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This article first appeared in the PB January 2004 issue of Pro Builder.

What goes up must come down. Somewhere in elementary school science, each of us learned this basic scientific principle. Likewise, language arts teachers told us that good stories include a beginning, a middle and an end. In gym class, races started and finished.

The concept of beginnings and endings gets thrown out the window with total quality management and process improvement, for these efforts begin but never end. As a 2004 Silver winner of the National Housing Quality Award, Grayson Homes understands that the process, not its completion, delivers the rewards — higher profits, greater customer satisfaction, better trade partner relationships and higher employee morale to name but a few. This Ellicott City, Md.-based home builder anticipates that even greater returns on its efforts lie ahead.

Grayson’s quest to win the NHQ Award didn’t really begin with the award at all, but rather a response to a changing marketplace. As national builders gobbled up buildable land in the Baltimore/Washington market, Grayson faced a choice: Get smaller or grow. Because the company prides itself on being a builder of people first and homes second, the only choice was to grow, and TQM provided the framework to put the company on the right path. The effort started in 1997 and continues today.

“While this new journey hasn’t been easy, it’s been rewarding personally, professionally and monetarily for all involved,” says Cindy McAuliffe, Grayson’s president and chief operating officer.

To achieve an NHQ Silver Award requires an entire organization to embrace and practice TQM principles. At Grayson Homes, areas of excellence emerged. We share Grayson’s best practices here in hopes that others learn from its experience and example.

Leadership and Strategic Planning
Grayson’s leadership knows who they are and what they’re good at, and they stick with that formula in shaping the company’s future, observed the NHQ examiners. “They do a good job of articulating a strategy, in selecting their market niche and in setting the numerical definitions of their plans for growth,” said examiner Mark Hodges. “They are clearly focused on achieving that strategy.”

During a planning retreat, Ron Swecker, director of home building, and the rest of Grayson’s management team identified that the company and its trade partners build attached product very well — and very profitably. Demographics for the company’s trading area suggest that aging baby boomers will drive demand for new homes, and with their preference for maintenance-free living, the future for luxury townhomes looks good.

Knowing which product it builds best and that the market demand for attached luxury housing looks good drives land decisions at Grayson’s sister company, Grayson Development Co. Development company president David Vannoy looks for land deals that support this product type and buyer profile. Design center manager Sharon Weinstein manages the product mix and options package to appeal to this demographic.

Customer Focus
The company truly excels here. Customer satisfaction surveys show continuous improvement on an already solid satisfaction level. Most noteworthy, said the judges, is Grayson’s genuine commitment to its reputation and to achieving industry-leading customer satisfaction. The company posts a 96% rate of zero defects at closing, manages an extensive survey mechanism for buyers during construction and after closing, and links compensation for all employees to customer satisfaction.

Grayson managers review customer satisfaction surveys after each settlement. The company’s overall “recommend to a friend” rating increased from 86% in 2001 to 88% in 2002 to 90% in 2003.

Geared for Growth
With a destination and a process to get there, Grayson Homes set in place a foundation for profitable growth and a skilled team motivated to making the company the region’s builder of choice and an industry leader in customer satisfaction.

Grayson Homes

Location: Ellicott City, Md. (Baltimore/Washington suburb)
Management team: Chairman of the board/CEO Floyd Grayson, president/COO Cindy McAuliffe, CFO Chris Riley, sales/marketing manager Willie Sickel, director of home building Ron Swecker, architecture and planning manager Gary Leith, operations manager Keith Fossett, design center manager Sharon Weinstein
2003 numbers: 134 homes closed for $58 million in revenue
Product type: Luxury single-family homes, luxury townhomes
Future product mix: Increase percentage of active-adult housing and/or attached product from 43% in 2003 to 87% in 2007
Quality measurements: Buyers surveyed three times during building process, twice after settlement; annual employee surveys; biennial surveys of trade partners
Results: Gross sales revenue increased more than $10 million from 2002 to 2003. Direct construction costs as a percentage of sales decreased 5% during the same span. Gross margin and net profit as a percentage of sales increased dramatically, as did return on owner’s investment. Administrative overhead as a percentage of sales dropped to less than 4% from a high of nearly 5%.