Could some of the most in-demand housing markets be cooling off?
One on One -- Tom Lewis
This Arizona home builder believes he has a business plan to carry him through the current building boom as well as when things go bust.
Deserts are not known for their fertile soil, but the Arizona desert is sprouting homes like so much kudzu. The Phoenix-Mesa metropolitan area issued almost 48,000 single-family permits last year, second only to Atlanta. The area would seem like a perfect place for small builders to expand and big builders to grow even bigger. It would seem that way to many people, but not to Tom Lewis.
As founder and president of T.W. Lewis Co. in Tempe, Tom Lewis has built 250 to 300 homes per year since 1992, and he could have built many more. He believes that concentrating on that number allows the company to focus on quality rather than quantity. He might be right, if satisfied customers are any indication.
"We do customer satisfaction surveys every month, as we have for years," says Lewis. "There are little shifts from time to time, but nothing major. We’ve made some mistakes on houses, and we look at them as a chance to show not only our customers but also our employees where our commitment is. A lot of times, the moment of truth is when you screw up."
Lewis’ first job out of graduate school was director of land sales for a master-planned community in Richmond, Va. As he sold land to area builders, he built relationships with them and gradually began to envy their positions.
"I wanted to be on their side of the table," says Lewis. "I wanted to be more in charge of my own destiny." Soon one of those builders offered Lewis a job in its training program. "So I took a big pay cut, bought a $400 pickup truck and spent six months out in the field as an assistant superintendent."
He was recruited away to work for another builder in Phoenix in 1979. Five years later he was offered a partnership in Trammell Crow Homes. Soon after, the housing industry fell on hard times, and Lewis’ national partners asked if he would rather close down the residential division or take it off their hands. So Tom Lewis, former engineering major and land salesman, became the owner of his own home building company.
PROFESSIONAL BUILDER: How does T.W. Lewis deal with labor and materials shortages in such a hot market as Phoenix?
TOM LEWIS: I would say we deal with those things indirectly. We have not had any significant material or labor shortages affect our business beyond price increases in the last five years or so. It really comes down to good relationships with our trade contractors. We apply the philosophy of "single-sourcing." We have the same trades building our houses today that we did when we started in 1991. The attitude is win-win, long term. I think people appreciate that, and when the trades, suppliers and wholesalers are put into a bind, who are they going to treat well? It’s usually whoever treated them well.
We had a situation like that recently with insulation. We deal with a local insulation contractor who was getting a lot of cost increases thrown at him. He came in, and we talked about it, and we worked something out. It was really a case of, are you interested in making a buck if he loses? Or are you looking for a way that you both can make a buck?
What is it about your company that makes the trades want to stick with you as opposed to going out and possibly making more with someone else?
It’s not all about money. There are some people who like to call contractors up and yell at them, curse at them, intimidate them. We don’t do that. Our standards are high, but we’re nice about it. I like to use the analogy that Trammell Crow used: You’ve got sharks, and you’ve got dolphins. Sharks go in and intimidate others. Dolphins are nicer, but they can actually kill sharks. So we try to operate as a dolphin. We don’t want to be taken advantage of, but we try to be gentlemen about it.
You’ve said there is not a lot of career advancement at T.W. Lewis -- that you look for employees who like their jobs and want to stay with them. Does that tie in with the loyalty and respect factors you were just talking about?
Yes, but it’s a bit different. The question is how do you keep your employees happy, and the number-one criterion for me is to hire nice people. When you hire nice people, you end up having a group of 60 to 70 nice people, and it becomes a nice place to work. People are treated fairly, not as numbers or cogs in the machine. We have a policy manual, but we don’t ever really open it. We try to deal with people as individuals.
We also identified several years ago that turnover is a real enemy to a company. If we have a person who is struggling, then we’ll try to correct that instead of firing them or making them want to quit. Employment is a two-way street. As an employer, I have to be happy with performance. As a former employee, I know that if someone is not happy with what they are getting out of their job, then they’re going to leave.
Has it been easy for you to find these types of employees? Have you recruited many away from other builders who do not share your philosophy?
We try to network with people, and we’ve got a good reputation in our market. But not everybody is for us. We have a program that I think we try to define pretty well, and we try to hire people that fit that program. You may be the best new home salesperson or the best superintendent in the world, but if you like to do things in your own special way, then you may not be right for us, because we have our program. What we want to do is explain what that program is and recruit people who want to sign up for it. We try to match people with our value system. When we find a good match, then everybody is happy.
What do you see as some crises looming in this market, as well as across the nation?
There is a lot of attention out there right now being focused on land use; planning departments are overworked, underpaid and understaffed; fees are going up; product requirements are going up, and most important, public sentiment is turning away from growth.There are some specific proposals out there that could really change our industry, so these are the good old days. It really won’t get any better than this. It’s only going to get tougher.
Phoenix is home builder heaven; the market couldn’t be any better. But that doesn’t mean that everybody is going to make it. The winners are going to be the ones that are the smartest, that work the hardest, that listen to the most customers, that use the soundest business philosophies, that follow Stephen Covey’s business principles and stay on top of their permits. The ones that are in it for the quick buck don’t appreciate the complexity and don’t work that hard will be the first ones to fold their tents when it gets tough. We’re not going to count on what the market does; we’re going to try to make our own luck.