CEO Spotlight: Keystone Custom Homes' CEO Jeff Rutt

Jeff Rutt was a dairy farmer before he became a home builder. He likes to say that he changed careers because he was looking for an occupation with less risk and fewer hours. “Most people who haven't been in the dairy business think that's crazy, but it's actually true,” says the CEO of Keystone Custom Homes in Lancaster, Pa.

Long hours on the farm instilled in Rutt a set ofvalues that carry over to this day. “We have a waste not, want not philosophy,” he says. “We make sure we're investing wisely as we allocate resources.” It's an attitude that applies as much to people as it does to building materials.

Rutt's values and beliefs are simple and straightforward: persistence, perseverance and hard work, having “the right people on the bus,” and developing leaders within the company. For Keystone, it's been a successful formula. The company's closings will only be slightly down in 2008 compared to 2007, and revenues are expected to be about the same as last year. Rutt is forging ahead with plans to expand into Maryland, and he continues to evaluate potential land acquisitions.

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What does dairy farming have to do with home building? Jeff Rutt explains. Click here to listen to the podcast.

At age 20, Rutt bought a 200-acre dairy farm with 150 cows. Running the farm and staying active in his church sharpened his people skills: “I chaired several committees and watched how people developed into leaders.”

A decade later, he swapped his 100-hour week for a job in real-estate. Working with three local builders, he gained experience in market research, customer service, marketing and sales.

In 1992, he founded Keystone Custom Homes. Recognizing that his strength lay on the marketing side rather than swinging a hammer, he hired an experienced construction manager who was also an engineer. Membership in a Builder 20 Club, Rutt says, helped him learn the ropes early on.

Today Keystone has communities in south central Pennsylvania and northern Maryland. Many customers come from Philadelphia or Baltimore. The company is active in six counties with product ranging from apartments, townhomes and duplexes to large single-family homes. Prices range from $150,000 to the mid-$500,000s.

Chief Operating Officer Larry Wisdom was named president in April 2008. Rutt now concentrates on marketing and land acquisition and development, while Wisdom focuses on leadership development and the day-to-day operation of the company. “Larry has 31 years of experience in the building business,” says Rutt. “One of the main reasons I decided to bring him in was to develop leaders; he's really good at it.”

As far as the corporate culture, “We're always looking for continuous improvement and learning as part of our culture, and I think people see that when they go to buy a home. They're trying to peek under the hood and see what the [builder] is all about, what they believe in and how they'll treat customers when they're halfway through the construction process or a year down the road when there's a problem with the home.”

Rutt admits there has been some attrition in the ranks, necessitating new hires, but the number of employees hasn't changed much over the past two years. “We've had our margins compressed somewhat,” he says. “We've definitely felt the impact of the challenging market. But we've worked very hard to keep our volume up and not lay people off.” Thanks to long-term relationships with lenders, Keystone is still able to secure bank financing.

Memberships in the Builder 20 Club and a benchmarking group keep Rutt up to speed on best practices that will ensure Keystone is ready for what's to come in the next 10 years. He anticipates 290 to 300 closings by the end of 2008, and revenues that are close to what they were in 2007: $95.9 million.

Scrutinizing Every Process

One of Keystone's resource-efficient practices involves grinding up construction waste on job sites — including drywall, scrap lumber and cardboard — and leaving it on the ground as a kind of mulch.

“I learned that gypsum, a byproduct of drywall, has some value as a nutrient for the soil,” says Rutt. “That's how we got our permit from the state Department of Environmental Protection. By cultivating [the drywall waste] back into the soil, the lawns will be greener, and we won't be filling up landfills.”

Hear Jeff Rutt's take on what the housing industry will look like in the next 10 years. Click here to listen to the podcast.

Regular Product Development Review (PDR) meetings gather people from various parts of the company to present ideas that either provide more value at the same cost or the same value at a lower cost. “It can be something as small as moving a door or changing the way we do our trim,” he says. “It might save $7 a house or $700 a house, but when you multiply that times 200 homes, it adds up.”

Another big emphasis at Keystone is to make the home-buying experience less stressful for customers, particularly the selections process. About seven years ago, the company implemented a Web-based program called KeyChoices that buyers can access day or night. The program contains more than 50,000 options, predefined and prepriced so that the buyer only has to point and click. Over the years, Keystone has refined the program, adding photos or drawings of nearly every option.

“From our standpoint, it's convenient because we don't have to spend the time going through and pricing everything,” says Rutt. “From the [buyer's] standpoint, it's huge because they don't have to pay for something they don't want.”

Homes are warranted for 20 years against structural defects in materials or workmanship that significantly affect the load-bearing portion of the house. Keystone's building practices include 2-by-6 exterior walls, jack studs that offer better support for headers and wood cross-bracing, which is stronger than metal and reduces the likelihood of noisy floors.

These efforts have paid off in a high level of customer satisfaction. According to an independent, third-party agency, 88 percent of Keystone buyers would recommend the company to friends or family members.

Keystone will match, dollar for dollar, donations made to charitable organizations by clients or employees. But Rutt's passion is something much bigger: Hope International, a microfinance organization he started 11 years ago. “I'm excited about how our company's been able to influence so many people by giving out small loans,” he says. “More than that, I'm excited about the future and what we can do by joining other builders together.”