Leaving Money on the Table

I was talking with a friend over the weekend. He’s part of a small crew that does warranty work for one of the nation’s largest home builders. They’ve been working on a development in which not one or two, but quite a few, houses had their chimneys improperly flashed. Water got down into the sheathing and wall boards and made a mess for the homeowners. Its a big deal to fix. First masons have to tear down the chimney, then the mold people have to come in, seal off the room, and work in space suits to eliminate the mold. Then my friend’s crew strips off the siding, sheathing and wallboard, replaces same, re-plasters and paints. It takes weeks and costs tens of thousands of dollars per house, plus a huge hit to the builder’s reputation (as an on-line search for this builder confirms.) Yet my friend’s crew is busy year round in the greater Boston area.

Why, I’m sure you’re asking, doesn’t the builder employ an inspector (or clerk-of-the-works) on each development site? The cost of one would pale in comparison to the warranty cost the builder pays out. I thought about it and realized that the critical thing that the builder competes on must be the scouting and acquisition of the development site, and obtaining the permits necessary to build a large development there. It’s clearly not in cost control!

Yet they are leaving money on the table. In today’s environment you can’t afford to do that unless you are controlling something inherently limited like land or the political permissions needed to develop it. If your business isn’t in that position, you need tight QC everywhere throughout it.

Ralph

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