Avid Ratings

Home Builders Need to Nurture Middle-Ring Relationships

by Clark Ellis, Senior Avid Advisor

In September, I was lucky enough to attend the Multifamily Executive Conference in Las Vegas. My big aha moment came during the keynote by Marc Dunkelman from Brown University, author of The Vanishing Neighbor: The Transformation of American Community.

Dunkelman made the disturbing observation that innovation in America is lagging and that the millennial generation is on track to be the least entrepreneurial in our history. This seemed counterintuitive at first, what with the Ubers, AirBnBs, WeWorks, and other cutting-edge companies springing up. But as he spoke it began to make sense, and I realized that the societal trends behind his observations are similar to those at work in the home building industry.

The Three-Ring Model

Innovation blossoms when people encounter new ideas that have worked in an unfamiliar context then apply or combine them to their own challenges. The iPhone blended components from telecom, software, touchscreen, and internet technologies.

However, changes to our routines and relationships in recent decades have insulated people from these new ideas. Dunkelman groups relationships into three concentric circles. The inner circle represents those closest to us, mostly family and friends. The outermost ring is the broader society. The middle band is local relationships that make up the “township” or “neighborhood”—people we don’t know intimately but see on a regular basis at the PTA, church, or the softball league.

Those middle-ring relationships are what fuel innovative thinking, but most people have fewer of them than ever.

There’s been a fundamental, technology-driven change in how much time we devote to each of these groups. Smartphones, for instance, put us in constant contact with our inner ring. We spend more time than ever communicating with spouses, children, and other family members because it’s so easy to send a text, an email, or a Facebook message.

We also spend more time with the outer ring because the internet makes it easy to virtually connect with like-minded individuals. Whether it’s a group of Philadelphia Eagles fans, death metal devotees, Holden Caulfield enthusiasts, left-wingers, right-wingers, Betty Boop fanatics … you can find it on the internet.

The net loser is the middle ring. Most people report not knowing their neighbors very well, and Rotary Clubs, Civitan clubs, bowling leagues, billiards leagues, and other community groups are all hurting for members. The dinner party, once a staple of American society, is on life support.

The problem is that those inner and outer rings seldom expose us to new ideas or new ways of thinking. Friends and family may offer an insight now and then, but they rarely challenge our mental models. And when it comes the outer ring, most of us associate exclusively with like-minded groups. (Imagine what would happen on the Philadelphia Eagles fan board if someone seriously suggested that “Hey, you know, those Dallas Cowboys really aren’t so bad.”)

That middle ring is where we meet people from different walks of life and different cultures, people with ideas that don’t match ours, who bring new perspectives on a variety of subjects. These relationships plant the seeds for innovation by broadening our perspective, making us more accepting of others and revealing new ways of solving problems.

What About Builders?

So what does this have to do with collaboration in the home building space? A lot.

Three of my prior articles laid out the case for collaboration. One of them—“How Collaborative is Your Company?”—provides a framework for you to evaluate your company’s place on the collaboration curve and to identify what you need to do to become more collaborative. Dunkelman’s three-ring model is a useful way to think about these efforts.

The home builder’s innermost ring includes the company owners, leaders, and staff. The outer ring is industry groups and gatherings where builders compare notes and reinforce each other’s notions of who’s who and what’s what.

The builder’s middle ring consists of trade contractors, suppliers, municipalities, developers, code officials, and customers. Here, home builders are actually ahead of the societal trend in that most have never taken full advantage of these relationships. That’s unfortunate: the few builders who do take advantage invariably find fertile ground for new ideas.

How do you view your architects, engineers, trades, and suppliers? For most builders these relationships are purely transactional: They provide needed goods and services, period. Some builders even see them as adversaries with whom they perpetually battle over fees. Does this describe you? Do yourself a favor and really think about how you manage these middle-ring relationships.

Partnership Pays

The most innovative home builders I know treat the residents of that middle ring as important business partners. They’re the people who challenge the builder’s preconceived notions and help them devise ways to build better homes, more profitably and for happier customers. These builders think of middle-ring companies as neighbors in the same town, working together to thrive as separate businesses while also improving the neighborhood.

What results might you get by changing your mindset as it relates to these organizations? How might your architects, engineers, trades, and suppliers alter their behavior toward you if you changed yours toward them? Might you enjoy more success reducing material waste? How would your value engineering improve if your architect, engineer, structural, and MEP trades collaborated to make the home easier to build and more structurally efficient?

If you don’t have a group of second-ring relationships engaged in making your processes more efficient and effective and if your trades and suppliers aren’t offering innovative ideas that solve problems and bring more value to your company and to your customers, then maybe you should ask yourself why.

Let’s identify the usual culprits, the most common barriers to collaboration and innovation.

  1. Time. You and your team are busy running the business. Your second-ring relationships are also immersed in their daily grinds. But if you make it a priority to find time to collaborate and innovate, you will figure out ways to shift away from those “urgent” things that dominate most days and will end up investing more time on the important things.
  2. Price mentality. A lot of builders can’t see past the contract price. The smart few have built collaborative relationships with suppliers and trade partners. And they work with those suppliers and trades on ideas to improve the business, including ways to work more efficiently and to close the same number of homes without extra labor. Everyone wins.
  3. Contracts. Most contracts define a transaction, not a relationship, giving trades no incentive to suggest process improvements. The result is tremendous cost and time wastage. On the other hand, strategic relationships make it possible to find ways to reduce and eliminate this waste.
  4. Split incentives. This is where one party invests in a solution while another reaps the benefits. It’s the builder who pays more for wall panels but whose framer won’t discount its labor price, even though the shell goes up in less time. Innovations like this are more successful when each party shares in the rewards.
  5. Cultural inertia. Production home building’s adversarial culture is a big roadblock to innovation. Builders who seek collaborative relationships with their trades—whether in a trade council setting or one-to-one—can quickly get past this barrier.

It’s possible—though not likely—that you can create better relationships with that middle ring without assessing and methodically attacking these five barriers. But when combined with the framework I outlined in “Solving Construction Workflow Pain Points” and “Emotions can Make or Break Collaboration”, removing these barriers will transform your company. It will make almost anything possible.

But it all starts with you. And what you believe.

Clark Ellis is a Senior Avid Advisor for Avid Ratings, a leading provider of customer loyalty research and consulting to the homebuilding industry. Through the Avid system, industry-leading clients improve referrals, reduce warranty costs, and strengthen their brand. He can be reached at clark.ellis@avidratings.com.

*This article was originally published on BuilderOnline in October, 2018. Click here to read the original article.

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