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.
NHQ Awards: Charter Homes' new model of home building
Charter Homes & Neighborhoods garnered a Silver National Housing Quality Award by, among other things, offering timely designs that exactly meet their markets.
The team at Charter Homes & Neighborhoods at one of its model homes in Lancaster Pa.
Winning an award for total quality management can involve quite a lot of arcane detail. The discipline involved in quality management is so thoroughly mapped out that winning can seem to be more about successfully clearing a series of hurdles than, at the end of the day, a true passion for profitably designing, building, and selling great homes.
Make no mistake, Charter Homes & Neighborhoods, a 21–year-old firm based in Lancaster, Pa., has cleared nearly all of the numerous hurdles required to perform at the highest level of quality management — the technical merit. But the firm’s greatest strength lies in the company’s passion for building great homes and communities — the style points.
This year, the company earned its second straight National Housing Quality Award, specifically the program’s penultimate honor, a Silver Award. Nearly all of the quality experts involved in the 2011-2012 NHQA judging cited Charter’s enthusiastic culture of building great homes and great neighborhoods to be its most singular achievement.
Company founder and CEO Rob Bowman says this year Charter is on pace to sell more homes at a greater gross margin than it has in each of the past four years. The reason: his team has taken an aggressive approach to meeting the market with homes people want to buy — homes designed to exactly meet the needs and wants of today’s buyers.
Charter Homes & Neighborhoods
No. of homes built in 2010: 184
Markets served: 1
• Ready Now program — Charter Homes is a design-data-driven organization. They use local market information on recent new- and existing-home sales to bring the hottest design features to market. Then they build a conservative inventory of newly designed homes to meet the market.
• Focus on customer satisfaction — The builder has steadily increased its level of customer satisfaction over the years and is moving toward its goal of 100-percent on-time delivery of its homes. The on-time focus is in place because it is the No. 1 way to improve customer satisfaction.
• Alignment with trade partners — Charter has implemented a trade contractor council that meets regularly to work through “hot spot” issues identified during walkthroughs with customers. The goal is to improve communication and smooth out transitions during construction.
• 7 Practices of Model Teamwork — To deliver a high level of teamwork, Charter employees live by the company’s seven best practices, which include: always being proactive, never blaming others, knowing the institutional message, and owning what you say.
The 2011-2012 National Housing Quality Awards were underwritten by:
“We have a neighborhood today, Windsor Meadows, that just opened with four models,” Bowman explains. “And we have sold seven homes there in the last month. Meanwhile, another builder has a neighborhood just down the street that opened a year ago and they have not sold a home. That is just an example of how we listen to Realtors and stakeholders to offer homes buyers want today.”
In a time when there is an oversupply of housing on the market, a massive, looming shadow inventory consisting of distressed homeowners having trouble making payments, and lower prices for homes, Bowman and his team are believers that there are plenty of buyers but an undersupply of the right kind of homes.
“People still want to buy this year’s model,” says Bowman. “They want newer, better things. Our commitment to design is a passion for us about building better places, and this is our strategy moving forward, no matter how long the market stays flat. When we see our competitors try to go out and compete on cost per square foot, we know that you can never beat the resale market on cost per square foot. So you have to find a way to put something on the market to make people say, ‘I am willing to pay more for something that helps me live better.’ That is why we focus on design.”
One of Charter’s recognized best practices is its Ready Now program, where new homes, with the latest features and benefits, are matched with buyers prior to finishes being installed. The homes are nearly complete and the buyer has the opportunity to specify their finishes and very quickly move into the home.
The Ready Now program is driven by the company’s superior market intelligence and analysis. Week-by-week throughout the year, Charter executives gather market data for each of the locations they serve in Central Pennsylvania, including Harrisburg, York, and Hershey, in addition to Lancaster. Multiple Listing Service (MLS) data is supplemented by anecdotal information from local Realtors and a variety of other market stakeholders, including local building authorities. Knowing what is selling and for how much gives Charter the opportunity to build homes exactly at the center of the sweet spot in the market.
“We do market research and find out what is in the market right now and identify gaps between what is out there and what people are actually looking for,” says Rebecca Fowler, Charter’s director of marketing. “We put homes in the market and the goal is to sell them before they get to cabinetry. We invite the Realtor community out and ask them to bring their clients with them. That is where a lot of our sales have come from this year.”
But Charter did not succeed on design alone. Year over year, the company made big strides on the technical merit relating to total quality management. The NHQA judges gave the firm its highest marks in areas related to strategic planning and operations. And in the 12 months since their last NHQ Award, the company has instituted a trade contractor council and has conducted a “Kaizen” or Lean building summit with that group to help further identify savings and efficiencies in the company’s building process.
“We have worked for many years on having homes 100-percent complete on delivery,” says John Albright, the company’s director of homebuilding. “We were down to a final group of items that seemed to be left uncompleted when we were one week away from final walkthrough, and, until this year, we could not seem to break through that barrier.”
Albright took that list and put it on the table. Together they recognized that many items should have been completed much earlier in the process.
“We are now in a situation where our trade partners are checking the trades that come in before them — policing each other before they start their work. So they are eliminating any pre-existing problem that may keep them from completing their work.”
Top and bottom-line growth, along with a healthy increase in its customer-satisfaction scores, have been the natural outcome of Charter’s multi-year quality management journey, says company CFO Rich Fooks. In 2010, the company closed 130 homes with an average sales price of $328,000, to reach $42.5 million in sales with a gross margin of 25.1 percent. In 2011, the company will exceed 180 homes closed with improvements made in all other results. Tellingly, even the company’s CFO attributes the gains to the company’s culture.
“At most home-building companies today, you would expect to see negative results and slow growth. You would expect to see people’s heads hunkered down. They would be in the bunker, trying to hide,” says Fooks. “And what you see here is completely opposed to that. You see an upbeat attitude. If you want to differentiate, culture is certainly a way to differentiate, and it carries over in a lot of different areas.”