Last month, I attended NAHB’s midyear meeting in Miami and had the pleasure of sitting in on a presentation by Daniel Swift, president and CEO of Des Moines-based architecture group BSB Design.
A Custom Revolution
Remember when chess champion Gary Kasparov went up against Deep Blue, the supercomputer? Kasparov won the first time. But the second time, Deep Blue's programming included almost every possible combination of moves. As a result, a shaken Kasparov conceded defeat. Simonini Builders, Inc. (SBI) has done to custom building what Deep Blue did to chess.
Remember when chess champion Gary Kasparov went up against Deep Blue, the supercomputer? Kasparov won the first time. But the second time, Deep Blue's programming included almost every possible combination of moves. As a result, a shaken Kasparov conceded defeat.
Simonini Builders, Inc. (SBI) has done to custom building what Deep Blue did to chess. This North Carolina-based firm has used information technology to change the definition of "custom." Home building may never be the same.
But that's just one of the reasons Professional Builder chose Simonini Builders as the 2006 Builder of the Year — the first ever custom builder to be recognized as the fairest construction firm in all the land.
The other reasons? How about fierce employee loyalty, sales volume rivaling a mid-sized production builder and customer satisfaction ratings 13 percent higher than FedEx? Here's a glimpse inside SBI's world-class operation.
"We had reached the point in our business evolution that we needed to more clearly define our brand, reputation and market position," says Ray Killian, Jr., co-owner and chief executive officer of SBI. "A few years ago, we had an outside firm conduct a brand evaluation of SBI. They met with bankers, brokers, agents, politicians, customers, lawyers and other influencers and asked the [influencers] many questions about impressions of SBI.
"One of the questions was 'If you were to compare SBI to a movie star or a car, what would the image be?' The answer was Paul Newman (as a movie star) and Lexus (as a car)."
That information, Killian says, convinced him and company co-owner Alan Simonini to apply the tools and marketing methods of the luxury auto industry to custom home building.
"When you buy a Mercedes, you have thousands of options to choose from," Killian explains, "but that doesn't mean you're getting any less of a product. We call [this strategy] our Hedgehog (referring to the book, "From Good to Great," by Jim Collins). We want consumers to feel passionately that they have received a custom home, even though it's a portfolio home."
That goal led SBI's dynamic duo to aim higher for their company on every level. They began by cherrypicking key employees, often spotting talented people among the overworked ranks of public builders. For example, new chief financial officer Bill Saint, a former Centex division controller, took the lead in setting up SBI's "Structure" management software (see "Super Structure" on page 74). And veteran builder Bob Pugh joined the SBI team to head a new Renovations Division, aimed at high-end clientele (see "The Sweet Spot" on page 70). The company also diversified into the window and building material business, opening Southeast Builder Supply in Charlotte.
Through the whole re-layering process, however, Alan Simonini, whose father Al founded the original company back in 1973, zealously defended the company's core values — insisting that good people and construction quality remain at the center of every move forward.
"A lot of builders expect the client to accept all kinds of defects," Simonini says, "but we wouldn't accept a dent in our new car or any other products, so why accept it in our homes? There's no such thing as too picky. If it's wrong, it's wrong."
That zero tolerance standard sometimes puts a strain on SBI's management in the field, but it also earns their respect.
"Alan will go to the end of the universe to satisfy people," Bob Pugh says, "sometimes to the point where it may hurt [financially]. But Simonini's reputation is untouchable."
What does quality mean in a Simonini home? How much time have you got? From through-wall copper flashing to ensuring that the screws in the light switch covers are vertical, no detail escapes notice.
Simonini is keenly aware of the narrow, affluent niche it serves. To expand that base, the firm has been expanding into promising new regions. These include several parts of South Carolina, including Charleston, the Hilton Head area and wealthy enclaves such as Daniel Island.
How did a relatively small custom building company create field teams in these remote areas? By making nice with the locals.
"We had to export our brand, not our crews," notes Saint. "We found that if local subs don't know you, they won't work for you. So what we did was hire a well-respected superintendent who lived locally, and set up a satellite operation.
In addition, the company now plans and builds complete neighborhoods, not just the "one-off" homes typical of many custom firms. And when SBI builds a community — whether close to their home office in Charlotte or far afield — they often include several spec homes.
Hey, isn't that called production building? Well, yes and no. It's not that simple. These are not what most people think of as spec homes — floor plans pulled out of a book and plopped on a vacant lot.
In Heydon Hall, SBI's upscale community in Charlotte, Killian notes that "one architect designed all of the homes, after taking 300 or 400 pictures of older homes in the area. These are basically custom homes."
The custom-production distinction gets even more blurred when clients enter the picture. They can choose from a few layout options in floor plans, but as many as 10,000 surfacing, cabinet, flooring and other options. Which begs the question: How many options separate a custom home from a production home? Is 10,000 enough? Simonini's customers apparently feel it is.
"If you think about it, 1/10th of 1 percent of the market is who we sell to," says Saint. "We've learned that we need to reach the influencers, the people who they ask when they go to buy a home. That means politicians, attorneys and previous customers."
Scott Teel, Simonini's marketing director, has a lot of material available every time he tries to turn the heads of those "influencers." The company has garnered about 60 awards in recent years, for design, business ethics, housing quality and other areas of excellence.
"The truth is that the most effective and essential marketing tool that I employ is the simple leverage of our reputation," Teel says. "People know our name." What does he use for "levers?" Anything he and marketing coordinator Sherie Lewis can dream up, including advertising, parties and grand openings, newsletters, a fancy website, and, of course, lots and lots of award entries.
Those tactics have paid off. The SBI sales and marketing staff have shared in that shower of awards, consistently raking in national and regional awards for everything from newsletters to model homes. Suffice it to say there's almost no aspect of Simonini's business that hasn't been applauded by one awards program or another.
Another incidental part of SBI's marketing, is the company's outreach in the community — a generosity that extends to local causes and beyond. For example, Killian and Simonini asked employees to pitch in after Hurricane Katrina (against their matching funds). And they have set up a $25,000 annual charity. Employees may ask that certain charities get a piece of that pie, or request their other matching donations from the top brass.
And unlike many builders, who tend to steer charitable funds only toward conservative groups, Simonini's generosity is non-partisan. Sure, there's a fund for the Boy Scouts — a perennial builder favorite, but there's also money going to social causes and progressive groups such as the Sierra Club and the Nature Conservancy. Balance. That's a word you'll hear again.
A lot of companies recite the "we're only as good as our people" jargon, but at Simonini, you actually see that philosophy in action. Every employee can voice an opinion, or make a suggestion for change.
The two guys at the top, Simonini and Killian, make no secret of their reliance on the talents of others.
"Alan and I have made a practice of always trying to hire people who are better at what they do than we are," notes Killian.
Equally important, those people stick around. Average retention is five years and growing. It's not for nothing that this company ranked among Professional Builder's "Top Companies to Work for in Residential Construction," for two years in a row.
"We want them to work here the rest of their lives, so they can ultimately retire in comfort," says Killian. "We know there are risks we all have to deal with, and we've chosen to be in an environment that supports them through their working lives.
"We don't have to answer to outside stockholders," Killian continues, "and that gives us more freedom in how we run our company. If we don't compensate our people well and give them the kind of incentives that help them, they're not going to want to stay with us."
Graydon Jackson, one of the newest builders at SBI, left Toll Brothers looking for more than just a job. He wanted his life back.
"I was working 70 or 75 hours a week, overseeing 35 homes, getting home at 8 o'clock," he says. They were burning me out. I get the sense that [Simonini] really understands that people have families."
And Jackson is a perfect example of what makes a Simonini employee special. A veteran builder at age 28, he also speaks fluent Spanish. That's a priceless skill to have on the job site, when 70 percent of construction crews are Hispanic.
Along with a generous pension profit sharing program and health benefits, SBI has another strength that no public builder can boast — a small enough staff that every employee knows the boss.
"Life is a balance, it's truly a balance," says Killian, waxing philosophic. "I love my leisure life, and I love business, but I expect to have a balance. These are all the things that go into making the character of people.
"We find that within a year, if you don't fit in with our team, the problem purges itself. Everybody pulls their own load here, though we help each other. That's what makes a great company."