Most home builders are seeing their worst margins in 15 years. Thus builders in America now face the acid test on quality and customer satisfaction, when you can no longer afford to give away.
I once wrote about a client who described the state of quality and service in the industry and lamented, "It's just build 'em up, fix 'em up — build 'em up, fix 'em up!" It was what his grandfather taught his father and what his father taught him (See "The Cost of Puppies," October 2004).
When asked if he were teaching his own kids the same approach, he stated emphatically, "Oh no! We have learned from our mistakes!" He declared that it's still "Build 'em up, fix 'em up," but now we "Buy 'em a puppy!"
This revelation came to him when he was upset with one of his teenagers, trying to stay mad, until his wife placed their new 8-week old golden retriever in his arms. "It is impossible," he said, "to stay mad when you are holding a puppy!" For this client, the only real change was that the industry was plying the homeowner with puppies — an expensive combination of personal attention, rework and bribery to fix things after the home closes and good survey scores collected.
That gem has found its way into countless presentations I have done since and it always rings true with the audience. After describing the "Buy 'em a puppy!" strategy, I notice 20 or 30 people whispering to their neighbor, then laughing uneasily. When I ask them to share, it's always some version of, "Yeah, that's exactly what we do." My client's fear was that the downturn was coming and soon we'd no longer be able to afford those cute little puppies, in whatever form.
It turns out, he was right. Most of you are seeing your worst margins in 15 years. Thus builders in America now face the acid test on quality and customer satisfaction, when you can no longer afford to give away puppies (as if that was ever the answer). I will admit that back-end, fix-it-after-it's-broken approaches and personal attention can buy you short-term improvements in scores, but that will never sustain your effort. You will either learn how to build and maintain an operating culture focused on customers from the beginning to the end of the homeownership process — doing things right the first time — or you will suffer.
You also have to learn to manage costs and do it the right way. Almost half of my columns in 2006 were on just that subject. It is that critical because squeezed margins are forcing the elimination of not only the puppies but the elements that are essential in the process of building the culture, such as training. People are quite adept at "reading the tea leaves," and the messages sent in these times are unmistakable. When you back off, they follow your lead.
Depressing — or is it? What if you are the company that holds the line — doing the right things, maintaining customer focus while keeping productive relationships with employees, suppliers and trades? You face another magnificent opportunity to stand out from the pack. There is absolutely nothing better for a business than tough times when you do the things your competitors can't — or won't.
After huge gains in J.D. Power ratings every year since 2000, the scores for 2006 were flat. I'll predict that next year they will go drop on a national basis. Yet, there will be a few companies in each market that shine, and those are the ones that will show us the way to true quality and customer delight.
In the absence of puppies, the genuine article will emerge. I look forward to it.
|Scott Sedam is president of TrueNorth Development, a nationwide consulting and training firm focused on quality, process improvement and organizational development. He can be reached at [email protected] |