Our conversation is with Margaret Whelan, Founder, and CEO of Whelan Advisory, a boutique investment…
My dad built my first sandbox. Located a few paces on to the back lawn, it was a place where I met my friends for hours of fun. All of our 6-year-old worries were parked outside of the homemade wooden square, and the only limit to our creativity was mom’s call for dinner. Our sandbox was an extension to our house, integral to its existence.
Sandboxes were fun, and remain a source of fond memories for my family and me. But a new type of sandbox has emerged in the homebuilding industry and it’s not so fun. I call it the Quicksand Box.
Here’s how it works:
Your homebuilding company is putting the final touches on a successful Q4 in 2015. Closings for 2015 are up 10% and record October-December sales have created a healthy 2016 backlog. In order to push as many 2015 closings through as possible, you created ad hoc processes and cut some corners. Unpaid invoices, outstanding punch list items, and endless warranty lists may be waiting for you, but you just had your best year yet financially. Kudos to everyone!
Flash forward to the end of Q1 2016. Internal processes are still in chaos after 2015’s frantic pace. Your executive staff was supposed to rework your 2016 plans but they were “just too busy.” You are releasing construction starts at a record pace but have yet to add staff because much of your working capital is tied up in delayed Work-in-Process (WIP) inventory in the field. And it has become more time-consuming than ever to find, hire and train new employees.
This combination of higher volume and broken processes causes quality to suffer and schedules to slip. Employee engagement starts falling, threatening the stability of the culture you worked hard to establish, nurture and grow. Employee dissatisfaction causes turnover to spike as your competition takes advantage. This leaves your remaining people with even more stress.
In short, you now find yourself approaching the halfway point of 2016 without the necessary resources, processes, and strategy to support your market’s potential sales. Stretched resources are causing your operation to slowly deteriorate.
Eventually, fallout from your internal problems reaches your customers. Frustrated by delays, selection mistakes, miscommunication, and poor quality, they share their opinions on social media and with their friends and neighbors. As a result, your company’s image – its most critical marketing element – suffers big time.
This is the industry’s new Quicksand Box. It was created by the pursuit of an aggressive growth strategy without a clear and honest evaluation of the company’s capabilities and capacity. Leadership decided to push forward as quickly as possible to capitalize on demand and squeeze in as many sales and closings as possible. This undermined the organization slowly at first, then catastrophically, like quicksand. The hustle and long hours at the end of 2015 were just enough to hide internal deficiencies, but by the halfway point of 2016, the company found itself waist deep in the quicksand, unable to escape.
As common as this scenario is, it’s totally avoidable.
At Continuum Advisory Group, we believe in setting aggressive goals. We encourage it. However, these goals must be developed with a clear understanding of the organization’s capabilities and capacity. This level of understanding can only be achieved through effective and timely planning.
To help jumpstart your planning process, we will be publishing a series of articles in 2016 to provide the direction and content needed to successfully map the future of your organization and avoid falling into the Quicksand Box.
These articles will cover the four main quadrants we focus on when working with homebuilders. They will offer practical advice on managing the external business environment, your processes and systems, your organizational design, and your change management strategies.
Specific topics will include:
- Creating a Company Vision and Mission
- Setting Short and Long Term Goals and Objectives
- Creating Short and Long Term Strategies and Tactics
- Effectively Managing Internal Processes
- Thinking Strategically When Making Resource Decisions
- Making Strategic Software Decisions
As we turn the calendar to 2016, the opportunity to grow is there for all homebuilders, regardless of size, market, or historical performance. If you are capital constrained, the opportunity is there. If you are people constrained, the opportunity is there. The key is understanding and acknowledging these challenges early, and then crafting an effective strategy that addresses them.
Remember the traditional sandbox? The one built on the lawn that you created for your customer? The one you could always count on to wipe away your concerns and deliver a fun, enjoyable experience? This is the sandbox we want for you. Enjoy the articles.