There are many margin killers in home building but among the most insidious are failures in what I call sales fulfillment—the process of managing the customer from signup through every option, selection, and color and on to the day of closing. Nothing makes managing a tight schedule more difficult. I have seen this firsthand with builders of all types and sizes in four countries, and it is rare to see a management team embrace the issue and resolve it.
There are myriad variables that confuse the issue of sales fulfillment but the big picture is quite simple. Whether you offer 500 options or five, whether you build in 180 days or 60, whether you have an internal design center, a contract design house, or your sales staff runs it from the model, a builder's ability to proactively manage a customer from contract through close with every option and selection made on time profoundly impacts the bottom line. As the schedule goes, so goes the builder. A disregard for decision dates always means disarray in the schedule, which translates to frustrated suppliers and trades, unhappy customers, and lost profit.
12 Steps for Solving the Sales Fulfillment Gap:
1. Decide what business you are in and exactly what level of options and selections you offer.
2. Build systems that enable the consistent fulfillment to that level of options and selections.
3. Establish the companywide goal of delighted customers at the closing table who meet every decision date for options and selections.
4. Make the choice: Either (A) your salespeople are fully responsible to manage customers from contract through closing or (B) hire someone to do it for them.
5. Bring sales, purchasing, and construction together and clearly, firmly agree on the cut-off dates for each option and section.
6. Flowchart your schedule from project design through closing, identifying each obstacle in the way of meeting decision dates, and address those head-on.
7. The role of sales management is to lead, support, and instill a discipline within salespeople and/or design center staff to complete the post-contract fulfillment process.
8. Give your salespeople and/or design center staff a chance to learn the process of sales fulfillment. Those who cannot learn and practice it need to find a new home.
9. Find a sales trainer who accepts that a major part of his or her job is to teach salespeople and/or design center staff that a sale without on-time fulfillment is an incomplete sale.
10. Align your reward systems to support on-time fulfillment.
11. Provide full support. If any member of the company team is building obstacles, tear them down.
12. Check your management behavior. If you cave on decision dates, everyone caves.
A good way to describe the impact of a failure in fulfillment is to break down the elements required for getting it right, which fit reasonably well into 12 steps listed in approximate though not always strict order. Your steps, of course, may differ, but the issues are universal.
1. Decide what business you are in and exactly what level of options and selections you offer. Just as we cannot lay failure for maintaining a schedule solely on the backs of the superintendents, neither can we place failure in sales fulfillment exclusively on the backs of sales. Salespeople are frequently thrown into situations where they don't know exactly what they are selling. A new project goes on the market without final plans, specifications, options, and lot-fit analysis, and they keep changing. Be careful about blaming purchasing for this. How can we expect them to get a project bid, costed, and contracted if it's in a continual state of flux and they never, ever get enough time to do their job? The problem is, we don't count very well. If we did, we'd know about the huge negative bottom-line impact from failure in sales fulfillment and do something about it.
2. Build systems that enable the consistent fulfillment to that level of options and selections. Builders can have as much variation in the form of plans, specifications, and options as they like provided they maintain the systems, process, and people to support it, but the stark truth is that few builders do. From contracts to selection process to paperwork to start packages to plans to purchase orders, if your systems can't keep up, getting the sales fulfillment process on track is nearly impossible. Today's software and computer power make the task far easier, but I saw it done regularly back in the 1980s, often manually with perhaps a rudimentary Excel spreadsheet.
3. Establish the company-wide superordinate goal of delighted customers at the closing table who meet every decision date for options and selections. This caveat is deceptively simple and should not be so hard to practice, yet it is. Systems and processes as described in Step 2 are critical enablers, but ultimately this is a cultural issue. A sales fulfillment discipline must be reinforced on a daily basis and everyone including design, purchasing, construction, and administrative support must understand their role. This should be a critical performance indicator for your top sales management but again, they cannot achieve this alone.
4. Make the choice: Either (A) your salespeople are fully responsible to manage customers from contract through closing or (B) hire someone to do it for them. The work of sales fulfillment always gets done, eventually, so why not do it on time? We gain nothing by running a haphazard options and selections process with ever-changing rules, dates, and exceptions, except more work for purchasing and construction, rework for trades, extra deliveries for suppliers, and unhappy customers. So just who is responsible for fulfillment in your company? The old approach of salespeople running it all from the model is still out there but is increasingly rare as customers have grown used to having more choices. You may have an internal sales center, use an outside contract sales center, or hire a dedicated customer advocate who walks them from signup to close. Whichever you choose, communicate the plan and hold the responsible parties accountable.
5. Bring sales, purchasing, and construction together then develop and clearly commit to decision dates for each option and selection. The less enlightened often just let construction dictate the decision dates with no sales input; but if you want buy in, purchasing and sales must be involved. I use the term "decision date" instead of the more common "cut-off date" because the latter term brings a negative image to the customer. Whatever you call them, they have to be clear, firm, and supported by all. Construction will even find that sales gets much more enthusiastic about meeting the dates if they understand the significant cost implications for the builder along with suppliers and trades. If you are not running 95 percent or better in meeting these dates, you have serious work to do.
6. Flowchart your schedule from project design through closing, identify each obstacle in the way of meeting decision dates, and then address them head-on. Bring the right group of knowledgeable people together with someone who knows how to run process flow effectively. The results are never short of profound. Always an eye-opener, people begin to understand how a week's slippage on interior finishes sets the entire schedule back two weeks, costing hundreds if not thousands. That late change to an upgraded range required changes to four suppliers and trades, with rework for three others. Now that simple little $350 option you forced through late came with a hidden cost of $1,500. Or how about that extra outlet in the master bedroom that could have been settled at the decision date for $35? Now that the home is painted, it costs more than $400 to install. The late service door on the garage came with a total cost of $2,000 with seven suppliers and trades involved and disrupted the schedule of three other houses. Did you get enough to cover that? The answer is never.
7. The role of sales management is to lead, support, and instill a discipline within salespeople and/or design center staff to complete the post-contract fulfillment process. Sell, sell, sell. Without sales we have nothing, but give me 100 signups with 100 percent sales fulfillment on time over 125 deals with haphazard options and selections any day, and I'd make more money. Few builders have problems with sales these days, but I see continual problems in timely fulfillment. Yet, I don't find most sales managers stepping up to embrace their role and responsibility here, which makes this a senior management problem. How hard can it be to fix? Communicate to sales management that on-time sales fulfillment is at least as important as the sale itself. Reinforce it, and hold them accountable.
8. Give your salespeople and/or design center staff a chance to learn the process of sales fulfillment. You cannot ask people who have never had a particular skill to begin practicing it perfectly tomorrow. What may seem easy and obvious to you is a major challenge with our over-coddled, high-expectation home buyers who are told in every advertisement for every product that they can have it all, and it's going to be better than free. Regardless, we have to proactively manage those same customers to decision dates that enable us to build efficiently at the highest quality, but it takes training, patience, and full management support.
9. Find a sales trainer who accepts that a major part of his or her job is teaching salespeople and/or design center staff that a sale without on-time fulfillment is an incomplete sale. I did a quick survey by calling builders and asking if any of them have ever seen a sales trainer, internal or external, place the sales fulfillment requirement front and center with emphasis on closing the deal. After 10 calls without a positive response, I gave up. Yet each agreed this point was a critical shortcoming. Each year the NAHB IBS features the Super Sales Rally. I did a Google search and reviewed the agendas from past years and saw nothing on this critical builder issue. If you are in the sales-training business, here lies an incredible opportunity.
10. Align your reward systems to support on-time fulfillment. Paying salespeople part of their commission on signup with the balance at closing makes sense, but the successful on-time fulfillment process should determine part of their total compensation. You'll have to adjust if you use a design center, of course, but whoever you established as responsible in Step 4 must be held accountable. For sales management, make successful fulfillment a key performance indicator that is monitored continually and is a key consideration for a year-end bonus. Remember, too, that rewards are not only monetary. What sales people are recognized for and read in the company newsletter are just as important for most.
11. Provide full support. If any member of the company team is building obstacles, tear them down. With great design in systems and requisite accountabilities, you are way ahead of the game. But senior management's role to support sales fulfillment never ends. Obstacles arise daily. So you did that deal on the piece of dirt that demands building a product with which you have no experience. Plan on using more time and effort to get the design, specifications, options, and selections bid and contracted. Also understand that the sales team will have a new product to learn. This challenge is nearly always underestimated, if discussed at all. There is no more important job for senior management than to proactively eliminate every obstacle in the process.
12. Check your management behavior. If senior managers start breaking bad on decision dates, everyone follows en masse. Life happens and occasionally an exception must be made for birth, death, and illness. But if your sales fulfillment process follows the previous 11 steps, exceptions will never affect more than 1 or 2 percent of your production. This is not a just-say-no philosophy. This is proactively managing your customers through a sales fulfillment process so well that they meet every decision date and arrive at the closing table with a smile.
Last year while working with a builder team righteously engaged in the lean grind of eliminating waste in all forms of product and process, I sent an email to their sales trainer who was slated to launch a major training effort the next month. I told him that the last thing these salespeople needed was to learn how to sell more homes. They had plenty of sales. Rather, he needed to teach them their solemn responsibility to proactively manage customers through the entire sales fulfillment process and meet each decision date for options and selections. Then show salespeople and design center staff how to keep the customers happy while doing it. I concluded with the admonition that this would do more to help this builder's profitability than anything else he could do. I copied the president. Now I am copying all of you. Let's stop avoiding this issue and get to work.
Scott Sedam is President of TrueNorth Development, an internationally known consulting and training firm based in the Detroit area. Scott welcomes your comments, questions, and feedback at firstname.lastname@example.org. Find Scott's LeanBuilding Blog on www.ProBuilder.com or www.TrueN.com, where you will find archives of past articles. To keep up with the latest on Lean Building & Design, join "The LeanBuilding Group" on www.linkedin.com.