Previously, we broached one of the greatest profit-sapping issues in home building: how to manage customers from sign-up through to the closing table, having met every decision date on time with a smile. It’s a problem that spawns an almost universal groan, yet generates little action toward a remedy or better yet, prevention. I described a 12-step sequence that greatly enhances the odds of success in this process then decided to take it to the streets—the home building streets—and gather some reaction from builders and perhaps a couple of sales trainers. I was hard on sales trainers in the last article in particular because after calling 10 builders to learn how their trainers, either internal or external, address the problem I call “sales fulfillment” what I got was a universal, “They don’t.”
I then sent a copy of the first article to a cross-section of builders and received a wide variety of responses, some short and sweet and others with considerable detail. A common word emerged as I read those replies—communication. Is that all there is, just improved communication between sales, the design center, purchasing, construction, and the customer and then everything gets better?
As Dr. John Douglas, one of my favorite college professors, used to admonish, “Communication is never the problem; it is merely a symptom.” Symptoms, of course, are indicators of a deeper glitch afoot in the system, and we’d be wise to remember Dr. Douglas’ warning as we plow through these responses. In my 40 years in business, I found that an intense focus on outward communication cannot only mask the real problem; it can actually lead you astray. Here you will find observations and ideas from builders who, if they have not solved the problem, are owning up to it and making progress.
This may sound simplistic, but there are some essential basics. Hire the right person to the expected job outcomes/fit, attitude, and do it in a purposeful, scientific way. Train them. Their success is our responsibility since we picked them. Support them with the right tools. Benchmark against others, including those outside the industry, such as retail, etc. Survey customers and listen to their feedback both positive (celebration and reward) and negative (process first and person second with corrective action). Work on development plans with your people. Hire, train, and support toward the outcome you desire.
Solving this issue requires a resolution of competing perspectives. Finance wants a margin that exceeds pro forma; design wants the coolest look; production wants a box, etc. We decided to create small teams with membership from each department required to accomplish the goal. We are just beginning, but our people are very excited about the teams and believe they will have more control of their own issues.
All selections are made by our salespeople with customers in our sales centers. While we have many choices, they are done in a way whereby the customer is not overwhelmed. We try to provide the popular colors and options and focus them around design packages. Our customers can upgrade from there if they choose, but there are no handoffs. One single source, one message, and we feel that’s a better customer experience. Our sales agents are trained to cover the dos and don’ts during the selection process, and our customers are told that once the home is started there are no changes. Therefore, together the sales agent and customer verify all selections and options before the contract is sent into our office and ratified by me. To avoid having to tell the customer “No,” we make sure they understand that if a change must be made it requires a change order fee of $250 plus the cost of the change up front. This makes it their choice, but protects us, our schedule, and our margin.
This issue had been Item No. 1 for us this year, and we attacked it full force. We went after additional sales and strayed from our formula. We are a spec builder, and we have always limited changes to our plans. We began allowing this and in return lost margin based on time, efficiency, and not charging enough for the changes and/or upgrades. We sat down as a group and pared the changes and upgrades that we would offer. As hard as it was to say to our customers, we had to give them a “quality no.” It’s a work in progress and the most important thing you can do is communicate with your staff and your customers. How your departments within your organization communicate also is critical.
In our area, it is normal practice for salespeople to manage the fulfillment process. That is, get the selections made, coordinate the final prints, do the walkthroughs, etc. We don’t do that, but for a different reason than you might expect. My reason is that I think my salespeople should be selling. I let them write an agreement, get the conditions removed, spend a few hours turning the deal over to our office and field people, and then forget the buyer. I think the customer is better served that way than by having salespeople also act as clerical workers—something that the profile of a good salesperson doesn’t ever contain. And, I get more sales.
We prided ourselves on being a builder that embraced customization. The national builders cannot stretch a garage or master bedroom to fit your needs, nor can they customize a covered patio to the buyer’s exact wishes with an extra column. This “just-the-way-you-like-it” approach (to steal from Whataburger) we believed set us apart from the giants and gave us an edge. But the recession made things worse. We were willing to completely customize a 1,400 sq. ft. plan, stretching it any which way possible, changing sizes of doors, etc. just to make a sale. The lack of a defined process and clearly stated expectations created chaos, mistakes, missed closing dates, higher cost (less profit), and had an adverse effect on the very thing we wanted—high customer satisfaction.
Since then we have gone through substantial change, examining our entire process from contracting through closing, beginning with clearly defining the process. Buyers are informed verbally and in writing what to expect and exactly what changes can be made and when. Cut-off dates are defined as part of the purchase contract and since implementation of this policy, the number of change orders has decreased dramatically yet the dollar amount hasn’t. The first change order at the time of selections is free, but additional changes incur escalating charges. We determined the most popular structural (plan) options our customers like and offer them as predrawn and prepriced plan options. They have to be chosen at the time of contracting.
We expanded the number of predefined and prepriced standard options and established standard color families, which more than 80 percent of our buyers chose. This simplified the process for everyone and eliminated surprises. Our communication process includes: preconstruction conference call with sales agent and superintendent, preconstruction site walk, pre-drywall site walk including a firm close date set at this time, weekly buyer phone calls with superintendent and sales agent on Friday, recapping the week’s activity, preview of next week’s schedule, buyer concerns, and buyer deliverables. We see the payoff through happier customers and higher referral rates. We see comments like, “Omega is so easy to work with;” “We always know what is going on;” “Omega is the only builder in the area who consistently completes their homes and gets them closed on time.” Our Realtor sales have gone from about 45 percent per year to 60 percent. This took a lot of time and effort, but the results are worth it.
It is a fundamental responsibility of sales management to continually increase the efficiency and effectiveness of each sales team member, understanding that the entire company is the sales team. Most traditional training does not address the culmination of good sales process—on time closings and achieving profitable margins. This is what I try to instill into builder management:
1. Appropriate sales and operational process, consistently executed, takes the pressure off of people. This provides time to focus on the requirements of sales fulfillment.
2. Compliance requires processes that are jointly established, communicated, and understood by all involved. Establish incentives for compliance and consequences for noncompliance.
3. Establish all activities and actions with timelines that must be achieved by each department and individual, including documents, information, and steps to support customers in the fulfillment process.
4. Three rules:
a. When something becomes personal, it becomes important.
b. When it’s everybody’s business, it’s nobody’s business.
c. Money is important.
5. Prorate sales compensation based on meeting target dates for achievement sales fulfillment. Each subsequent day needed to meet a key date reduces payment. You’ll get 100-percent compliance within weeks.
6. Consider the same for customers. A builder was having problems with buyers completing documents and fulfilling required actions. He created an incentive certificate for design center options and dates. If all occurred on time, fully complete, the entire incentive was awarded at closing. If segments are not completed, the incentive began to decline.
7. It is legitimate to ask, “Why should we have to do this? Pay people, especially employees, to do what they should be doing in the first place?” The answer: “We shouldn’t, but we do, and it works.”
Having strong relationships with buyers for a long period, sometimes up to eight or nine months, can be very challenging. Setting expectations up front with buyers is critical. If the salesperson spends time reviewing deadlines and stressing the importance for the buyer to meet each one, the process goes smoother. This takes more time during the contracting phase, because the salesperson needs to go over the entire list of options available and which changes cannot be made after a certain date. The sales staff should contact each buyer a few days before the cut-off date, remind the buyer what is expected of them by then, and never get caught having to explain that an option cannot be added after the cut-off date. It takes commitment and discipline to make this process happen.
There is a management technique—perhaps more of a life technique—that says whenever you describe a problem, a pain, a difficulty, a failure, ask, “Why?” five times. When your salespeople don’t submit their paperwork complete and on-time, ask the five whys. When the start packages and POs go out with errors, five more whys. When your customers fail to make their decision dates, still another five whys. Keep that up and the deeper issues will become clear. That is actually the hard part, facing the brutal facts and being both individually and organizationally honest. Once you’ve done that, a clearer path emerges. All that’s left now is hard work, happy customers, and greater profit.
Get to know Division President of Fresh Paint by Garman Homes Rebecca McAdoo in this week’s…