My initial thought, when John McManus, vice president and editorial director of the Hanley Wood Residential Group, asked for my take on a way to look at skilled labor capacity differently than the majority of home builders and other construction professionals currently look at it, was this: Which infinitive best describes this dilemma?
Do we try to increase the supply of skilled construction labor to meet the demand? Are we planning to outbid the competition for a limited supply? Are we resigned to rationalizing the situation, to accepting it?
You can likely find thinking that agrees with all of it.
However, the best way to describe this dilemma is that we have to deal with it, we have to deal with a chronic skilled construction labor shortage, whatever that is, for a yet-to-be-determined period of time. And, we have to deal with the demand for that skilled construction labor relative to its limited supply.
It is about the shortness of supply, but it is also about the burden of demand. And--it is about utilization. This requires some combination of the following: Increasing the supply; reducing the dependence; making better use of what is required.
One thing is certain. If we don’t change the way we do business, if we don’t take action--proactively, resolutely--on an ordered set of steps to deal with this situation, it will remain a chronic skilled labor shortage.
We need to declare war on it, as McManus puts it.
We cannot eliminate the skilled labor shortage in the short term, if our understanding of the parameters of the problem are correct: the economics; the demographics; the production practices; the development programs; the cultural changes; the immigration picture. For now, it is not going to go away.
We have to deal with it.
Home building firms that deal with it will survive, possibly thrive. Those that don’t, won’t, or can’t deal with it, will not remain in business.
For everyone, it will be Life on the Serengeti.
In our Pipeline workshops™, one of the mental models we stress is finding ways to “do more with less”, because that is what increases velocity. That’s important, since velocity is one of two co-equal components of economic return, which we measure as Return on Invested Assets (the other co-equal component is margin).
Return on Invested Assets = Return on Sales x Asset Turnover
ROIA = Margin x Velocity.
In figuring out how to deal with the supply/demand/utilization of skilled labor, however, we are in some luck. Although there is no easy solution, and we don’t have the luxury of dealing with a loosely-connected set of independent and unrelated parts of a whole, this is one of the rare circumstances of a problem large enough to require a set of solutions that address both higher margin and higher velocity.
It is higher margin and higher velocity working together, which also places less of the burden on either of them.
The linked span of solutions for builders to consider covers a wide range, and--because we live in a world of systems, with cause-and-effect relationships and constraints on finite capacity, rooted in the way things work, rooted in the way problems are solved, rooted in the ordered behavior of the environment in which it must operate--the order of solutions will not be the same for every builder.
The recurring--and continuous--process of improving operating and business performance can be stated in very simple and straightforward terms:
- What are the core problems?
- What is the simple, practical--the elegant--solution?
- How do we get there from here?
So--here are the key elements that contribute to the solution, each of which will be explored in more depth, as part of this nine-part series:
- Part I: Open-Book Management and Team-Based Performance Compensation: Addressing the “Why” and the “Want-To”: Developing a Savvy, Motivated, Mutually-Accountable Homebuilding Team
- Part II: Architecture: Restoring Elegance of Design
- Part III: Variable Costing: Getting More Out of Direct Labor
- Part IV: Offsite Component Manufacturing: Moving the Building Process Out of the Driveway
- Part V: Building Information Modeling: Integrating, Consolidating, Linking information. Making Data Accurate, Useful, and Manageable
- Part VI: Business Process Improvement: Eliminating the Cost of Non-Value-Adding Work
- Part VII: Epic Partnering™: Unifying the Value Stream: Program and Process
- Part VIII: Critical Chain: Reducing Cycle Time and Raising Productivity with CCPM
- Part IX: Vertical Integration: Reducing the Scope of the Home building Strip-Mining Operation
This was originally posted at Builder.