This month’s issue includes stories about three unfilled market niches that are significant opportunities for builders: culturally aware housing, live-work housing, and Missing Middle Housing.
Good News Up
Not long ago, I heard a speech by the president of a large building company at a building industry forum. I listened as he extolled the virtues of the company.
|Contact Scott Sedam
via e-mail at scott@TRUEN.com
Not long ago, I heard a speech by the president of a large building company at a building industry forum. I listened as he extolled the virtues of the company. He cited three areas in particular as standouts: training, a focus on customer satisfaction, and support for building productive partnerships with suppliers and trades. He made it sound like anyone who didn’t buy his vision would be quickly dispatched. This wasn’t a program — this was strategy. Music to my ears. He sounded sincere.
A week later, I was sitting in the office of the president of a big supplier/trade organization in a major city. As we talked, his assistant dropped off a stack of mail. The president glanced at the stack and saw a big envelope addressed to him marked “personal and confidential.” He took one look at the return address, ripped the envelope in two and tossed it in the trash with a decidedly disgusted look. I noticed that the return address was of the very company whose president I had heard speak one week before. The president of the supply firm apologized for the interruption but said he had to take care of something quickly.
“Karen!” he yelled, “I told you that I never want to see anything from these people again! Anything you get from them, just trash it!” Karen said she knew that, but because it said “personal and confidential,” she thought it was an exception. He shot back, “No exceptions! Trash it!”
What the supplier had ripped up and thrown away was a bid package from one of the largest builders in town. It was an opportunity for business and a lot of it. But the supplier wasn’t interested at any price. He had simply had so many consistently bad experiences with this builder that the company had decided to never do business with it again. The builder had marked the bid package to the president of the supply firm “personal and confidential” because the builder had figured out that none of the supplier’s estimating and takeoff people would respond to the bids.
What do you think is going on here? Bad builder? Arrogant supplier? Too much work to go around in this town? Let me give you details.
The builder is a large, well-known firm that brings enough volume to the table that any supplier or trade should want its business — money in the bank. The supplier is one of the most respected organizations in its city. I have three clients who do substantial business with this company, and all say it is the best in town. Best prices, best service, best quality, best people.
It always does what it says and stays perfectly on schedule. It brings a lot of added value, such as offering training to a builder’s people. The supplier continually innovates, trying to find new products and methods that save builders time and money or increase value to the customers. When this supplier’s people interface with builder customers, all reports are positive. Two of the three builders I queried offered, without prompting, that if all of their suppliers and trades were like this one, there would be nothing to this business.
So what’s going on here? The supplier’s story probably won’t shock you. The company used to do a considerable volume of business with the builder in question. It had a strong relationship established, and then a new regime came in at the builder. Suddenly, everything was put to bid, and bids of other firms were constantly thrown at the supplier. Being well-connected, the supplier knew that some of the so-called competitive bids were scams. There was also a continual problem of apples-to-oranges bidding comparisons, with other suppliers substituting inferior product or leaving out significant value-added services.
The builder also experienced tremendous turnover in its superintendent ranks to the point that the supplier was wasting a great deal of time dealing with inexperienced, unknowledgeable people. The schedule was never right, yet phone calls screaming for service and delivery here and there had become daily events. This supplier prided itself on making sure homeowners were satisfied, but soon it was apparent that the builder’s policies were making that almost impossible. The supplier got paid, but unexplained charge-backs were common, and there were always problems with paperwork and sign-offs.
The supplier put up with the increasingly messy situation because of the substantial volume but after two years finally declined to bid on a couple of projects. The builder’s reaction was virulent. The supplier received less-than-pleasant phone calls from purchasing and operations personnel. The message was clear — if the supplier chose not to bid, it had better forget about any work in the future. At that point, the president of the supplier put out the word to no longer accept bid packages or phone calls from this builder. That was two years ago, yet every month bid packages come in from the builder, and all go into the trash.
I called a project manager with another firm who had been with the builder in question. I asked his opinion of the supplier, wondering if there was another side to this story. His response was firm and direct. The supplier was “only the best company I ever worked with.” I asked if there was ever a problem with the supplier. “Never,” he stated flatly. “They were the best.”
So now I’m back to the president of the building company and his impressive speech, and I have to wonder, is this guy dishonest, in denial or simply totally out of touch? In his presentation, he was unassailable. It was hard for me to doubt that he believed what he said. But the evidence that his company is not what he believes was overwhelming. I had to conclude that either he was in total denial or that this guy really has no idea what goes on inside his company.
This is a scary scenario. It’s a safe bet that this builder’s board has no idea that the president hasn’t a clue about what goes on in the company. The board would be shocked to know that the best supplier in town will have nothing to do with him. If he doesn’t know that, what else doesn’t he know?
I’d like to say that this is the first time I have encountered this, but it is more common than you might think. A strange phenomenon occurs to those in such positions: an alarming tendency for a “good news up” syndrome to set in, whereby only information devoid of pain works its way to the top. And here’s the kicker: I have yet to meet a company president who didn’t believe that he or she was completely cognizant of everything really important happening within the firm. Company presidents always think they know. A few times it has been my job to bring the president of a company the real story. It has never been received well, at least initially. How would you respond? Some guy waltzes in to tell you that the company you are supposed to run has run off without your even knowing it. Yeah, right. No fun, but someone has to step up.
The movement toward partnering with suppliers and trades has reached a groundswell, and that is heartening. However, the amount of cheap talk I hear and the lack of genuine, two-way, mutually beneficial relationships I see still dismay me.
I know that many of you are trying to figure out who the builder and supplier I described are. You can’t believe the builder could be your company. You certainly hope it’s not. But it would be most healthy if you went forward thinking it just might be your company and that its president believes that people are trained well and effective partnerships are developed while deep down inside you know it is only skin-deep.
Skin-deep won’t cut it. Maybe you’ll be the one to tell the president the real story. And after he throws you out of his office, maybe he’ll call you back in and thank you. Maybe you will survive and get this guy back in touch with the company. Maybe the next time he gives that speech, what he describes will be true.