Analysis



The Wells Fargo/NAHB Builder Confidence survey, for February, reported a historic drop in Builder Confidence. The report was hyped and in some cases further embellished on many television stations and in print sources. The apparent source of this drastic decline in Home Builder confidence was the 9% drop in February’s prospect traffic. Come on, give me a break!
 

I have taken quite the respite from my blogging activities, despite statistics that showed a growing readership.  For whatever reasons, I felt the blogging juice just didn’t justify the squeeze.  I wrote of topics ranging from referral sales, to customer service, to ultra-marathon running in an attempt to draw readers in.  Well, this blog post is different. 

During Operation Desert Storm in the early 90s, France’s decision to not support the U.S. intervention revived an old joke from the World War II era.  

It has been long been said that “homebuilding is a local business” and as much as I’d like to think that Lean always transcends locality, that is not always the case. Last week during one of our LeanWeek events in Austin, the head of a drywall installation company asked about using 54” width drywall—aka “stretch board”—in lieu of standard 48” widths for 9’ ceilings. Nine foot ceilings are rampant in Austin and so many other markets these days—unless of course they are 10’.

Do you remember the last time you received a piece of personal U.S. mail (not counting bills)? According to a recent study, the average American receives a piece of personalized U.S. Mail every six to seven weeks – and this includes birthday, holiday and other family generated cards. Wow, what a metamorphosis in personal communications in the past 20 years!

I read thousands of customer surveys every year – THOUSANDS!  This customer insight gives me a unique perspective on many home building topics, like today’s “Finding Your Special Agent 007s For Huge Sales Increases."

I wrote my first article on the coming trade shortages last October about the perils and politics of immigration policy. I wrote the second one in December providing a 10-step immunization plan to protect a builder from the effects of trade shortages. I receive so much mail, pro and con, that for February I published two of the best letters and commented on them.

When I travel with my wife, or sometimes just run to the grocery, cleaners or hardware store, she frequently has to remind me, “Scott, remember, you are NOT in charge here.” Many of you fellow Leanistas know the drill. You hardly ever see a restaurant, a checkout, a meat counter at the supermarket, a parking lot or God help us a TSA line at the airport – in our out – that we could not spend 5 minutes rearranging and save folks a ton of time and money.

When I was part of a growing home building company we learned to be on guard for the newest “technology” coming down the pike that promised to revolutionize our home building business. We called the condition of falling for these fantastic technology claims the “allure for the sexy lady of technology.”  Thirty years later, it is safe to say, some things never change.  Before I expand on the latest siren of technology, let me give you the results of a couple recent studies.

It is not a secret to regular readers that increasing a home builder’s customer satisfaction increases referral sales.  Many home builders blow away the 15% national average of referral sales and achieve 40-50%, by virtue of meeting the customers’ hierarchy of needs and having in place a respectful referral sales strategy.

The market bottom is clearly behind us, and this is validated by three very reliable indicators.  First, annualized home starts have more than doubled from the Spring of 2009.  Second, consumer confidence (and therefore builder confidence) continues an upward trend, and for regular readers, you know these are good predictors of sales activity for the next 6-9 months!  Third, and my favorite market turn around indicator, is that the Salesperson Auto Indicator (SAI) has turned positive.

There is no question that Lance Armstrong has one of the most unique comeback and sporting histories of all time.  He was a little known triathlete, cancer survivor, turned seven time Tour de France winner, and founder of an extremely successful non-profit foundation, before dramatically falling from public grace by virtue of the U.S Anti-Doping Association (USADA).  As a fellow cyclist and racer, I held Lance’s accomplishments in very high regard, adorning my office with Lance posters and a picture from our meeting after his 7th tour victory.


The first lesson that I learn

My December column just came out on HousingZone.com and you can read it here: http://www.housingzone.com/scott-sedam-how-do-you-lead-leader or in the Professional Builder magazine.

We all know that teamwork is an important ingredient in building great homes and great relationships with our customers. This importance is substantiated by Woodland, O'Brien & Scott studies showing that a builder's teamwork rating is a good predictor of future referral sales. Given the importance of teamwork, particularly as we head into a busier year end construction and closing season, the following teamwork fable may be helpful.


In the days before civilization, out on the prairie, lived four oxen: Randy, Todd, Scott and Chuck.

Performance bonuses have been around the homebuilding industry for a long time.  Salespeople earn commissions and bonuses based upon their sales productivity, and Superintendents earn bonuses for their Quality, Budget and Schedule performance.  For the most part, customer satisfaction bonuses were left out of the equation…until that is…a particular marketing company decided to venture into the home building industry with their version of “Customer Satisfaction” awards.  Regardless of the accuracy or merits of that award program, it proved to be a performance bonus game change

Team sports analogies have long been used in home building for obvious reasons.  They both have the common component of individual performances that roll up into team results.  Home building is the ultimate team endeavor, made up of internal employees and external trade partners numbering into the thousands.

Why is teamwork important in home building?  The answer is potent – customers' teamwork ratings are highly correlated to customer referring activity and future referral sales! 

I travel this country meeting with builders virtually every week and between my monthly Professional Builder article, my weekly blog on HouzingZone.com and our Lean Building Group on Linkedin.com, I hear from many more. As housing is picking up in most parts of the nation, I am beginning to hear a lot about labor shortages. Just last week I received a note from a builder lamenting how in central Florida there is a bidding war for framers and drywall contractors. I have also heard it coming out of Texas.

Todd Hallett and I are running a LeanPlan Workout session this week in Tennessee with one of my favorite builders. In the years I have known them they have grown from #11 in their market to #2 last year and this year there’s a good chance they will be #1. They are beating all the nationals. These guys truly “get it” and accomplished all this during the worst housing recession in history. As good as they are, they wanted to take it deeper, so this they engaged a total of 24 of their suppliers & trades to generate more than 300 ideas to improve plans, using our highly-structured process.

Readers may recall a study I did a few years ago attempting to identify the most reliable predictor of future new home sales activity.  The closest predictor turned out to be the Michigan Consumer Sentiment Study (MCSS).  The trick was that you had to adjust the MCSS data six months FORWARD to match new home sales.  In other words, six months after MCSS started to improve, new home buyers feel confident enough to buy a new home.

The 5th article in my series on Quality Management was just published by Professional Builder Magazine and appears concurrently on www.HousingZone.com. It is titled “10 Steps to Mastering Field Quality” and at the end of the piece I offered a PDF with all 5 of the articles in a single document. I have since been deluged with more than 30 requests sitting in my mailbox just this morning. In my 15 years writing monthly for the building industry, this is the most requested article or series I have ever done with more than 100 requests to date.

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