Decentralized Structure Empowers Site Teams

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When Pam Sessions and Don Donnelly decided to return Hedgewood Properties to its design/build roots, they tore up more than the hierarchical organization chart.

December 01, 2002

 

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Corporate staff at Hedgewood Properties is small and collaborative. The Centennial team, clockwise from left: Pat Mason, Jose Cruz, Pedro Paulete, Brent Leibee and M.J. Walker

 

When Pam Sessions and Don Donnelly decided to return Hedgewood Properties to its design/build roots, they tore up more than the hierarchical organization chart. They dismantled the computer systems and software they had spent more than a year installing and eliminated the jobs of virtually all middle managers as well as information technology professionals.

Most business cards in this company no longer carry a title. Some carry a title for a job that no longer exists. Brent Leibee is still vice president of operations, but he's really the builder at the Centennial community, back in the field after 12 years as manager of all construction operations. Pat Kurek's business card says he's a "director." He's actually the builder at Vickery, starting there as Longleaf nears build-out, and also does a lot of the research and development on green building technology.

"Big companies have layers of management," says Russell Coulton, Hedgewood’s chief financial officer, "but we really only have one - the project teams out in the field."

Corporate staff in areas such as design, estimating, land development, customer service and quality control are all service providers supporting those entrepreneurial teams. Hedgewood owns House & Home, a retail furnishings store in a 1911 bungalow in Alpharetta, Ga. The store employs interior designers who merchandise Hedgewood's models and meet with buyers to help with selections of options and upgrades. It's an independent profit center.

Because Hedgewood's housing products are tailored to each location, they vary dramatically. The narrow, three-story homes at Longleaf in Atlanta's Buckhead neighborhood stand in stark contrast to the rambling rural estates at the Chattahoochee River Club, the most prominent throwback to Hedgewood's past emphasis on big houses on big lots. The project team of builder and sales agent at each community provides the vital link between the people who craft Hedgewood's brand - the designers - and the customers who buy the houses.

 

Listen to the Market

Builder Brent Leibee and sales agent M.J. Walker didn't hesitate to exercise their entrepreneurial control at Hedgewood's Centennial community when market feedback indicated that their mix of 69 townhouses and 99 detached homes was priced a little too high.

"We sit down as a team once a week and go over what we learn from customers and shoppers," Walker says. "We found that instability in the stock market was affecting our market. We decided we could really benefit from broadening our range of pricing."

"The first thing we did was re-examine the spec level," Leibee says. "Our pricing on the townhouses was supposed to start at $292,000, and we didn't have a lot of wiggle room in the specs at that price. But we were able to show our vendors, suppliers and trades the nature of the problem, and they worked with us to aggressively go after cost savings. So we got the entry price of our smallest townhouse down to $275,000."

The next target was broadening the range of floor plans offered in the single-family homes. "Because of our proximity to schools, and connecting sidewalks, we thought we would appeal to families," Walker says, "so we loaded up on plans with four and five bedrooms. To broaden the pricing, we went back to our designers and asked for some smaller, three-bedroom houses that we can price below $400,000, and go after professional couples and empty nesters as well."

Hedgewood's 3,000-square-foot Centennial model home, with four bedrooms, opened in November. Two furnished townhouses are due this month. Leibee is confident that the broader pricing range will loosen buyers’ purse strings. "We have one contract closed and two pending," he says. "The price resistance was at $400,000. I'm just glad we have the freedom to make the adjustments we made. Decentralization works."

Al Causey, who leads design and estimating, likes it that way. "Since we decentralized, control is now in the field," he says. "Who better to make the decisions? They meet with shoppers and buyers every day. Corporately, we monitor architectural styles and detailing because we try to stay historically accurate, especially with our exteriors. That consistency is the essence of our brand."

However, the teams pick plans and set specification levels for the homes in each project, choose vendors and assemble the trades to do the building.

"That's what keeps me here," Kurek says. "There's no restriction on my ability to grow professionally. Pam and Don are visionaries, and I learn from them on a daily basis. They know the brand and the niches. Don sees the plans and knows the pricing on every house we build. It's easy for me to sleep at night."

Sessions says she tries to keep each builder at a production level that's challenging but not high-stress. "It's a balance," she says. "We probably have some people who would like to be more on their own and others who would not want to lose our contribution. I just hope that over time Don and I contribute more training rather than doing."

The sales agents are mostly independent real estate agents working on straight commission under the banner of Hedgewood Realty. That's common in the South, but there's no split loyalty. M.J. Walker, who teams with Leibee at Centennial, says, "It's just the way the business is organized. We've looked at going in-house as employees. There are pros and cons either way. We haven't seen a big reason to change. In practice, we’re one big happy family."

Hedgewood now has 12 project teams and 60 people employed between property and real estate organizations.

With each project organized as a quasi-independent profit center, recruiting and training builders restricts growth. "It's not just hiring builders and turning them loose," Coulton says. "They have to learn to think the way we do and understand the niches. What we do takes special land to avoid price-per-square-foot competition."

Kurek adds another factor: "High-density projects are very different to build, and that's mostly what we do now. Scheduling deliveries and directing traffic is a major challenge. At Longleaf, sequencing was tough. When you're building three-story houses over drive-under, rear-entry garages, 10 feet apart, you can't close a $700,000 sale on one house while framing the house next door. People get upset."

While focused mostly on the bottom line, Sessions hopes to grow the top. "We get a lot of calls from people wanting to work here," she says. "What they see from the outside is that what we're doing has meaning, makes the world a better place. People like building things that look good. But anyone looking to climb a corporate ladder or have a place in a hierarchy will not be happy here. We're not that structured."

Instead, Hedgewood bends to accommodate employees' changing interests. "We try to help people find what excites them," Sessions says. "Fortunately, we have a lot of depth."

Roles are constantly changing. Sales agent Fran Marty, who used to work in customer service, says, "It's a company with a lot of opportunity, but don't look for a fancy title."

The bottom line? Donnelly and Sessions won't reveal it, but they target 30% gross profit on every house. "Our range is 26% to 32%," Sessions says. "Infill is where we see the highest margins."

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