Little Gems: Managing Fundamentals

By really listening to recommendations from its suppliers and contractors, tying the company's back-office system to practical business tasks, and focusing on construction quality, Keller Homes in Colorado Springs, Colo., is sure to score well on the J.D. Power ratings every year.

“We want to attract the kind of buyer who ... appreciates value and can be relaxed that the house will hold up,” says Tom Adams, the builder's vice president of operations.

Adams' job is to focus on quality construction processes. He says the company starts by delving deeply into the recommendations of its trade contractors. For example, he says, Keller Homes really tries to understand why the HVAC contractor might recommend a 3-ton system versus 2.5 or 3.5.

“We always want to know what is driving the recommendation,” Adams says. “To some degree, we want to enter the trade contractor's business.”

Keller Homes began a careful review of the company's construction processes about a decade ago, when it deployed the FAST back-office and scheduling system. Adams says that, in the past, the builder might have had seven different projects going on, but each was only as good as the super assigned to the project. Although that's always going to be true to some extent, Keller Homes decided to standardize some basic processes, a move that helps the company deliver a more consistent product and stay on schedule.

INSIDE KNOWLEDGE: Interior designer ColorDesignArt from Los Angeles brings a West Coast design flair to Keller Homes projects in Colorado Springs—a feature that scores high with home buyers.

Some examples: All the floors are installed before any trim work goes in. Adams says putting in the floors first gives the home a more finished look—there's a smoother intersection between the cabinet and the floor, and less trim work is required. There's also less trade damage along the way. Another Keller Homes trademark: It always pours the concrete slab before the framing crew comes in. It may cost a couple of days in the schedule, says Adams, but it's easier for the framer to work on a lot where the slab has already been poured.

“Builders don't always give their trade contractors the proper environment, time, or money to produce quality,” says Adams. “There's always enormous pressure for quick and inexpensive work,” he says, adding that “we go back to our trade contractors and ask them what environment they want to work in, what needs to be in place for the job to go well.”

Another part of the Keller Homes system is to have a quality assurance manager, as opposed to the project super, handle the final walkthrough with the home buyer.

“We want an independent person who is an advocate for the customer and the warranty department,” says Adams. “Our goal is to take the customer out of the loop in terms of them being the quality assurance inspector,” he says, adding that “it puts them in an awkward and uncomfortable place, so we go to great lengths to assure that they have an advocate.”

“Mentally, once the house is ready, the super is on to the next foundation,” says Dave Keller, the company's president and CEO. “It really takes another person to nitpick a house for things like drywall imperfections,” he says, adding that the home builder's real secret to satisfying customers is doing a strong job communicating its processes and setting expectations.

“If you communicate to a customer that you're a Cadillac, but you're really a Saturn, and then they move into the house, that's when you have a disaster,” says Pam Keller, Keller's wife and the company's executive vice president of sales and marketing.

Dave Keller says he's the first one to say that if customers are not on board with the company's detailed and meticulous building philosophy, salespeople should send them someplace else.

“Our salespeople and our design studio people are expected to come to us with customers they identify as not aligned with our company,” he says. “It's just understood. We're not all things to all people.”

And it's not always about building the most expensive home. Dave Keller points out that his company sells homes that range from $300,000 to $800,000; it is not building $1 million-plus custom homes.

“We get a very persnickety buyer,” says Pam Keller, adding that the builder caters to such buyers by bringing in Los Angeles–based ColorDesign-Art. The design firm keeps Keller Homes up to date on all the latest design and merchandising trends from the West Coast.

“If someone wants an $800,000 house and expects us to turn it around in three days, I tell them we're not a good match, that I can't change my system,” she says, adding that construction doesn't start at Keller Homes until the home buyers make all their selections.

“I don't have change orders,” Pam Keller says. “I don't allow them, but I have to communicate that,” she says, adding that managing expectations is critical to keeping customer satisfaction high.

Market: Colorado Springs, Colo.

2005 closings: 175

Price range: $300,000 to $800,000

Average square footage: 3,500

2004 J.D. Power score: 131

Keller Homes was No. 3 in the Denver/Colorado Springs market in 2004, just two points behind No. I Lennar.

SOURCE: J.D. POWER

Two of the three builders profiled kept their scores high in 2005.

The real challenge for the builders profiled here is not so much scoring well on the J.D. Power ratings, but keeping up stellar performances.

For 2005, Keller Homes in the Denver/Colorado Springs, Colo., region and Venture Homes in Atlanta kept pace with their 2004 J.D. Power scores. Tucson, Ariz.–based A.F. Sterling Home Builders was the only one of the group that didn't score as well, mainly because J.D. Power did not receive enough responses from A.F. Sterling customers in 2005. Venture Homes president Bob White says his company has scored either first, second, or third in the Atlanta region for the fourth year in a row. The company ranked second, behind Ashton Woods, in 2005.

“If you look at the data, we don't score as high on amenities as the companies building master plan communities because we can't build to that scale. We do 100 to 150 lots at a time,” White says, pointing out that where a smaller builder such as Venture Homes really shines is in its scores for home readiness before the sale and service after the sale.

Tom Adams, vice president of operations at Keller Homes, admits that Keller's score did slip from 131 in 2004 to 128 in 2005, but that, overall, he was pleased with the 2005 score.

“After being in the program for the past five or six years, I think we've hit a plateau,” says Adams, adding that he's not too concerned because the three-point drop is not dramatic, and Keller's scores are still among the top five in its trade area.

Randy Agron, COO of A.F. Sterling, just dismissed this year's scores as an off year. “We had enough closings to qualify, but J.D. Power didn't get enough responses back,” says Agron. “I'm sure if you look at the responses we did get, we did fine.”