Change Is Constant

Every year, the home building industry becomes more complicated. More new products and services emerge. More knowledgeable consumers change their demands quickly. More challenges emerge. In the 1980s, successful companies completely reorganized to adapt to changing market conditions approximately every seven years. Today, I estimate that major reorganizations occur every two years. We have to reorganize to survive.

Nimble Organizations

The most successful companies in our industry are nimble. They have leaders who continually challenge employees to improve. They reassess market conditions almost daily, and they proactively research opportunities to improve. Employees are taught to embrace change. Leaders of nimble companies know that the first companies to react to changes are the most successful companies.

Nimble organizations come in all sizes. Professional Builder magazine's August issue featured a number of small builders who are succeeding by seeking out and structuring cash-free land acquisitions. Also, many large builders in our industry have created nimble cultures by empowering employees to find opportunities and capitalize on them. Lennar Corp. is an example of a large, nimble organization, as evidenced by several timely market entries and several recent acquisitions of public companies whose stocks were trading far below their asset value. When your competitors are saying, "Why didn't I think of that?" you know you have a nimble organization.

Reacting to Changes
Consider the Riverside-San Bernardino (Inland Empire) area of Southern California. Eleven of the top 15 builders in that market have reorganized in the past two years, making several major acquisitions, creating several new divisions in areas previously covered by one division, and redefining several division boundaries to take advantage of management strengths or supplier relationships. The reorganizations resulted in improved operations as well as additional responsibilities for more employees. Several builders that were among the top 10 in that market several years ago fell out of the top 15. In general, they are doing well, but not nearly as well as their competitors.

Nimble organizations prosper in good times and bad. In fact, bad markets create opportunities for nimble companies. Consider the stories of these two builders:

• Fee builder: During the rough days of the early 1990s, one builder successfully renegotiated a bank loan to earn a small fee for completing construction of the homes and then returning all of the sales to the bank. The fee barely covered operating costs, but the firm eventually became the "fee builder" of choice for that bank, building through a number of other builders' troubled projects. The builder subsequently became a large, profitable company once the market improved, while most of its competitors had gone out of business or were starting a new company from scratch.
• Resourceful builder: A builder/land developer was forced to return a large property to the bank, yet the company eventually made millions by partnering with a capital source to buy the property back from the Resolution Trust Corp. (RTC) at a steep discount. To survive, the company went overseas and created a relationship with a relatively unknown foreign capital source at a time when little capital was available to the industry. This "out-of-the-box" thinking kept the company afloat and eventually resulted in several more opportunistic land acquisitions at a time when few companies were buying land.

These nimble companies succeeded while their competitors were busy fighting with lenders.

Becoming More Nimble in 2004
Strategic planning season is here, and that's always a great time to evaluate your firm. Have you created a culture that looks for and acts upon opportunities? Here is a brief self-assessment you can perform:

1. Maintaining the Pulse of Market

• Were our competitors unpleasantly surprised by one of our decisions?
• Were we unpleasantly surprised by a competitor's move?
• Did we make small, continuous market adjustments during the year?
• What changes did we make to respond to customer needs?

2. Rewarding Employees for Desired Behavior

• What new ideas did our employees suggest?
• Which ones did we act upon?
• What rewards were given to employees or, more important, the team?
• Did we emphasize individual ideas or team ideas?

3. Integrating a Philosophy That Change Is Good

• How did we reorganize to be better?
• Did all employees know everything they expected to know?
• How did we react to an unpleasant surprise?

4. Performing Continuous Self-Assessment

• What did we learn from our successes? Failures?
• Where were we out of balance?
• Where were we most vulnerable?
• Did anything slow us down?

5. Using Technology to Improve

• Did employees have easy access to the information they needed?
• What process improvements did we make?

 

 

 

 

Now ask yourself what you can do to be better next year. Your competitors will be better, and so will you.