Gary Freiberg can look at the calendar and pretty much point to the day that he decided things had to change at Venture Homes. It was 1996 and it had been, by his own admission, a difficult year.
"We were closing houses the old-fashioned way--sell as many as you can, close as many as you can, and worry about the defects later," says Freiberg, senior vice president of the Marietta, Ga., builder. "We were not focused on the customer. We were focused on the bottom line."
The crisis point arrived in the summer when the Olympics were in full swing in Atlanta. He had to pay movers to store the furniture of six buyers whose houses were nowhere near ready on move-in day.
"I was so far off delivery I would have offered to put them in a hotel, but there weren't any because of the Olympics," Freiberg recalls. "We had six dissatisfied customers who had a legitimate gripe and we weren't accepting that."
At that point, Freiberg says he had something of an epiphany.
"I said, 'I don't like my job. I'm not being fair to the customers and I'm not being fair to [owner Bob] White. Why are we in business? There's more to life than making money.' "
That was the turning point, Freiberg says, when company executives agreed to begin investing toward the goal of zero-defect closing. It's a mark they ultimately decided might not be realistic to hit. Yet today, 25 percent of homes have zero defects at orientation (the remainder average 2.3 items). And for the past two years, Venture Homes has placed at the top of J.D. Power's customer satisfaction ranking for new home builders in Atlanta.
The turnaround has been the result of no less than a total change in philosophy, says president Bob White. First, Venture Homes embraced total quality management (TQM), started benchmarking, and measured all the processes. But Venture also took one other step--focusing on effective habits. Every employee in the company--and every trade contractor--has been trained in Steven Covey's Seven Habits of Highly Effective People. Venture has certified trainers on staff and among its trade partners.
White and Freiberg admit that the changes haven't come easily. They lost about 20 percent of their builders and trade contractors when they instituted TQM. It involved taking 27 builders and trade partners to Phoenix, Ariz., for three days to watch how Shea Homes operated its jobsites for them to see the potential impact.
"We walked their houses and all 27 people had a light go on," Freiberg says. "We came back, formed the trade council, and wrote a program based on research and benchmarking."
As for the Covey training, the trades bought into the system, Freiberg says, because it would ultimately make their companies more profitable.
"The trades realized if they had higher customer satisfaction, they wouldn't be doing all these call backs," he says.
They wound up completely revamping the assembly process, focusing on building in quality, and understanding how one trade's processes impact those around them. For some of the trade partners, it was the first time they had talked to the craftsmen that performed tasks before or after them.
Focus on Change
One of the first systems to be changed was scheduling because it ranked the highest on the trade contractors' list of gripes. "When we'd ask the trades 'What's important to you?', we'd get 'keeping the house on schedule, job readiness, having the house ready for me to work on when I get there,' " Freiberg says. "If your main concern is 'will the site be ready?', quality isn't the paradigm emphasized. We run 99 percent-plus scheduling compliance. Now you're freed up to think about quality."
The trade contractors themselves developed a list of 20 items that were important to them in delivering a quality product. They're asked to implement and execute that list on every house. Performance against that standard is constantly measured and is part of the first quality control walk that is done a week before orientation. A second walk-through assures that any defects found are repaired. A third walk is done by the orientation staff with the homeowner. A final walk-through is done just before closing.
While some trades and builders opted not to work with Venture after the massive process change, others embraced a system that is providing them with a growing amount of work and a weekly pay schedule.
"We're at 400 homes," Freiberg says. "Next year will be 500 homes; in 2005, 800 homes. Systems and attention to culture will get us there. Those trades who bought into the system understand it's real. They see a future for themselves. I'm not playing games--we're going to pay them every week. They don't have to check their money."
What's the impact? Cycle time on a Venture home is 57 days from foundation to certificate of occupancy, plus five days for quality inspections and five days for orientation. That figure has dropped by three days every year for the past three years through efficiencies of the trade programs and computerized scheduling. Profitability has increased by half a percent and warranty costs have dropped from more than $500 per house to $300. The number of home buyers who report that warranty issues are resolved on the first visit has gone from 23 percent to 85 percent in two years.
The attention to detail, the consistency, and the rock-solid commitment to on-time delivery has helped dramatically on the sales side, White says. The stellar reputation it provides them has fueled a 20 percent increase in sales.
"They use our process to sell," White says. "The sales agents will tell a customer, 'I don't know what your experience has been in the past, but if we tell you the house will close on Sept. 20, it will close [on that date], and a week before that, your walk-through orientation will average around three items.' "
On customer satisfaction surveys, 98 percent of customers report that they are satisfied or highly satisfied; 82 percent give the company a top-box score. Three years ago, the top-box rating was at 55 percent.
"We have homeowners who get on their backs and look under the casing looking for something," Freiberg says. "We have two homeowner inspectors who find items for customers. That shows a real passion. Our goal is not to have a defect-free delivery. It's to have a satisfied customer."
Learn more about markets featured in this article: Atlanta, GA.