Avid Ratings Blog

The Price of Oats

by Mark Hodges

The residential building product landscape is littered with unfortunate and expensive tales of products gone bad. If you’ve been around long enough, you likely remember fire-retardant treated plywood. Treated with chemicals to reduce the movement of flames from one multi-family roof to another (a fine idea), the product was found to delaminate the OSB sheathing, causing unsightly bulges in roofs and ultimately degrading to the point of being hazardous. Thousands of roofs had to be replaced at enormous cost and inconvenience to homeowners.

You need not to have been around as long to recall Chinese drywall. Laced with formaldehyde from gypsum quarries, the product caused massive corrosive damage to wiring, appliances, HVAC coils and even foil-backed mirrors. Remediation required moving families out of their homes (and housing them), taking the homes down to the studs and rebuilding the entire interiors of affected homes. I had the fun of working with over 40 VERY unhappy homeowners to solve this major problem, and suffered the inevitable evening news coverage that followed.

I’m reminded of an old joke where a man buying oats asked the farmer how much he charged: “That depends on whether you buy them before or after they’ve been through the horse.”

It’s no secret that the price of an inferior product differs significantly from the cost once the deficiencies become known. One more example is the now defunct window manufacturer (who will go unnamed), whose irresistibly priced windows quickly began to suffer broken seals and shifting in the openings, creating havoc in thousands of homes. We all know that you get what you pay for, as these harsh lessons validate.

The good news is that there is much more readily available information today about product quality, thanks to the internet (and great tools like Avid’s GoTour and GoSurvey). The trouble is that purchasing managers are often incentivized to buy the lowest-price product or service, intending to “save the company money” in costs. This seemingly sensible objective results in countless poor and expensive decisions. But I’ll leave that discussion to others.

Instead, I’ll focus on the intangible costs of products that many homebuilders don’t consider. Here is a list of some of the most overlooked costs that don’t get calculated in the ultimate “price” of the products you buy:

On-time delivery – No matter how good the product, if it holds up construction because the manufacturer fails to manage their production and distribution processes, you’re spending money on “empty house days” while waiting for delivery.

Correct delivery – If the cabinets that do arrive are oak instead of the ordered pine, or don’t fit properly in the kitchen openings, you’ve wasted even more time and risk missing your closing dates, which is one of the most important influencers of customer satisfaction.

Changing specifications – If the manufacturer is constantly changing specs on their products without informing you, or you neglect to provide up-to-date model displays, you’ll end up selling products that your customers didn’t buy. And believe me, they’ll notice.

Poor warranty service – If your manufacturers don’t stand behind their products (and instead hide behind flimsy warranties), your buyers won’t blame them, they’ll blame you. Service performance is critical, no matter how good the product normally is – things break.

I could go on, but won’t. The point is that choosing a product based on price alone fails to take into account many potential factors that could increase the ultimate cost – with quality and performance leading the way, but with quality of service coming in a close second. It’s a relatively easy lesson to learn, but a very difficult one to follow, if price is leading your company’s decision-making processes.

So, the next time you’re buying oats, be sure to take delivery before they’ve gone through the horse!

Optimize 3Ps to Create Outstanding CX

By: Tim Bailey – Division President of Avid Ratings Canada and Paul Cardis – CEO and Founder of Avid Ratings

There are proven business initiatives that generate profound results and home builders may employ one or more of these initiatives, such as Lean, Six Sigma, or Kaizen, to stay the course towards sustained excellence. Lean initiatives help reduce waste and inefficiencies. Six Sigma practices reduce defects and deficiencies. Kaizen maintains a focus on continual improvement. The core building blocks of all business improvement initiatives are People, Product, and Process. Understanding the interactions of these 3Ps is essential to CX — the customer experience.

People
A key ingredient in a successful organization is the people. The collective knowledge, attitude, aptitude, and level of genuine caring has a tremendous impact on the success of the organization. Having the right people only solves part of the equation, as they must also be aligned to the right roles. A highly skilled construction manager who consistently exceeds time, quality, and budget objectives, but falls short with customer-facing interactions, should either be provided with thorough training to help excel at customer interactions or be buffered from those situations in order to leverage what he or she does best for the company. Hammering a square peg into a round hole does not create solutions, only friction. Recognizing key strengths of individuals and aligning these strengths with respective roles and responsibilities will maximize success.

Comprehensive and ongoing training will always generate a significant return on investment. Acquired skills and knowledge better equip team members to be trusted and empowered. An organization is only able to scale successfully if people are afforded the trust and authority to make decisions within their area of responsibility. It is important to remember that trades and suppliers form a substantial percentage and integral part of the “people” for a home builder, and must therefore be considered part of that detail in the 3Ps blueprint.

Product
The best people and processes cannot be successful if the product misses the mark. In home building, “product” includes factors such as design, specifications, location, and price. Achieving a successful “product-market fit” is the goal, and fortunately there is a vast amount of data that can be leveraged to ensure product-market fit is not left to chance. Home builders are not building structures, but providing “solutions”. Intimately understanding the needs of home buyers in a target market allows product to be brought to market that meets those needs and provides those solutions.

Product design must consider demographic, ethnographic, psychographic, and economic information for a target market. Home building is a high-stakes industry and including features or specifications that are not valued by a target market adds unnecessary costs. Designing a product that “checks all the boxes” for the target market will maximize value for customers, increase sales velocity, and improve margins.

Process
A well-intentioned team and market-matched product will not be able to succeed without a sound process. “A bad system will beat a good person every time,” according to quality expert W. Edwards Deming. A good process is repeatable, scalable, efficient, and constantly improving. Auditing the current process in home building means digging deep into every area of the company. It is a significant undertaking but reaps great rewards. Process analysis unearths existing bottlenecks, non-value-added stages, inefficiencies, and waste. Layering the customer journey over that process exposes potential “friction points” and allows the process to be engineered to enhance the customer experience.

The effects of process deficiencies are often easy to spot, but identifying root causes is what facilitates improvement. A root cause exercise of “5 Whys” is a common practice in Lean, Six Sigma, and Kaizen methodologies. It involves digging deep into a negative effect by asking a series of “why” questions five times. The answer from each “why” forms the next question and the fifth “why” generally exposes a root cause.

Using 3Ps for CX
The customer experience is at the core between the interactions of people, product, and process. To “manage with metrics” to optimize the 3Ps, leading companies rely on:

  • Employee feedback
  • Trade feedback
  • Customer feedback
  • Production statistics
  • Deficiency/warranty data
  • Market research
  • Financial results

Business excellence designed around the 3Ps will result in teams that are engaged, organized, and advantaged, and a customer experience that creates loyal promoters.

Are You Struggling with the Trade Shortage? What if You Could Build Your Homes in 44 Hours?

One of the major issues facing our industry today is the shortage of skilled labor in many markets across North America. If your company is among those struggling to get enough trades to your communities, what can you do to solve this problem?

The simple answer is to make the trade shortage someone else’s problem by creating an environment where available trades can operate more efficiently and profitably at your communities instead of at your competitors’. So, how do you do that?

On Monday, August 5th, 1999, our team set about to prove that better scheduling, proper supervision, smarter use of skilled craftsmen and on-time delivery of materials could dramatically reduce the amount of time it takes to build a home. At 7AM that morning, we broke ground on a 2000 sq. ft. home. At 12:45PM on Friday, August 9th, we received our Certificate of Occupancy. In total, the home was completed in 44 hours, as we worked from 7AM to approximately 5PM each day.

Details of the project included:

  • We held a morning-long planning meeting with all trades and suppliers a week before starting, where every step and minute of activity was calculated and committed to. We had a minute-by-minute schedule.
  • The home was built with standard construction methodologies (no tricks), with the exception of using super-heated concrete to accelerate the curing of the footing, thus allowing us to pour the slab on this ranch home at 3:30PM on Day One. The home was stick-built using pre-assembled roof trusses.
  • The home was not a basic home. It included tile floors, Corian countertops, a fireplace, tiled walls in the bathrooms, an irrigation system – even the mailbox was installed at the curb in time for the final inspection.
  • Crew sizes were expanded significantly to accommodate the tight schedule. The home was completely framed and sheathed on Day Two. The roof was completed, windows installed and all rough mechanicals on Day Three. Insulation and sheetrock were installed on Day Four, cabinets were installed, with some mechanical finals being completed. Finally on Day Five, the home was painted, mechanical finals completed, driveway poured, irrigation and sod installed, all by noon.
  • The municipality worked with us (they certainly had to) to complete necessary inspections throughout the week. The Building Inspector commented that he would likely never again do a Rough Electric inspection on Tuesday and an Electric Final inspection on Thursday!!

So, what did we learn? We learned that maximizing the crew sizes and the distinct role of each craftsman (i.e. the electricians divided their work among crew members – one installing outlet and switch boxes, one cutting wire to length, one fishing wire, etc.). The home was pre-wired in about 90 minutes, while other work was going on.

We figured out which crews could work simultaneously instead of devoting entire days to one trade, even when they could finish their work before lunch.

We learned that having all the materials readily at hand greatly sped the process. And we learned that having our Superintendent on the ground for every single minute of work on the home provided better coordination, troubleshooting, etc.

So, what’s the point of all this? Every day, trade owners assign their crews to work at numerous building sites in your market. I can guarantee that they send their crews to the job sites where the homes are ready for them to work, where the materials are on hand, where they can do their work productively and without interruption, and most important, where they can make the most profit.

Contrarily, they’ll go last to the job sites where the schedule is chronically inaccurate, where the homes aren’t ready, where they end up making “dry runs”, wasting time and losing money because the builder didn’t have the systems or mechanisms in place to ensure maximized productivity. They’ll go last to the job sites where the construction documents are incomplete, where the options they’re to install aren’t clearly designated, where the previous trade(s) left a mess and incomplete work. And perhaps most important, they’ll go last to the jobs where they know they won’t get paid in a timely fashion.

The secret to solving the trade shortage is to be the best builder to work for in your market. That’s a tall order, but is an iron-clad solution if you’re looking for one. Trade Partners make choices every day about which homes in which communities command their attention, and which are their priority (not yours!).

No, you don’t have to build homes in 4 ½ days, but if you can develop the scheduling rigor, material delivery processes and great supervision, you won’t have to worry about trades showing up. They’ll be lining up to work on your homes.

By the way, when we sold the home, they buyers had zero items on their walk-through list. You can not only build fast, you can build with high quality, with the right team, the right processes and the right trade partners.

It’s All About The Culture

Many years ago, when I was a young new home salesman, I had the misfortune to work with a Construction Superintendent who considered our customers to be an unwelcome interruption of his day. He grumbled his way through every encounter, treating them dismissively and disdainfully. Once, while conducting a final walk-through with a particularly finicky customer, who in his estimation was taking too long, he informed them at the foot of the stairs that they had 15 minutes to tour the second floor, after which he was leaving, finished or not. Not surprisingly, they were in my Sales Office in short order seeking intervention, and then spent several weekends parked outside the Sales Office, warning prospective buyers about how we treat our customers.

The company stood by the Superintendent, reinforcing his behaviors, in large part because he performed reasonably well in other areas, like budget control and construction schedules. The company thus demonstrated to me how they really feel about their customers, despite their public claims. I learned that taking care of customers was less important than protecting the company’s interests, that treating customers badly was acceptable. It spoke volumes about the company’s true priorities and culture.

As an Avid client, you already take customer satisfaction seriously, as evidenced by your commitment to tracking performance through Avid surveys. I hope that you also have vigorous mechanisms to act on gaps in your team’s performance in managing their customer relationships. To me though, it comes down to the kind of culture you create, the integrity and ethics you demonstrate, and the behaviors you embed in your company’s DNA.  Consider the following questions:

  • How often do you stress the importance of your company’s integrity and commitment to the customer in company communications, meetings and conversations with team members?
  • Are your key decisions based on what’s best for your customers? Do your decisions reflect your integrity and fairness toward customers?
  • Does your team consistently make decisions that are in the best interest of your customers, following your example? Can they predict how you would handle customer satisfaction issues when they arise?
  • How much recognition do you provide to team members who excel in serving their customers? Do you celebrate and publicize great customer care stories?
  • Do your employee performance reviews include discussion about their customer satisfaction scores and the quality of their relationships with customers? Are integrity and ethical behavior among your core values?
  • Do your incentive compensation plans include high customer satisfaction ratings as a condition of receiving bonuses?
  • Do you hire people partly on the basis of their values and expressed sensitivity toward customers and co-workers?
  • Do you tolerate employees like the Superintendent described above? (This question is particularly important. Having even one employee who treats customers badly sends a very loud message to all other employees!)

Your team looks to you for evidence of your personal integrity, and ethical and fair treatment of your customers, business partners, and them. Your decisions and actions speak louder than your words. Do you consistently “walk the talk”?

In a related topic, the Avid Team has been spending a lot of time lately discussing the importance of transparency and integrity in publishing customer satisfaction data. Some companies manipulate such data to improve their perceived standing among customers, an activity which is now illegal and subject to serious penalty if discovered. As important, those companies’ employees are surely aware of these actions, exposing management’s willingness to compromise the company’s integrity and ethical standing in a shortsighted attempt to boost sales.

A leader can’t be “mostly ethical” or demonstrate integrity most of the time. It’s an all or nothing proposition. That goes for how you treat your employees, your business partners and your customers. If that Superintendent works for you today, invite him to “seek excellence” elsewhere tomorrow.

How often do you stress the importance of integrity and commitment to the customer in your company’s internal communications and meetings?

Mastering the Homebuying Experience

Greetings Avid readers! First, I thank Paul Cardis for inviting me to join the Avid team as an Advisor, and for his confidence that I can contribute to helping Avid clients achieve high levels of customer delight. I look forward to working with Avid and perhaps with you.

Throughout my career in homebuilding, I have often had the responsibility to improve and enhance the homebuying experience for my company’s customers. During my years as VP for Quality for Hovnanian Enterprises, (and ultimately as SVP of Corporate Operations) we were successful in raising the customer satisfaction ratings from a worrisome 78% “willing to recommend” to a much more gratifying 96% in just a few short years. We accomplished this by focusing on three key areas – 1) creating a culture of commitment to the customer, 2) building a better-quality home and 3) redesigning the customer relationship (CRM) processes.

Certainly, you can’t provide a world-class experience for your customers if your employees don’t care about them. Further, building and delivering a high-quality home is an essential requirement. In this article, though, I’ll focus on the third “leg of the stool”, the CRM processes, which I believe are the most critical, and often most overlooked keys to creating “Raving Fans” among your customers.

First, a change of context. Most homebuilding companies don’t actually build anything. Very few of their (your) employees ever swing a hammer or hold a paintbrush. Your homes are designed and constructed by other companies you hire. You are a process management company, overseeing the processes by which your homes are built. In that sense, your relationship with your customers amounts to a series of encounters driven by operational processes. When those processes are poorly designed or executed, your relationships with your customers suffer.

When customers complain that they didn’t understand that optional features shown in your model aren’t included, the process of communicating standard features is flawed. When your Construction Manager doesn’t know that your customer added skylights at the Sales Office, your change order process is suspect. And when, 30 days before the contract closing date, you still haven’t notified your customer that the home will not be ready in time, your internal communication processes are broken. Breakdowns in your internal processes inevitably affect your customers. Fixing those processes, then, is the way to eliminate the negative outcomes that infuriate your customers and fuel dissatisfaction.

I recommend focusing on the customer experience from a process perspective. Begin by assessing each of the formal “touch points” with your customers. Are the included features carefully explained? Is the “beginning to end” process of buying a home fully outlined at contract signing? Is your Construction Manager prepared for the “Pre-Construction Meeting” where selected options, home siting and construction schedule are reviewed? (Do you conduct these meetings?) Do your customers know what to expect when they visit your Design Gallery? How often do you update them on the status of their home during construction?

Managing the customer experience is a matter of deeply understanding the processes you design to manage that experience. Setting clear expectations and communicating proactively throughout the buying experience are actually key drivers of your customers’ satisfaction.  Delivering a quality home at the end of the process is almost a given, a ticket to entry. Delivering a worry-free, enjoyable and predictable experience is the way to turn an “OK” homebuying experience into a “WOW” experience. You can’t simply will yourself to improve the customer experience by fixing mistakes, over and over. Look for the root causes of problems, and you’ll usually discover that poorly designed (or executed) processes are the culprits.

Your customers are not an interruption of your work. They are the purpose of it. Focus on the processes by which you manage those relationships and your customers are certain to appreciate the difference, and the “quality experience” you make possible.

Digital Experiences Help Builders Generate Reviews and Sell More Homes

As Millennial buyers take on a larger share of the already competitive home market, builders need ways to better communicate with digital natives about the value of their homes.

With Millennials now representing 50 percent of the home buyers, according to Zillow, builders must go beyond a basic website with photos to communicate with people who’ve grown up in the Internet age and rely on user reviews to make many buying decisions.

“The millennial shopper is used to customer reviews, they don’t buy a pizza or order a movie without looking at reviews, why would they buy a home or renovate their home without studying what other buyers think?” said Paul Cardis, CEO and founder of Avid Ratings.

Founded in 1992, Avid Ratings is a full-service customer loyalty management firm, providing customer loyalty research, organizational consulting, employee training and marketing solutions for more than 2,300 homebuilders throughout the United States and Canada.

A 2014 New Home Conversion Report by Bokka Group and NAHB Research Center found that 80.9 percent of homebuyers surveyed find the reviews and testimonials of other buyers to be of paramount importance when researching different builders. Additionally, Nielsen’s Global Trust in Advertising Survey indicates that aside from recommendations made from personal acquaintances and relationships, consumer opinions posted online have the most influence on purchasing decisions. As such, the impact of online customer reviews may now both rival and surpass television advertisements, branded websites, print ads, and other important marketing channels.

In an exclusive interview, Cardis talked with ProudGreenHome.com about the importance of a digital customer experience for builders, and some of the tools available to builders to elevate their online and mobile presence.

PGH: What is Avid Ratings’ role in the building industry?

PC: We help the industry harness the power of reviews and getting the authentic customer feedback as part of the buying process.

Certainly buyers can go to sites like Yelp for reviews, but what we do is much deeper than that. Yelp is an overall rating. We actually get into the building products and materials that are being used, the trade base, as well as the staff of the homebuilder.

What we do at Avid is analyze all those different layers and provide that level of detail, not just for the industry but also to consumers. Our focus for the past 25 years has been to help builders understand that they may or may not have a good painter or maybe they’re not using the best quality fixtures in their plumbing line and maybe they need to upgrade for their buyers.  Now we’re opening up our data to consumers so they can understand the quality of a builder, understand the quality of materials that go into a home.

The bottom line is, people buy homes because they’re in the right location, they buy them because they’re priced right, and they buy them because they look pretty. What buyers don’t understand is what are homes made of, what are the materials that go inside the walls.

PGH: Why are online reviews becoming a bigger part of a builder’s reputation?

PC: Home building is a complicated purchase; it’s not like going to a restaurant that’s an hour or two hour experience. Home building is a process that involves multiple departments and trades and materials, and last six to 12 months or more.

We’re giving buyers tools, such as our GoTour product, to be able to explore what a house is made of. Buyers have shown they care about the behind-the-wall stuff in a home. The problem is we’re not giving them an easy way for them to see behind the walls. With GoTour they can walk into a model and hold their cell phone up and be able to scan a tag and see what kind of insulation or plumbing is in the wall or any other features the builder wants them to understand.

Our goal is to make it a digital experience so it will be very easy to peel back the layers.

PGH: How can builders offer a full digital experience for their customers?

PC: Digital doesn’t mean just having a website anymore or a picture on a website. To be truly digital and engage on all facets of the digital, you have to have pictures of your products on line, you have to have options for that product on line, with product details so people can dig deep, and finally they need to have customer reviews. Only when you have all three of those do you truly have a digital experience.

Our product line ranges from GoSurvey where we cultivate reviews for builders as well as manufacturers for insulation, windows and plumbing and different components, and also give digital tools for buyers to discover these things. Then we have our GoSocial and our GoTour product lines, which essentially promote those products with their reviews.

PGH: Is the marketplace responding to a deeper digital buying journey?

PC: The leading builders today are seeing an average 20 percent increase in home sales and they’re seeing an average increase in option sales of 11 percent. So the numbers are very palpable and so if you do it, you’ll get the return on investment, and those who don’t do it are getting left behind.

You can view the full original article at Proud Green Homes.