This article first appeared in the PB October 2014
issue of Pro Builder.
Last month in Professional Builder’s September issue, I offered “25 Lessons Learned” from my 25 years in the home building business, working with and studying builders not just in this country but around the world. It makes sense to follow that article with an October piece presenting feedback from builders on some of their own key lessons. I emailed a prepublication copy to a select group and not surprisingly, got back more ideas than I can fit in one article. But two things stood out. First, although the response to the September article was universally positive, I heard a lot about what comes under the general heading of sales and marketing. In fact, a couple of the builders rather dressed me down over my failure to include more in that regard. To this I plead no contest because although they are correct, I have spent 90 percent of my past 25 years working on operations, by choice. So much of sales and marketing deals with the fleeting emotions of buyers, and then there is that problem figuring out what really motivates new-home salespeople and why they do what they do. Yes, we can argue that sales and marketing are part of operations, but construction and purchasing get most of the airplay on that channel.
Second, it is remarkable how many respondents cite lessons learned that most would lump under a general heading of “culture.” Although I have written extensively on culture in the past, this reinforces a trend I see in builders emerging from the housing recession, best described as the culture gap. That gap is growing, creating problems and generating so much concern that I will take that up specifically in my November article here in Professional Builder. What follows are further lessons learned by a wide variety of builders representing a broad spectrum of locations and product types.
David Weekley, Chairman, David Weekley Homes, Houston
The marketing process is just as important as the home building process, and one of the biggest mistakes I see is building what you like, not what customers say they want. Add to that really understanding your competition, their product, and pricing.
Lamar Crowell, President, Keystone Homes, Augusta, Ga.
Brian Joiner, one of the Deming Masters, said something no one should forget: “Every system, and every company, is perfectly designed to produce the result it is getting.” It’s so basic. If you aren’t happy with the results you are getting, you are responsible, so change something.
Alan Laing, President, Orleans Homes, Philadelphia
As a leader, spending quality time in each community with sales, supers, and service and trade partners to establish standards for team work, cycle time, trade hand-offs, job ready/job complete, site cleanliness, model and spec presentation, etc. It’s easy to assume these standards are common sense but if they were, they would be common practice.
Edson Gallaudet, President, Build Urban, Seattle
Remember, there’s always another deal. Buy land smart. Margin comes first.
Todd Booze, President of Construction, Ideal Homes, Norman, Okla.
Builders lose their discipline when sales are up and abandon their plan. Senior management ramps it up, crams it in, then pays for the collateral damage. In the end, you make less money than if you had stuck with the plan.
Richard Dugas, Chairman, Pulte Homes, Detroit
A focus on construction, scheduling, and trades is essential, but the sales process is hugely underutilized as a profit and customer satisfaction tool and requires clarity, honesty, simplicity—especially regarding options. And never forget that culture is a force multiplier, for good or bad.
Scott Jagoe, Co-owner, Jagoe Homes, Owensboro, Ky.
Developing lots and building homes are two different businesses and both demand a profit and ROA (return on asset). If you cannot do both, just pick one. Never sacrifice margin for volume.
Saun Sullivan, CEO, DSLD, Denham Springs, La.
Not partnering with suppliers and trades in a deep way is foolish. Current practices are quite similar to when doctors used to bleed their patients to get rid of “bad blood.” When you are discussing your suppliers, trades, and especially customers, always talk as if they are in the room with you. That changes everything.
Tim Hernandez, Principal, New Urban Communities, Delray Beach, Fla.
One size does not fit all. Small, private builders can survive and thrive by tailoring their product to underserved markets. We are more fragmented demographically than at any time in our history, and many buyers want homes customized to their lifestyles as much as possible within their price range. Don’t sacrifice value to reducing cost. Sometimes the answer is “just say yes.”
Ronda Conger, Vice President, CBH Homes, Boise, Idaho
Staying fresh and current is a full-time job that takes everyone’s attention. I want to poke my eyes out when I ask those who have been in the business for years why they do it “that way” and they reply, “because that’s the way we’ve always done it.” Question, research, learn, get outside your box, push, tweak, and by all means make it better every day. To all builders out there, put a big R.I.P. on “that’s the way we’ve always done things.”
Brad McCall, Partner, McCall Development, Billings, Mont.
Don’t create a product that everyone will like; create something that a small group will love, and once they have seen it, they won’t be able to live without it.
John Rausch, President, Rausch Coleman Homes, Fayetteville, Ark.
It is critical to always tie your product to the end user—the customer who buys your home. What really makes your homes more salable? Market survey data and buyer choice/preference are essential.
Greg McCall, Partner, McCall Development, Billings, Mont.
Ask “Why?” five times! It’s too easy to pin problems on people and not ask why. Is the problem with the superintendent, the salesperson, the warranty manager, or the process? Only after you have done that and you truly understand the issue, then you may seek a solution. This has been a true life lesson for me.
Nelson Mitchell, CEO, HistoryMaker Homes, Ft. Worth, Texas
Home building senior executives must be obsessed with sales and understanding what is going on in the sales office each day. Sales process, your sales team’s culture, and accountability are crucial to success in both rising and falling markets. Ask yourself, “How do we increase revenue? How do we increase market share? Does our sales team convey our value proposition in alignment with our strategy?” If these questions are not monitored and answered, you look up one day and the sales team is executing a completely different strategy than what the senior team designed. There has to be accountability between strategy and sales execution. Great sales organizations can save a company in a downturn and can generate incredible profits in an upswing.
Adam Siegel, General Manager, Building and Business Improvement, Metricon Homes, Sydney, Australia
Are we a building company or a marketing company? Who cares? The best housing companies have a sole focus on selling their customers a dream then exceeding their expectations throughout the entire process. The “choose your own adventure” construction technique, whereby everyone builds the way they like, may get an individual job done ahead of schedule or even under-budget today, but the whole-of-life costs pose grave risks for a builder and its brand. Surprising to many, on-site safety is the best lead indicator for construction performance and profitability.
Gord Bontje, President, Laebon Homes, Red Deer, Alberta
Everyone in the organization, from the guy on the shovel to the president is a sales manager. Do they all understand that the customer provides their pay?
Bryan Flamm, President, Candlelight Homes, South Jordan, Utah
Couldn’t agree more with, “Every dime you think you save jamming a new project out early costs you a dollar over the life of a project.” In the past, we have been in an incredible push to get communities released, and historically that has been way too early. The buyers end up waiting too long and all momentum is lost.
Kent Lay, Division President, Woodside Homes, Las Vegas, Nev.
It’s all about having the best team, and that takes having the right culture and people who complement one another and work together. You can have great talent but if that talent can’t work together, it doesn’t matter. The best lesson I have learned is to not hire people with the same strengths and personality as mine. Hire people who complement your strengths and weaknesses.
Jim Waldrop, President, HomeSphere, Boulder, Colo. (former Homebuilding Group President, Pulte Homes)
“Do what you say you will do” should be your motto in every aspect of your business, but especially when you commit to a customer. Failure to deliver on customer commitments generates more problems and reputation issues and, ultimately, results in the loss of future sales. If you do have a problem, making mistakes right with a customer creates evangelists for your company.
Jeff Czar, COO, Armadillo Homes, San Antonio, Texas
Adopt the mantra, “Help, don’t sell.” We don’t sell homes; we help people improve their lives by investing in a home. It has become part of our culture to motivate all of our team to do the right things at every level. Do that and the results come.
Jeff Rutt, CEO, Keystone Custom Homes, Lancaster, Pa.
If you have the wrong piece of land, it is hard to make up for it by building the right house. If you have the right piece of land, it is difficult to completely foul it up by building the wrong house.
Mark Dunaway, Division Manager, Rausch Coleman Homes, Fayetteville, Ark.
Don’t get emotionally attached to what you build—instead be emotionally attached to the experience your customer has.
John Howe, President, Omega Homes, Temple, Texas
Be in 100-percent control of the building process by working with your trade partners rather than dictating to your trades how it’s done. Together, develop and continuously improve a standardized production schedule and combine it with an even-flow production approach. This will set you apart from competitors and make you the builder of choice.
Keith Porterfield, COO, Goodall Homes, Gallatin, Tenn.
Never underestimate the power and wisdom located within your own people. It is unleashed when every employee understands how to be a business owner, and there is no better way than open book management. This not only helps to bring out their full potential, but also attracts the top talent available.
Dwight Sandlin, President, Signature Homes, Birmingham, Ala.
Fewer than 10 percent of all homes sold are new homes, so never ignore 90 percent of the market competing for our sales. And remember to simplify, simplify, simplify! Da Vinci said simplification is the highest form of sophistication.
Chris Cates, CEO, Caviness & Cates, Fayetteville, N.C.
Expect what you don’t inspect. Stay involved in all aspects of the business or don’t be surprised when what you stopped paying attention to becomes a problem.
Tim O’Brien, President, Tim O’Brien Homes, Milwaukee
Even with the best strategy (and I worked for a builder famous for great strategy), a mediocre or bad culture always holds back top performers. Culture trumps strategy all day long.
One of the best things about home building is the passion displayed by so many of the leaders whom I meet at all levels. That is clearly evident in the quotes above. Their ages range from early 30s to late 60s but, as we discussed in the September article, the issue is not how much experience you accumulate, but how much you learn from the experience you have. Sometimes years count, though, as the odds of running into the significant learning opportunities increase with those wrinkles and gray hair. The last great housing recession—from which we are still emerging—provided a disproportionate number of these opportunities in a condensed time period. I will assert, in fact, that the learning opportunities presented in the seven years from 2006 to 2013 easily count for double or more the experience of the 15 years from 1991 through 2006, when just about anyone who could find a construction loan could make money in home building. The last really big crash was in the early ‘80s and not many from that era were still around for this last one. How many times I have told those in their 20s and 30s what an incredible advantage they have had to learn during the most difficult times in home building since the Great Depression. They don’t believe me yet, but they will.
When the next crash comes around, as it always does, those who truly learned from their experiences will be well-equipped to shoulder the burden, and it will be their turn to mentor the younger crowd that experienced nothing but good times.
I recommend you take both the September and October articles (available in a single PDF by emailing info@truen.com) and methodically work through them with your management team. Work hard to find the applications in your own company and write down what we missed. Then share them with me. My guess is you can easily provide 50 or more and bring this list to “100 Lessons Learned in Home Building.” A few pages on each and we’d have an important book to pass on to our children. PB
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 scott@truen.com. Find Scott’s LeanBuilding Blog on www.ProBuilder.com or www.TrueN.com, where you will find archives of past articles. You can also join “The LeanBuilding Group” on www.linkedin.com.
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