In the October issue, we announce the winners of this year’s National Housing Quality Awards: gold award recipients DSLD Homes and EYA, and silver award winner French Brothers.
History Maker Measures Up
Their management methods owe more to Jesus Christ than W. Edwards Deming.
Their management methods owe more to Jesus Christ than W. Edwards Deming. But if you think about it, the quality management maestro would have to applaud this company for delivering value to first-time home buyers by applying The Golden Rule.
|Keepers of the faith at History Maker Homes are president B. Nelson Mitchell Jr. (seated) and other management team members (from left): CEO Bryan N. Mitchell Sr., Colson Mortgage president Kim Lewis, founder O.N. Mitchell Jr., vice president/sales Cliff Crumpler, vp/administration Cindy Culpepper, vp/construction Wally Sampson and vp/customer service Dave Dudziak.
The Mitchell family's History Maker Homes of Fort Worth, Texas, ran away with the only Gold Award in the National Housing Quality competition this year. Its strength is solid but not flashy process controls keyed to effective measurement. But more than anything, the NHQ judges were blown away by the way this firm's Christian faith-based culture ties employees, trades, suppliers and even customers together in a production system bent on maximizing the homeownership rate among young Texans in the Dallas/Fort Worth metroplex.
History Maker's quality journey began in 1994 when the management team, led by CEO Bryan N. Mitchell Sr. and son B. Nelson Mitchell Jr., faced increasingly stiff competition in the Dallas/Fort Worth entry-level market with a company sporting weak production systems, low customer satisfaction and management controls geared more to fighting fires than preventing them. "We knew we had to grow to survive," says Bryan Mitchell, 54. "But we also knew we'd need a much better company to build 300 houses a year, and make money at it, rather than the 150 we were building." The firm held its first management retreat that year and decided to embrace quality management methods then in their infancy in the housing industry. The team also wrote its first mission statement: "Our goal is to develop a professional, innovative team building value-added, quality homes on a volume basis, resulting in a 'world-class customer experience.'" It concludes: "We're not just building homes, we're building relationships."
|All job sites must be broom-swept and clean after each trade finishes work. "Customers see everything, and they equate cleanliness with quality," says History Maker Homes president Nelson Mitchell.
That bit of prophecy might have been wishful thinking then, but it is certainly true today. Even the heart attack that felled Bryan Mitchell in the late 1990s didn’t slow HMH as Nelson, 31, took over active leadership of the firm. The senior Mitchell now works more in the background, concentrating on land acquisition and development. And with the charismatic Nelson as president, History Maker is reaching new heights in customer satisfaction and profitability, as well as sales and closings.
Beginning in earnest in 1998, History Maker began bringing in top housing industry consultants. Scott Sedam came in to advise on strategic planning, quality process control, and partnering initiatives with trades and suppliers. Rick Heaston recently began training the sales force in his concept of interview selling.
The turnaround began slowly, picked up steam throughout 2001 and kicked into high gear last spring, says customer satisfaction researcher Paul Cardis of NRS Corp., which has surveyed HMH buyers since 1995. "In 1998 History Maker had customer satisfaction scores four points below the national average in our surveys," Cardis says. "They had a 76 on our scale, where 80 is the average."
"That's not a 'would recommend' percentage. Our scale combines the percentages of buyers who say they definitely or probably would recommend the builder to family and friends with the negative impact of those who say they definitely or probably would not recommend. The 'would recommend' percentage is the sexy number everyone concentrates on, but you must account for the negative impact of people who are saying they wouldn't recommend. Word-of- mouth is a double-edged sword."
|Partnering with trades and suppliers to create a seamless production system at History Maker Homes resulted in dramatically improved customer satisfaction numbers, shorter build times and fewer warranty requests all at a time when the Fort Worth, Texas-based builder was experiencing double-digit growth in sales and closings.
By the first quarter of 2002, HMH had a scaled score of 87, and the percentage of customers saying they definitely or probably would recommend the builder was up to 88.4%. "But in the second quarter this year, the scale score shot up to 91, a 15-point gain over 1998, and 93.2% of buyers were saying they would recommend the firm," Cardis says. "Given the trend line, by year-end the change could be really startling."
Remember, this firm is growing at a rapid rate. HMH closed 291 entry-level, single-family houses in 1998 for $26.8 million in revenue and only 271 houses in 1999 for $27 million. But in 2000 it closed 429 sales for $44.5 million, and in 2001 it had 466 closings for $51.9 million. The firm now has 12 active locations, with sales averaging $120,000 for 1,800 square feet.
At the same time, quality measures such as open warranty service requests, days to respond to service requests and items in homeowner orientation walks were dropping. The average number of days a warranty service request was open dropped from 45.85 in mid-1999 to 12.44 in the first quarter this year. In 1999 the company averaged one warranty service request for every 3.5 houses. The current rate is one for every 15.5 homes.
And the bottom line? While History Maker won't tell exactly, Bryan Mitchell says with a smile, "Let's just say that our net profit is above 10%."
"Less than 5% of the builders in this country make over a 10% net margin," Sedam says. "History Maker is probably making better margins than 97% of the industry."
The secret? Nelson Mitchell says there is none other than hard work. "There's no magic bullet in this business, but you’re either getting better or you're getting worse, a little at a time. We execute," he says, sounding much like a football coach. "It's all about blocking and tackling."
Sedam puts it more directly: "History Maker has smart people, but they're focused on implementation, not proving how smart they are. This business isn't rocket science. You can take down-to-earth ideas and implement them and make a lot of money selling and building houses. That's what they do. They're implementers."
Bryan Mitchell credits NRS surveys for opening his eyes. "They got us focused on our customers. We started listening to them, and they told us what we were doing wrong. For years our scores stayed at the same level. Then we started benchmarking against other builders around the country through a Builder 20 club. That showed us there are a lot better ways to operate. We started to look for ways to improve our processes. As we made changes, we began to see results in our customer satisfaction scores."
There are three major elements of History Maker's dramatic reversal:
- Measurement tools that HMH uses to spot weaknesses it can then turn into opportunities for improvement. The pioneers of quality management were statisticians. Measurement provides data that are the raw material of change and improvement.
- Partnering with trades and suppliers to create a seamless production system from the chaos that site building often becomes as dozens of independent firms pursue their goals rather than home buyer satisfaction.
- Culture, the most important of all, especially at History Maker, which uses its faith-based mission and values to bridge the gaps among firms in the housing production process. People throughout the production system must work together in partnering alliances to apply measurement tools that improve work processes. Christian values tie this network together.