NHQA presentation

Steps to Performance Excellence: Steps to Performance Excellence: National Housing Quality AwardNational Housing Quality Award

Denis Leonard

NHQA 25+ yearsNHQA 25+ years

• Survive and THRIVE• Customers’/competitors’need to

change• Effectively and efficiently achieving

organizational strategic goals• Coordinate and align improvement

tools and projects• Improve performance and profits

IMPACTIMPACT

• Of the NHQA Builder recipients 97% still in business today

COST OF QUALITY COQCOST OF QUALITY COQ

• COQ across industries 2.6-4% of sales revenue

• Construction industry

70% Failure costs

25% Appraisal costs

5% Prevention

• Failure cost includes Rework in construction

rework is 2-20% of total project contract amount

COST OF REWORKCOST OF REWORK

• Cost of rework in commercial construction 12.4% of total contract cost

• In residential construction 4.1%

Mills, Williams & Yu, Int. Journal for Housing Science, Vol.34, No.3 pp. 207-220, 2010

DEFECTS IN HOMESDEFECTS IN HOMES• Data captured by Quality Built field

inspectors on 31,995 completed homes and condominiums across 27 U.S. states for the 12-month period ending October 1, 2005.

• Single-family homes averaged $5,398 in corrected defects per home in 2005

• Multi-family homes and mixed commercial use construction averaged $4,556 in corrected defects.

Nation’s Leading Risk Management Company Releases Top Builder Defect Data for Construction Industry

Quality Built® Data Shows Builder Top Risk Issues Are Preventable Media Kit :Orlando, Fla., Jan. 11, 2006 — (International Builders’ Show)

Cost of Providing Cost of Providing Quality ManagementQuality Management

• Cost of correcting deviations from spec is 12% of total construction project cost

• Cost of providing Quality Management 1-5% of total construction project cost

(Xiao & Proverbs, 2002)

Pheng, L.S & Ke-Wei, P (1996) A Framework for Implementing TQM in Construction, The TQM Magazine, Vol 8 No 5, pp 39-46

CONTINUOUS QUALITY CONTINUOUS QUALITY IMPROVEMENTIMPROVEMENT

Step 1: Identify Opportunity

Step 2: Current Situation Or Conceptual Design

Step 3: Analysis

Step 4: ImplementProposed SolutionsStep 5: Results

Step 6: Standardization

Step 7: Future Plans

Act PlanStudy Do

Quality Control

Total Quality Management

Quality Assurance

Strategic Quality

Energyefficiency

Tradesco-authoring

scopes of work

SafetyCustomersatisfaction

Improving the warranty process

Customersurveys

Focus groups

Insurance

Defectreductions

Costsavings

ValueEngineering

TradeCouncils

ImprovingTrade

relations

Liability Constructionprocess

Specs andScopes of

Work

Checklists

Greenbuilding Builders

Challenge

QualityManagement

PATHWAYS TO QUALITY

THEMES IN COMMONTHEMES IN COMMON

•Some tools, metrics & processes in place•Begun to move to achieve real time metrics

•With data, HOW to improve?

•HOW to implement?

LEADERSHIP

BUSINESS RESULTS

LE STRATEGIC PLANNING

PROCESS

MGT

CUSTOMER

HUMAN

RESOURCES

CONSTRUCTION

TRADE

PARTNERSHIP

SATISFACTION

QUALITY

N

H

Q

A

LEADERSHIP

BUSINESS RESULTS

LE STRATEGIC PLANNING

PROCESS

MGT

CUSTOMER

HUMAN

RESOURCES

CONSTRUCTION

TRADE

PARTNERSHIP

SATISFACTION

QUALITY

Scenario Planning

EmployeeSatisfaction

DefectReduction

Supply ChainManagement

Communicate Mission Act As

Role Models

ProcessImprovement

ISO9000Six Sigma

etc

CustomerRelationshipManagement

BalancedScorecard

STEPS TO EXCELLENCESTEPS TO EXCELLENCE

Honorable

Mention

(Special Cases)

An outstanding practice.

Process Results

Bronze

Systematic approaches, no major gaps in

criteria.

Silver

Industry leaders in most

Categories.

Refined practices, good

results.

GOLD

Performance Excellence

National Benchmark in each

Category.

Quality fully integrated, sustained

performance.

OPPORTUNITIES FOR OPPORTUNITIES FOR IMPROVEMENT (OFI)IMPROVEMENT (OFI)

• Discuss your scores and what the strengths and OFIs were

• Come to a consensus score for each category and total score

• The real value is agreeing on the top OFIs• CREATE PRIORITY LIST OF OFIs

• IMPLEMENT !

NHQA RECIPIENTSNHQA RECIPIENTS

• 15 - 800 employees

• 15 - 20,000 homes

• $150k - $1.7M home price range

• Custom, Production

Build on Your Lot

ANYONEANYONE CAN APPLY ! CAN APPLY !

THE VALUE OF THETHE VALUE OF THEFEEDBACK REPORTFEEDBACK REPORT

• Apply for the award process

• Feedback report on how to improve.

• A value of $8,000.

• If you receive a site visit this report including the site visit represents a value of $22,000.

NHQA IMPACTSNHQA IMPACTS

• Average net income before taxes of 5.1%gross margin of 18.5%

• Whereas the NHQA builders achieved an average net income of 11.2% and gross margin of 25.5%.

NAHB Business Management Committee's1997 Cost of Doing Business Study

(RC ToolBase, The Bottomline on Quality)

Profits (Gross Margins) 12-20%Revenue 15-100% increases per yearConstruction Costs vs Budget +/- 1% Customer Satisfaction 93-97%Referral Rates 29%Cycle Time Reductions 15-50%Zero Defects at Closing 98%Defect Reductions 11-75%Employee Satisfaction 94%Trade Satisfaction 95%Customer Endorsements/Thank You Letters

73%

Warranty Requests Warranty Costs

1 per every 15.5 homes0.3% of sales

Based on NHQ Award winners articles featured in Professional Builder Magazine from 1993 through 2009the following impacts were cited

Improvement In Every Category In One YearImprovement In Every Category In One Year

44

4038

34

3033 32

35

53 52

4648 48 49 50 50

0

10

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100

Leadership StrategicPlanning

Customer andMarket Focus

Measurement,Analysis, &Knowledge

Mgmt

HumanResource

Focus

ProcessManagement

BusinessResults

Overall

Pe

rce

nt

of

Po

ss

ible

Po

ints

2003

2004

42

4744

36 35

40

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3129

33

29

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51

5654

50

44

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4745

4851 50

48

54

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51

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5350

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10

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100

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Perc

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ossib

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2003

2004

Improvement In Every Item in One YearImprovement In Every Item in One Year

Wathen Castanos Hybrid HomesWathen Castanos Hybrid HomesCase StudyCase Study

• Third generation builder started operations in 1983• High performance green home builder • Team of 28 • Building 200 homes per year (built over 4000 homes)• Fresno, California• Single-family, detached homes • 1100 - 2348 sq ft • $129-290k

The Goals of WCHHThe Goals of WCHH

•In a ‘ravaged, foreclosure impacted marketplace’ (PCBC)•Increased focus on quality methodologies to:•To advance the performance of their homes to sustain leadership in the market•Increase efficiency with a small team•Creating strong strategic planning •Continuing a focus on their existing culture based around customers and employees

STRATEGYSTRATEGY• What impact can it have for me• Having a champion to drive it • Link quality to strategy, a business tool

• Using NHQA criteria• Benchmarking• Everyone involved including the subs• Using a team focus & creating leaders• Providing training and development• Measure before and after (Self-Assessment)• Minimal resources and effort • One year period to see impact

IMPLEMENTATIONIMPLEMENTATION

• Establishing a Champion, The Presidents Vision

• Focus on the management team

• Training in basic quality tools• Self Assessment (annual)• Strategic planning• Formation of Work Improvement

Teams WIGs• WIGs focus on strategic needs

• Application for NHQA

HANDS ON TRAININGHANDS ON TRAINING

•Company leaders participated in training first

•Leaders acted as facilitators in all company training•Training used to kick start each WIG•One key WIG used to show how each tool could be applied•Training with sub contractors

WORK IMPROVEMENT WORK IMPROVEMENT GROUPSGROUPS

• Home delivery process• Scope of Work development• Option processing • Customer service feedback to construction

BENCHMARKINGBENCHMARKING

•Initial visit to NHQA winning builder to see the value of quality management•Continued to visit two other builders over the 12 month period•Toured outside industry company via local ASQ Section to get new perspectives •ASQ Design & Construction

Division on Linkedin

VALUE OF NHQAVALUE OF NHQAAPPLICATION & SITE VISITAPPLICATION & SITE VISIT

•An integrated and strategic view of quality and WCHH as a result of the application•Self assessment and focus on OFIs•Industry and quality experts providing in-depth site visit and feedback report used as key input for strategic planning

THE IMPACTTHE IMPACT• Improvement in performance (Self Assessment) in every

category

• Increased homes built from 200 in 2009 to 300 in 2012• Reduced defects by 50% in improvement projects• Doubled the energy efficiency performance of the home• Won NHQA Bronze in 2010 & Silver in 2011• National Customer Satisfaction Award 2010• Energy Value Housing Award Builder of the Year 2011

LESSONS LEARNTLESSONS LEARNT• The implementation of quality tools and techniques

can be achieved in a short time frame • Results/impact of quality implementation can be

quickly realized with limited resources

• Quality management provides an ideal set of tools to support and drive the efficiency and effectiveness of high performance home construction

• A champion, clear strategy, communication of the value of the tools and their aim, measurement pre and post implementation and clear results were the keys to success

• NHQA key in coordination, evaluation and driver

THE BEST ADVICETHE BEST ADVICEABOUT NHQA…..ABOUT NHQA…..…..DONT WAIT….…..DONT WAIT….

JUST START NOW!JUST START NOW!

USE USE BENCHMARK TO BENCHMARK TO

TAKE THAT FIRST STEP !TAKE THAT FIRST STEP !

The point of contact for the National Housing Quality Award

for more information is Award Director, Serge Ogranovitch

[email protected]

Denis Leonard

(406) 451 9124

[email protected]