At Pulte, at least in those days, you lived and died by “absorption rate”-the distribution of fixed cost over the number of units built in a given time period. Yes, you might make up a day on a Saturday, but there was a price to pay, both monetarily and psychically. For Bill, each day was a precious commodity, and the shared belief, which was part of the company culture, was a lost day could never be recovered. You Need to Understand Absorption Rateīill Pulte, the very best of my mentors, used to say, “As goes the schedule, so goes the builder.” Absolutely nothing has changed about that statement in 30 years. and that’s a lousy way to run a business. If you neglect your cycle time measurements, fail to track them over time, and react to them ad hoc, you are only guessing. This always works, but it begs sober, reflective insight, not knee-jerk reaction over short-term variation in your processes. If you do track cycle time and its components continually, your processes will talk to you and tell you where the pain points and losses are. Ongoing evaluation of cycle time and its components can’t be optional, just as closing your books and financial statements cannot be skipped. Last month’s column broke down cycle time into five distinct elements and discussed the ins and outs of calculation and how to avoid common measurement pitfalls. There are multiple explanations for this, but from what I’ve observed, the biggest cause is that builders don’t fully understand the scope, severity, or total cost of the impact of lost schedule. Yet, in my travels around the country, I don’t find the same sense of schedule urgency that existed 12 or 15 years ago. ![]() Three turns should be the absolute minimum standard, and four turns is an achievable goal for most. Woe be to those who fail to turn over their assets at least two times, which is the best 180 days will get you. Today, a no-tears assessment shows 150- to 180-day schedules are closer to the norm, and you’ll often find higher. Sincere 90- to 120-day schedules for production builders were the norm prior to the big crash, and 60- to 90-day schedules were not unusual. Just where do you make that day up? The Impact of Schedule Creep Drop that same day during a tight 90-day schedule, however, and there’s a good chance you’ll put your critical path at risk. Besides, with around 26 Saturdays in a 180-day stretch, surely you’ll make it up somewhere-or not. Losing one day out of 180 during an inflated schedule gets lost in the process, making the slip of that day easier to stomach. ![]() Annoying maybe, but nothing to panic about. For most builders, pushing back a day here or there over the months-long course of building a new home doesn’t strike them as disastrous. Take that on back to 2007, 13 years ago, right before the hammer came down hard on home building, and everything my TrueNorth team observes shows cycle time is up closer to 60 days, on average.Ĭycle time is an insidious thing. Census Bureau numbers show the build-to-close schedule up 30 days since 2012. This process is experimental and the keywords may be updated as the learning algorithm improves.Cycle time, as discussed in my column “ Getting Serious About Cycle Time,” has inflated significantly since emerging from the downturn, costing home builders millions in lost profit. These keywords were added by machine and not by the authors. 1 Yes, even the really bad pieces of direct mail. While annual planning and strategizing are not the primary focus of this chapter (well cover these topics at great length in Chapter 6), theyll give you a backdrop for thinking about its contents: an overview of the gift cycle, and the steps you will take to engage donors and maximize their contributions to your organization. Your efforts must be just as well planned. It isnt rocket science, but its important to know that a lot of thought has gone into those appeals you get in the mail, or those phone calls you get between 5 p.m. ![]() There is a lot of strategy behind crafting a message, coming up with an annual plan, and so on. A fundraising shop does not just ceaselessly ask people for money.
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