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.
Kaufman and Broad Still Into Rayco Model
No NHQ winner ever set higher benchmarks, in just about every area of operations, than Rayco-former Professional Builder of the Year Ray Ellison's old San Antonio jugernaut.
No NHQ winner ever set higher benchmarks, in just about every area of operations, than Rayco-former PB Builder Of The Year Ray Ellison’s old San Antonio juggernaut. Under long-time president Jack Willome and vice presidents Jack Biegler and Jack Robinson, Rayco won in 1996, the same year the firm was acquired by publicly-held, Los Angeles-based Giant Kaufman and Broad Home Corp. In 1995, Rayco delivered 2585 homes for revenue of $236.2 million, and a net margin of 12%, return on assets of 37.2%, and return on equity of 66.9%.
The whole housing industry is still chasing numbers like that, and the Rayco model-especially its even-flow production system, large option-selling showrooms, and the way the firm did consumer research--is a Holy Grail sought with breathless frenzy.
K&B has the only up close and personal view of that utensil, and used it as the framework for --KB 2000,-- the company’s current operations model. "We felt that was a better business model than we had," says vp of investor relations Mary McAboy. "It’s been the mantra of our company since the acquisition."
K&B measures all performance against the KB 2000 model. "True even flow would suggest that we have the same number of deliveries in every quarter," says McAboy. "We’ve not accomplished that, but the processes, systems, and review methods are all in place." (In fact, Rayco used to sell ten houses, start ten, complete ten, and close ten every working day, all year long.)
To get the data on which it based all product design, Rayco each month mailed a nine-page survey to every buyer of a new or existing home in Bexar County, Texas. "We’ve done over a million consumer surveys of new and existing home owners since 1996," reports McAboy. "We survey every two years in each of our 18 divisions. The survey is so extensive that we find every two years gives us the direction we need to meet new changes in consumer demand."
Rayco’s surveys were masterpieces of singleminded focus. "Nothing but buyer behavior matters," Jack Robinson said during an interview for the NHQ award coverage in this magazine. "You’ve got to keep all other agendas out of the questionnaire. Don’t ask a question if you can’t do anything with the answer. For instance, why ask about age? What can you do about it?"
"All our questions are framed to offer the consumer a choice of where to spend dollars," McAboy says of the current K&B surveys. "We are frequently surprised. For instance, we always considered fireplaces to be a no-brainer as a standard item, particularly in cold climates. But in Denver, we found a majority of home buyers have other things they’d rather spend their money on. And in Salt Lake City, where full basements are standard building practice, a majority of buyers said they would prefer additional above-ground square footage. So in those two markets, those items are now options, not standard."
Kaufman and Broad has a way to go to fully implement the Rayco model, or achieve Rayco-like results. "They’re working on it, but so are a lot of others."
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