If you are involved in the entitlement and land development phase of home building, you may be aware that real profits can be increased by implementing common process improvements coupled with technology “tools” that are readily available. If you’re not aware, you should be.
The biggest benefit of improved processes is shorter development cycles. Less time means lower development costs. Improved quality of the product will also likely result, bringing increased revenue and profit. The return on investing in implementing technology tools is huge, especially when you consider that the technology may already be in use within your organization — just not to its full extent.
Room for Improvement
There are several areas for which homebuilders invest in and use process improvement and technology tools. Today, homebuilders that implement process improvement technologies are usually addressing two areas of the business — customer interaction and construction project management.
Customer interaction involves systems for handling prospect and customer communication. It also facilitates contract and payment management, option selection, warranty issues and overall customer satisfaction.
Construction project management, on the other hand, involves systems for controlling cost, improving bidding and purchasing and scheduling jobs. It also addresses punch list items and communication with vendors and subcontractors.
The land development process is very similar to home construction from a “process” point of view. Cost control, schedule management and communication with subcontractors (i.e., consultants, engineers, etc.) is required. Land development is just a different kind of project. Interestingly, many homebuilders readily cite the biggest dollar investments and biggest risks as being in land acquisition and land development as opposed to the actual construction project. So, clearly, the land development process, too, could benefit from control and management tools.
Some homebuilders, it seems, don’t understand the process as well as the construction. Indeed, the process can be complicated, with its regulatory issues, its involvement with government agencies and its engineering issues, which are very technical in nature. There is a political aspect to the land development process, too, which can be daunting. A builder can’t control politics, and politics cannot be streamlined. Nevertheless, while these things are true, those things that can be controlled and can be understood can also have a big impact on the bottom line. It pays, therefore, for builders to make improvements where they can.
Process These Ideas
What ultimately drives the success of a new community or development is the location, purchase price and timing. Nevertheless, process improvements done after the land has been purchased can also increase profits significantly — even trivial process improvements.
The following are seven easy ways to improve the process and increase profits. Most of these improvements require the use of technology, but chances are these technologies may already be in use in your organization. Even if they are not, they are readily available and very cost effective.
Tip #1: Keep and Provide Documents via the Web
This is a simple yet powerful process change. Because the development process involves multiple consultants and takes time (even years) to complete, the individuals working on your project often have incomplete, incorrect or outdated information. They make decisions about the project, so give them easy access to the current and complete information that will affect those decisions and, ultimately, the project itself.
Tip #2: “Meet” Online
During the process, a developer or lead engineer might make decisions without consulting others to avoid the expense and time of bringing people together for meetings. For example, the developer could say, “I’d love to have my wetlands engineer at every meeting, but I don’t want to invest the money in flying him down every time.” Through an online meeting, and with common document viewing and redlining tools, you can have productive discussions that involve everyone. This communication will result in better decisions during the process and a better product in the end.
Tip #3: Establish a Communications Process
Today, most communications happen by phone or e-mail. The problem is that it’s difficult to track what is being said — to whom and by whom — what promises were made, what commitments were dropped, etc. Instead, use a communications system, commonly known as a workflow system. These systems keep track of all communications automatically and give you immediate access to their history. Project teams that use these systems are more aware of their actions and accountability is increased.
Tip #4: Use a Scheduling System
Schedule all of the tasks involved in the process and assign them to each project member. If you regularly maintain the schedule, you will always have a big-picture view of upcoming tasks and their roles relative to the expected completion of the project. Furthermore, you will be able to address potential problems before it’s too late. Maintaining and updating the schedule can be a challenge, but some scheduling systems are collaborative, meaning each person can update and maintain their own tasks so you don’t have to.
Tip #5: Monitor Activity, Share Your Findings
The old adage, “what gets measured gets done,” is true in all aspects of business. Because the development process is long, the team may, over time, meet less frequently or discuss progress and activity less thoroughly than they would with a construction project. However, even the simplest development management systems will track activity and progress. Being able to look at this information and share it with your team is key. It allows you to recognize trouble spots and areas where improvement could impact your bottom line. Once the team is aware of what is being monitored and measured, performance in those areas will naturally improve.
Tip #6: Develop a Range of Reports
Reports of progress, issues and status are critical in helping you to quickly spot issues that might slow down or affect the development. This is especially true if you are managing more than one or two developments. It’s important to have a system of key performance indicators (KPIs) that work for you. These are two or three leading indicators that give you a snapshot of your development progress and help you to determine whether you’re on track.
Tip #7: Create a Knowledgebase
History repeats itself. If you are involved in multiple developments or plan to be, you should create a database of information as you go through the processes. Organizational conventions, like the development checklist, can be maintained and refined over time so that each new development can benefit from the experiences of the past projects.
Although systems exist to address all of the above seven items, it’s probable that effective technologies already exist within your organization that will help you with at least one or more of those items now. Look into the software and the technologies you have available to you. What are their capabilities? Are those capabilities being maximized?
The important thing to recognize is the significant opportunity to increase your profit as a homebuilder or, for consultants and engineers, to help your clients increase their profits during the process.
Ronnie Antevy is president of e-Builder Inc., provider of Web-based project and portfolio management solutions.