NO PAIN, NO GAIN FOR ROSY MESSINA. HER company, ICI Homes, like many home builders in hot markets, is morphing—practically overnight—into a mega-sized version of itself. On the bright side, Messina, vice president of sales and marketing, is in the throes of the opportunity of her career, hanging on for dear life as ICI soars ahead with its plans (see ICI Snapshot, below). Still, despite the thrill that accompanies a 60-plus percent increase in unit count for 2004, the pressure to feed the machine, as it were, with more people on the ground and more effective systems and procedures has been intense. “It's consumed me,” she laughs.
To innocent onlookers, all is well—new communities are opening at warp speed, and processes once handled through nine separate databases finally feed into a single integrated back-office system that supports ICI's highly decentralized business model. Moreover, employees, who just last year huddled two or three to a desk, have moved to a spacious, pristine, newly built Daytona Beach, Fla., corporate office.
So what could possibly be wrong with this picture? “All this change has been really tough to manage,” says Messina.
Stand Up And Be Counted As operational efficiency and velocity together become the “new black” of the home building industry—replacing real estate price appreciation as the sector's profit juggernaut—many volume builders have mapped out ferocious growth trajectories for the next few years. After amassing impressive troves of land holdings and inventory of lot options over the past several years, many companies are beginning to realize the results of their acquisitive initiatives in rapidly climbing community counts. In 2005, according to exclusive new BIG BUILDER research, the nation's top 25 builders alone account for nearly 6,000 active communities—a number that reflects roughly 12 percent growth over 2004. Many expect that trend to continue, predicting double-digit community count growth over the next several years. (See Community Counts chart)
While the accelerated growth in the number of active communities is impressive in itself, the expansion rates spotlight the fact that land is not the only scarce resource for builders. An increasingly conspicuous variance has opened up between the industry's growth goals and the number of employees available to execute them. Consequently, human capital is poised to become a “C-level” executive's nightmare of the moment.
Consider that the top 25 builders have, on average, 300 communities in place, and, on average, expect a 12 percent increase for 2005. Following the math, each top big builder will add 36 active communities in 2005—in effect, creating a need for 72 new superintendents, 72 sales representatives, 12 construction managers, 12 service technicians, six sales managers, six administrative people, 12 purchasing/estimating people, and two vice presidents. Using these calculations, the total number of new employees needed for each builder is 192: totaling 4,800 new non-headquarters associates among just the 25 top organizations (see Personnel Projections, page 98).
So, with mounting pressures to succeed at a community level, builders are taking a hard look at the critical yet elusive factors involved in structuring, supporting, and motivating the “teams” of people who are responsible for a community's ultimate success or failure. “It's a chess game,” says Scott Sim, Pulte's vice president of sales in Minneapolis. “Creating our teams and bringing momentum into the process is crucial to success in our communities. This issue is at the top of the list in the things we struggle with.”
Structure Where escalating unit count speaks for ICI's growth, the number of new employees has followed: from 165 employees at the end of 2002 up to 330 today, literally doubling in size. “A flat management system allows us to be nimble,” Messina explains. “Instead of compartmentalizing as we grew, we identified the key people and then brought in staff at a junior level to support their needs. Adding bodies is easy, but not necessarily productive or efficient if it isn't done right.”
To keep pace, builders are searching far and wide for qualified new employees. And, by using a combination of hires from outside the industry, employees lured from the competition, and recent college grads with malleable skills but little training, companies have managed to squeak by. But Bill Carpitella, CEO of The Sharrow Group, says there are more strategic ways to approach the issue.
Prior to forming his executive search and organizational consultant firm, Carpitella experienced firsthand the big builder's struggle to find, employ, and retain key employees. But after years as a vice president of human resources for field operations with Pulte and a corporate senior vice president of organizational development with K. Hovnanian, he says the industry's emphasis on human capital is still little more than lip service. “At the end of the day, they know what they should say, but their heart isn't there yet. Big builders who would truly embrace that mindset could revolutionize this industry.”