There is a veritable geyser of data tracking housing today. From existing-home sales, to house prices, to new-home permits, to starts—housing metrics abound.
Taking the J.D. Power Cure
Perhaps most important, J.D. Power and most other customer satisfaction surveys miss the most critical factor of all because it's so hard to measure, and that is the impact of relationships.
|Contact Scott Sedam
via e-mail at scott@TRUEN.com
"One way or the other." Those words keep coming back to me because builders have important choices to make. For the past few months, we have thoroughly dissected the J.D. Power survey and concluded that despite Wall Street's lack of interest in the results, builders have plenty of reasons to care.
There is mounting evidence that companies placing at the top of the J.D. Power results or any other measure of customer satisfaction garner higher sales, more referrals, lower turnover, lower warranty costs and less exposure to product liability. The connection to profit seems obvious, although we can't prove it yet in home building.
Are you convinced? If so, then of course you want to know "the way." A quick review of J.D. Power's statistical findings will indeed send builders in pursuit of one particular way, yet this could send them in the wrong direction. According to published analysis, the major determinant of customer satisfaction is "builder's customer service" at 23% (J.D. Power and Associates, 2003 New-Home Builder Customer Satisfaction Study).
Oh, really? Homeowners complete the survey as much as 18 months after closing. What is most vivid in their minds? That the salesperson didn't return calls? That the pre-drywall walk was missed? That the superintendent was abrupt? Twelve to 18 months after closing, what do customers think about? Service and warranty. Well, duh! I'm not saying they're not important - even critically so. But service comes at the back end of a long chain. So before you pencil in another $200,000 in the service budget and throw some muscle at the back end, stop and think.
Another problem is that no amount of boost in one area will make up for a serious failing in another. I once was on a great airline flight. Everyone was friendly, efficient and attentive, and even the food was good. Then I watched a flight attendant dump a cup of hot coffee into the lap of the guy across from me. Yeeeeoooww! To make it worse, he had on a nice khaki suit. Then it didn't matter that the airline scored a perfect 10 on baggage service, ticket counter, takeoff, landing, food quality and on-time performance. Coffee-in-the-lap-en-khaki is trump, and loser takes all.
Likewise, something that appears to be a low-ranking factor in J.D. Power or any other survey quickly becomes the No. 1 factor if you really screw it up. So it isn't as simple as jumping on the highest-rated factor.
Perhaps most important, J.D. Power and most other surveys miss the most critical factor of all because it's so hard to measure, and that is the impact of relationships. Homeowners with whom you have built a strong, positive, trusting relationship will, barring some truly grievous error, give you a break. Those with whom you have a strained or fractured relationship seek opportunities to get even - if not directly, then through an otherwise passive act such as trashing you through an anonymous survey.
But whether the survey results are good or bad, they're seldom attributed to relationships because you can't ask about those directly. Customers don't respond meaningfully to "How's your relationship with the builder?" It turns up in a simple-sounding category such as warranty and service. So when J.D. Power lists its nine drivers of satisfaction, understand that the greatest underlying factor - relationships - doesn't even show up.
So what is your action item? What not to do is throw a ton of money at back-end service. You can spend your way to better scores. It's expensive, short-term and seductive, but you'll hate yourself in the morning, and eventually so will your homeowners. That's "the way" so many builders are tempted to pursue.
But there is another way, one that reflects a high-performing organization and not just a numbers game. I have to resist the urge to give you my laundry list of everything you should do and instead focus on the most critical element, one that is both a symptom and a cause. It is a symptom of exceptional leadership in an organization and is never found without it. It then becomes a cause that spreads the philosophy from that leadership throughout the company and even to suppliers and trades. It came to me in an interesting way.
Heather McCune, editor in chief of Professional Builder, asked me awhile back, "Who trains the best in the industry?" My answer came easily and in this order: Pulte, David Weekley and Shea. "What's different about them?" she asked. Simple. None has a "training program" or an "event" mentality. Individual and organizational development is comprehensive, planned and ongoing - virtually cradle-to-grave. The training is high-quality, geared to the needs of each position and not considered "nice to do when we have time."
I know a young recruit who joined one of these firms last month as a community service manager trainee. He started with a structured, 16-week mentoring program. He and his mentor have detailed manuals to guide them. In addition, the trainee will receive more than three weeks of classroom training his first year.
How does your plan for new hires compare? Many describe the typical approach as "sink or swim." It's more like "toss 'em off a building and see if they can fly." You'll never see that in these three firms. They take training as seriously as finding land, making sales, closing homes and doing monthly accounting. Individual and organizational development simply isn't optional. Senior managers who think it is won't last.
So guess who finished Nos. 1, 2, 3 in our national ranking of builders appearing in J.D. Power results in five or more cities (October 2003 PB)? Pulte, Weekley and Shea, in that order. Coincidence? You tell me.
So that's it, just train more? Do more workshops and go from worst to first? I'm not claiming if-then causality, and I've seen firms spend big bucks on training that does little more than waste time. I am saying that training and J.D. Power scores correlate.
When I talk with associates of these three firms, here are five things they know and practice that many of your people do not:
- They understand quality as a process, not a program. It requires everyone's commitment.
- They understand a prevention mentality versus the inspect-and-rework model. They work to eliminate the need for service, not just make service better.
- Every associate takes responsibility for customers and knows how to deal effectively with them, even the tough ones.
- They know how to work together internally and build relationships with suppliers, trades, brokers, developers, municipalities, etc. Their attitude is win-win.
- They have the day-to-day essentials of their job down and use common systems. They know how to open a project, schedule, purchase intelligently and on and on.
This won't come by osmosis, from worker to worker, and you can't hire it all off the street. These skills must be grown through painstaking individual and organizational development. More than anything else, that's what the top performers on J.D. Power do differently.
So the choice is yours. To improve your customer satisfaction ratings, you must do something. One way or the other.