WHEN ASKED TO DISCUSS THEIR current financial condition and prospects for future growth, virtually all public home builders are singing the same tune. The song goes something like this, “Our financial condition has never been stronger” … “We expect another record year” … “Sales and income are projected to grow by a double-digit percentage during each of the next three years” … “Our business has never been better.” And as you might expect, most large private builders share these same oft-repeated superlatives.
What is perhaps most remarkable (and refreshing) about these sentiments is that they are true. The past several years have seen unprecedented growth by most large home builders with levels of success and achievement well beyond anyone's expectations. This is, by most measures, a great time to be in the home building business.
I am not writing about this subject because I believe that “the other shoe is about to drop” or that a so-called “housing bubble” is about to pop. To the contrary, I strongly support the view that for many of us, the future shines very bright.
To the extent that we control the destiny of our businesses, what do we do with all this success? An obvious answer is to stay the course and continue with our current approach. Abetter answer is to sharpen our focus and give even greater attention to the most important fundamentals and values of our business: ethical leadership, strong quality, and reliable service.
Ethical leadership is not just about public companies and compliance with the requirements of Sarbanes-Oxley. All builders, particularly bigger builders, have a responsibility to themselves, their companies, and the entire industry to act with integrity. The ethical scandals of the past several years have severely blighted the reputation of U.S. business. Unfortunately, not enough attention was paid to governance, and the reputations of many were put at risk. To help restore public confidence and reaffirm that the high-profile scandals of a relatively few businesses is not pervasive within corporate America, it is integral that the leadership of our industry—both public and private home building companies—act with integrity. Much has been written about this issue and what we, as leaders, can and should do to insure compliance with ethical standards and behavior. While situations may arise within our organizations that we simply can't control, there remain many things that we can. The most significant is clearly the “tone at the top”—and this is where leadership plays an essential role.
Several months ago, Bruce Karatz of KB Home wrote an article for this column where he stated “whether building one home or 30,000 homes, builders must share a commitment to quality construction.” I totally agree. Taking this one step further, however, all builders have an obligation to not only build a quality product but also to provide superior levels of customer service. In many markets today, the demand for housing is so strong that we find ourselves consumed with volume: getting homes built and getting communities opened. In the face of such tremendous demand, the attention to quality and service could easily suffer. We cannot let this happen. We must re-examine and re-assess what we do from an operational standpoint in order to improve quality and enhance home building. Our company has enjoyed a positive homeowner approval rating of over 95 percent for 15 consecutive years. Nonetheless, we are constantly reviewing our systems to see what we can do better.
A number of years ago, my dad, the late Irving E. Schottenstein, was interviewed about the home building business and M/I Homes. Being a co-founder, he was asked by the interviewer, “If you had to leave a legacy to this company, what would it be?” My dad immediately replied, “If I had to leave a legacy it would be: Don't forget to treat my customers right.”
A strong commitment to ethical leadership, quality, and service helps guarantee that we, as builders, not only “treat our customers right,” but that we treat our associates, shareholders, and fellow builders right as well.
Editor's Note: This column is a forum provided to the CEOs of America's largest home builders in cooperation with the NAHB. Address responses to BIG BUILDER's editor at firstname.lastname@example.org.