maximize marketability and profit while reducing construction waste. This is done through a collaborative design approach that involves the builder and the building team (including sales) as well as the builder’s trades and suppliers. It is a design approach that focuses on cost reduction while increasing aesthetics and overall amenities.
It is amazing how quickly we can create a negative impression in the most of simple ways. The danger can be not having perspective, doing what has always been done or falling into the act of ‘processing a customer’ especially if we are busy or running out of time. Here are some things to avoid, yet are so common and make the customer feel you are not prepared or professional and therefore equate the experience to that they will encounter if they build a home with your company.
As an editor of one of the nation’s largest business publications covering home building, I’m frequently asked about the state of the housing market. Everyone from regional builders and product manufacturers to consultants and architects will ask: “What are you hearing from builders?” “Are we officially in a housing recovery?” “When will the market get back to peak levels?”
How are you listening to the Voice Of your Customer? A survey finds that 52% of organizations use 3 to 4 methods to gather VOC data and 22% as many as 7 methods! Only 5% rely on one source of VOC. The most common VOC data sources (in order of use) were:
Performance bonuses have been around the homebuilding industry for a long time. Salespeople earn commissions and bonuses based upon their sales productivity, and Superintendents earn bonuses for their Quality, Budget and Schedule performance. For the most part, customer satisfaction bonuses were left out of the equation…until that is…a particular marketing company decided to venture into the home building industry with their version of “Customer Satisfaction” awards. Regardless of the accuracy or merits of that award program, it proved to be a performance bonus game change
Despite the current market and the recession these builders show how they have continued to improve, change and increase their bottom-line and create satisfied customers with high quality homes. There are the four winners of the National Housing Quality Award this year, with awards in the Gold, Silver and Bronze categories, a great way to celebrate NHQA still going strong in its 20th year! Charter Homes, Gold Wayne Homes, Silver DSLD Homes, Silver Vintage Homes, Bronze
This year marks the 19th edition of the National Housing Quality Awards, the industry’s only recognition program dedicated to helping builders grow their businesses and become more profitable. During the past two decades, NHQ judges have evaluated and honored more than 100 builders and trade contractors for their quality management excellence. Of all the firms to win an NHQ Award over the years, only a handful have achieved every level of distinction (Gold, Silver, and Bronze), completing what the judges call the “quality journey.”
On a construction site a worker was grumbling to himself as he worked. “How is it going?” I asked. “What?........oh…..ah fine…..well…..do you know on how many jobs they keep doing this the same stupid way? I keep fixing this damn thing every week.
A roof can represent 10-25% of the cost of a building, 90% of improper installation procedures are covered from view upon completion of work and defects are not identified until leaks or other problems occur at a later date, which brings us to the fact that roof failures feature high in construction litigation. Bottom-line doing the job right the first time is the way to go! The most common deficiencies found in metal roof inspection are: (1) Fastener back out (2) Panel damage (3) Leaks (4) Seam defects (5) Missing or damaged fasteners
If there’s one common thread among the six builders featured in our article on fast-growing builders (“Big Gainers”), it’s the absolute importance of keeping the core team intact during the downturn. When the housing market started to crash in 2006, builders understandably kicked into survival mode. Many chose to let their most experienced and talented (and costly) employees go as part of their operations trimming process.