December 4, 2022

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Why do some builders continue to struggle, even when they’re making money? 

Why do some builders continue to struggle, even when they’re making money? 
A new client (let’s call him Doug) who is president of a home building company, recently asked me a tough but not unusual question: “What makes the difference between a good builder and a truly great builder?”
There it was, the old “good to great” question most notably popularized by author Jim Collins in his 2001 book by the same name. Collins compared pairs of companies in 11 industries, such as Abbott vs. Upjohn (now Viatris) in pharmaceuticals and Kimberly-Clark vs. Scott Paper in the consumer products industry, analyzing why the “great” firm in each pair performed so much better than the merely “good” firm. Collins’ book was a best-seller.
With 33 years in the industry and just completing the 25th anniversary of my company, TrueNorth Development, it is so tempting—easy, in fact—to play the expert,  and just tell people what to do. But I’ve learned, often the hard way, that listening, learning, and asking the client good questions is the smartest way to address such queries.
So I took a Socratic-method approach, asking Doug, “What do you think makes the difference?” This tactic works for two reasons. First, the client always comes up with many of the same things I would, demonstrating they already know much of the answer, which builds their confidence. Second, it creates buy-in because, again, they come up with genuine difference-makers themselves, often in areas in which they’re not currently excelling.
With confidence and buy-in, they become more open to any additional suggestions I may have, thereby taking us well down the path of working together to improve product, process, and profit. A good process on my part … or so I thought.
Doug was having none of it. He demanded, “OK, Scott, I read in your bio that you’ve worked with hundreds of builders and have been an examiner for the National Housing Quality Award (NHQA) for decades, so you should know the answer. Lay it on me. What makes some builders so much better than others?” I would have liked a day or two to ruminate on the question, but Doug wanted an immediate answer.
I had one, something I developed for one of my columns some years ago. I told him although there are many details to explore, it really boils down to “management will.” When the will to change, improve, create strong processes, and fully support the team is clearly present, builders get better and better, overcoming whatever stands in their way. Where there is an absence of will, the company loses focus and lacks direction, with constantly changing priorities and continual distractions. These builders struggle, even when they’re making money.
The rub is, many senior managers fail to see problems in themselves, blaming everything and everybody for the roadblocks they encounter. A hired gun in the guise of a consultant dropping in and telling the president, CEO, or owner the facts eye-to-eye, heart-to-heart, tends to leave the consultant bruised and bloodied and his or her ideas completely rejected. Been there, done that.
While trying to steer Doug back to self-discovery, he waved his hand, cutting me off with, “Give me specific examples. Names. Companies.” What followed was a stream-of-consciousness exercise where I just let excellent builders I have known for 30-plus years bubble up in my thoughts. I then related a particular element of management and leadership where they had excelled.
Due to space limitations, I can’t recount all of the builders we discussed, but let’s review some of them. Most of these leaders and their firms excel on multiple fronts, but for the purposes of my conversation with Doug, I’ll focus on one key point for each.
It’s no surprise I’m starting with Bill Pulte, who had more influence on me than anyone during my time in this industry. I could, and have, written entire columns about Bill, who passed away in 2018. There’s so much good-to-great material that I’ve been thinking about putting together a “Management by Bill Pulte” multiday workshop.
But on this day I thought of something essential to the Bill Pulte philosophy that I don’t believe I ever captured before: how Bill truly valued absolutely everyone in the company, regardless of title, level, or position.
That legacy lives on. Bill’s grandson (also Bill Pulte, a successful entrepreneur) posts weekly anecdotes on LinkedIn about his namesake. The post is usually accompanied by a picture of Bill, often in  his trademark teaching role—going over plans, out on a jobsite, or with a bunch of kids around him and his big, infectious smile.
Take a look at those posts and read the dozens of responses to them. What you’ll see is living proof of the many people who felt valued by Bill. They knew his interest in them was genuine, and it meant the world to each of them. Many relate how it changed their lives. It certainly did mine.
So I asked Doug, “If you asked your people, with 100% anonymity, if they feel valued by you, how would they respond?” Notice I did not say liked, respected, or even loved, although much of that goes along with it. Let’s stick with value. That’s the best word I can come up with, and everyone seems to understand its meaning.
If you’ve ever listened to Larry Webb speak at a conference, which he used to do frequently when he was CEO of The New Home Company, you’d be struck by many things, including his wit, wisdom, good humor, and out-of-the-box thinking. 
Yet what so many in the audience would openly discuss afterward was his frankness and complete honesty. I saw Larry on panels with other high-ranking execs many times, most of them just BS’ing their way through the questions, providing little substance. Not Larry Webb. If Larry said it, you could take it to the bank, and if he didn’t know the answer, he’d laugh and simply say, “I don’t know!” then ask the questioner, “What do you think?”
Completely open and honest discussion at such events is rare indeed, and the appreciation from the audience for Larry’s frank approach was palpable. Larry was no different when working with his own people. To have a business leader who unapologetically speaks the truth is of incomparable value.
If there is a better husband-wife team running a home building company in America, I haven’t met them or even heard of them. The Saints do so many things so well with a company they launched during the depths of the great housing crash. Within 10 years they had brought home the coveted NHQA Gold award, the greatest distinction of operational excellence for home builders.
The word I most associate with Classica is “culture.” It doesn’t matter who you encounter on the Classica team, whether it’s the head of construction, an accounting clerk, or a warranty tech, they all take full responsibility—the buck stops with each of them. Each Classica team member has bought into the mission. They are believers. They all care.
We had a family friend who had been through a lot. Recently widowed, she decided to relocate to Charlotte to be closer to her daughter and grandkids, but she’d grown up here in Michigan, loved her home, had many friends, and hated to leave. Imagine the stress she was under.
Our friend visited several builders in the Charlotte area and told my wife she was unhappy with the experience. I suggested Classica Homes to her. A week later she had a contract. She loved her new home and couldn’t stop talking about how everyone at Classica—and I mean everyone—treated her like a queen and helped make her difficult transition far easier. That’s a great (not just a  good) culture.
Some builders stumble in the second generation, many more fall apart in the third. How many have we ever seen not just survive but thrive in generation four?
Well, Jagoe Homes is one of those rare builders, and they just keep getting better. Recognized a decade ago as Pro Builder’s Builder of the Year, Jagoe does so many things well, and Bill, Scott, and Brad each bring considerable strengths to the table.
I singled Jagoe Homes out to Doug for the builder’s adoption of Lean process in every aspect of its business. Years ago, on my first visit to Jagoe, I was shown to Brad Jagoe’s office to wait for him to return from the field. His bookshelf had every book on Lean process I have ever seen—at least 30 of them. Each one I opened had highlights, notes, and pages marked. They had all been read—and studied. Imagine my excitement!
It’s one thing to hold a Lean workshop, quite another to fully adopt Lean operating principles—the continual  search for, identification of, and removal of waste from product and process. Lean process isn’t an event for Jagoe team members, it’s how they operate daily.
How vividly I recall the day Tim and three other new recruits walked in the door at the Pulte Chicago division. Fresh-faced college grads, excited, eager, ready to take on American home building, if not the world.
Thirty-odd years later, Tim, another NHQA Gold recipient, has built an exceptional organization. What stands out to me here is the total focus on systems, processes, and measures to track what’s going on in all phases of the business. They are almost maniacal about it (in a good way) and even more notable is the major attention they pay to process measures, not merely financial results. This dedication gives them nearly real-time feedback, avoiding the trap of driving while looking in the rearview mirror, a common trait of so many “good” (or worse) builders.
I met Nelson while he was still in his 20s and gradually taking over the reins of this third-generation builder. Now, having passed the age of 50, he has taken HistoryMaker Homes to new heights.
Of the many strong attributes you’ll find there, none has impressed me more than HistoryMaker’s commitment to giving back to the communities where it builds—and involving literally everyone in the company. The builder provides money to each community team, which in turn determines a need. No one is allowed to mail a check; it must be delivered in person to the recipient.
I could fill this page with organizations that have received critical assistance from HistoryMaker Homes, but perhaps my favorite is HistoryMaker’s ongoing partnership with nonprofit Miracle League DFW, which provides everyone, no matter their disability, with a chance to play baseball. These efforts culminated in Nelson Mitchell receiving the 2022 Hearthstone Builder Humanitarian Award, a high honor, indeed.
I have worked on and written about the critical importance of developing exceptional trade/supplier relationships for more than 30 years, and no one ever impressed me more than Gary Grant. When I was asked to speak at his retirement party, I considered it one of the top honors of my career.
For Gary, the care, feeding, and nurturing of these relationships was a daily duty, but never a chore. He was so good that every supplier and trade in his market clamored to work for him. I’ll never forget one of his trade council members, a plumber, telling me, “How good is Gary? We work with 15 to 20 builders every year. We give Gary Grant the lowest prices of any of those builders … and we make more money working for Gary than for any other.” Every other member of that trade council nodded in agreement.
Now stop and ask yourself, what did Gary do differently to achieve that rare status?
The story of Betenbough Homes, “the kings of West Texas,” is a remarkable one, indeed. Visit their Lubbock headquarters and you walk in the door of what, from my experience, are the coolest, most impressive offices of any American home builder. There is something unique going on here.
That special thing is the pervasive sense of mission. For Betenbough Homes, this mission is a decidedly spiritual one, and the company is very open about it. This particular approach won’t be for everyone, but Christian commitment is what drives Betenbough Homes.
The lesson here is how a keen, shared sense of mission, however defined by your company, brings everyone together to accomplish the tasks that support it. Find yours and, like the Betenbough team, live it every day.
I have not even described half of the builders Doug and I reviewed that day for examples of exceptional performance. Mike Rhoads from Pulte was one of the best teachers of the craft of home building operations ever and “multiplied” himself many times over. DSLD Homes’ Saun Sullivan puts together teams of high-performing people, supports them in every way, and provides the “psychological safety” that enables honest, open communication so people can speak their mind with no fear of reprisal. Buz Hoffman, now retired from Lakewood Homes, always made sure he had the right people on the bus and in the right seats at all times. Bob Goodall, Keith Porterfield, and Rich Pankow from Goodall Homes stand out for their sharing of business details and profit with their people. Just recently I watched Rachel Flint from Hubbell Homes foster sincere innovation and change to help her team reach performance levels they’d never imagined. Then there are those who can consistently present the best product, find the best land, and never run short of investment dollars.
I apologize for the many clients who will wonder, “Why didn’t Scott mention me?” and, if given all of the pages in this magazine, I could have! But rest assured, you are all mentioned to my other clients on a regular basis.
There is so much that goes into growing a builder from being good to great, and I’ve only scratched the surface here. If you want to learn more, simply go back and read the write-ups on every single Builder of the Year and the recipients of the National Housing Quality Award, the latter bestowed since 1993. That exercise will provide a hundred or so great resources for you.
Maybe it’s not quite that easy, but the skills, techniques, strategies, and tactics are all laid out. Simply, there are no secrets, no mystery about what it takes to operate at the top of the game. All it takes is the will. 
 
Scott Sedam is president of TrueNorth Development, a consulting and training firm that works with builders to improve products, process, and profits. A senior contributing editor to Pro Builder, Scott writes about all aspects of the home building business and won the 2015 Jesse H. Neal Award, business journalism’s most prestigious prize, for his commentary in Pro Builder. Scott invites you to join TrueNorth’s Lean Building Group on LinkedIn and welcomes your feedback at scott@truen.com or 248.446.1275.
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