In the past five years, Goodall Homes has jumped from 13th to second in the Nashville, Tenn., market. A big part of that success came from the usual places, such as holding a strong financial position and being able to buy lots at bargain prices during the downturn.
But if you talk to Goodall’s executives, there’s another driver behind the company's success—a book called “The Great Game of Business” by Jack Stack. Seven years ago, Goodall COO Keith Porterfield read the book, which promoted open-book management. Goodall Homes soon after adopted the book as a template for how to operate its business.
“We share all financials [with the exception of compensation], including net profit and overheads,” says Bob Goodall Jr., president and owner of the Nashville-based company. “That goes a long way to help [associates] see challenges and come up with ways to solve problems. It has helped us to create leaders in the company and overcome challenges.”
Every two weeks the company splits into different groups and has a “Great Game of Business” meeting. “One group may take office overhead, scrub that down, and come back with recommendations,” Goodall says. “Every group takes items. If we hit certain benchmarks, we have a prize.”
The open-book policy means Goodall will share things like its pricing sheets with its sales representatives. Many builders would shy away from that practice because it provides what cost is in the home and the true margin that the builder is making. “Our reps have that information,” says Chris O'Neal, vice president of sales and marketing at Goodall. “Then they are given targets they need to hit for a profit margin standpoint.”
At the Great Game of Business sales meeting, the reps are asked to stand up and tell their colleagues what the price of each home they sold was and what the profit margin was, which is a figure sales representatives at other companies may not have access to.
“Most sales reps just want to sell a home and move on,” O’Neal says. “Our approach is different. They still want to sell as many homes as possible, but I can tell you if the profit margin target is 25 percent and they miss that target and they have to stand up in front of everybody and say we made 22 percent on the home, it’s kind of embarrassing. Even though it is still a good margin, it’s one example of how the team clearly understands what it takes to make money and what happens when we miss that margin.”
There are other motivators in Goodall’s open-book management system. At the end of the year, the company gives out a Great Game of Business bonus. Once the company passes a threshold of net profit, everybody in the organization gets a percentage of the profits. As the profit go up, the bonuses get bigger.
“All of this focus on profits is very, very tangible because they know at the end of the year, that if we reach a certain mark, they’ll get compensated,” O’Neil says. “And it can be very good compensation.”