It's easy to look at a company that's performing well in another industry and say, “That would never work for a builder.” Why not? Because insurance adjusters face the same response-time pressures as warranty managers. A small hospital understands the fear of being raided by the big guy offering fat sign-on bonuses.
“You'll never make leaps and bounds until you look outside your own industry. If there's a great idea, it's already been taken,” says Brian Jones, a consultant for the Baptist Leadership Institute. The institute is the consulting arm of Baptist Health of Pensacola, Fla., a 2003 winner of the Malcolm Baldrige Quality Award, the U.S. government's highest award to a business.
To find the best practices for employee retention, BUILDER looked at Baptist Health and insurance underwriter ACUITY, two companies that overcame high turnover, poor morale, and subpar performance to become leaders in employee and customer satisfaction.
Value Your Agents (Um, Employees) In 1996, Baptist Health competed—badly—against two large, well-funded hospitals. Employee turn-over was running 35 percent annually, and morale was flat lining. And it showed. The hospital was in the 20th percentile nationally in the Press Gainey patient satisfaction survey. (Press Gainey is the health care industry's version of the J.D. Power survey—an independent, nationally accepted performance measure.)
“In health care, what our customers are purchasing is the knowledge of our staff,” Jones says. “They are not buying the equipment or the facility. Our greatest asset walks out of the door at the end of every shift. If they don't come back, it really hurts us.” At first, the staff made excuses. After all, they were a not-for-profit hospital built in 1950, in the worst part of town, slugging it out against corporate goliaths.
“We had to move beyond that,” Jones says. “We couldn't outspend the competition, get the hottest new doctors or equipment. If the organization was going to survive, we were going to have to make service our battleground. You can't do that if employees aren't satisfied.”
One of the first areas addressed was the hospital's top management. They weren't bad people. They were just very focused on one thing—the financials.
Now, they make daily rounds, just like the doctors. Plus quarterly employee forums update all 1,500 employees on the hospital system's five pillars: people, service, quality, financials, and growth. Employees also can stop by the president's office to ask questions. It was moved from the fifth floor to the first floor, right by the cafeteria.
A team of frontline staff created employee performance standards. Every employee was required to sign off on them to continue working there. New applicants must agree to the standards before their applications are accepted.
Employees also interview job applicants. That helps new employees feel that they are really wanted, and the current employees have an investment in their success.
“Managers want to make things simple because they're in a hurry—[just] hire the most experienced or educated person,” Jones says. “This way, [however], we get the best person for our culture. We hire for attitude and train for skills.”
Although competitive wages are important, people usually leave because they don't feel valued or have an opportunity to grow professionally. So Baptist Health asked employees what would keep them. Rewards and recognition topped the list.
But what's meaningful to one person may be a useless gesture to someone else. So Baptist Health distributes a “favorites” list to employees with “every kind of reward there is,” Jones says, along with questions about their favorite candy bar, soft drink, and lunch spot. Managers keep it so they know how to reward people in ways they will appreciate.
Employees can also recognize each other's outstanding service. When a person collects five “wow” notes, they get a gift certificate to a local restaurant or $20 to spend in the hospital gift shop.
As a result, voluntary turnover dropped to 13 percent; patient satisfaction scores are in the 99th percentile; and their hospital's bond rating and cash-on-hand position are the strongest ever.
How did they know to do all these things? First, they listened to their employees. Then, they looked outside the health care industry for best practices, benchmarking against one of the best-known names for customer care—Ritz-Carlton hotels.
Ingenious Ideas When ACUITY needed to cut costs in the late 1990s, the Sheboygan, Wis., insurance underwriter didn't just think outside the box, it threw the box away. The company closed 12 of 13 branch offices and told the employees to work from home. About one-third of its 725 employees are now home-based, staying connected via computer, phone, and fax. Plus the company dumped the concept of set work hours. As long as the work gets done, managers have wide latitude in scheduling their staffs.
It might sound as if it were a haven for slackers, but the company routinely outperforms industry standards for performance, productivity, and profitability. The industry benchmark for processing policies is two months; through a strategic investment in technology, ACUITY does it in a day more than 90 percent of the time. Plus, the company uses one-third fewer employees than the industry norm to produce the same number of written premiums, says vice president for human resources John Signer.
It wasn't always like that, says ACUITY spokesman Bret Blizzard. Ten years ago, the company had a reputation as a rigid employer with high turnover. In the past five years, voluntary turnover dropped from the high teens to a current level of less than 2 percent. In 2001, ACUITY was the only insurance company to be included in Fortune's list of the 100 best companies to work for.
The turnaround came with the appointment of Ben Salzmann as president, Signer says.
“He has made my job very easy,” Signer says. “He's the type of person who will come to me and say, ‘Here are some great programs. Why aren't we doing this?'”
Salzmann holds town hall meetings two to three times a year, gathering the staff to discuss company initiatives and ACUITY's position in the industry, and to thank the employees for their efforts.
“That is so well received,” Signer says of the town hall meetings. “When you have that direction and enthusiasm in leadership, it's catching. Everybody gets excited.”
Employees also get excited by fun, company-wide events such as ChocolateFest, company picnics, and Bring Your Child to Work Day.
At a more fundamental level, ACUITY's corporate culture values openness and employee participation in decision-making.
“With all the mergers, buyouts, downsizing, and right-sizing in the industry, we have a lot of checks and balances in place,” Signer says. “No one group can make decisions that have a severe impact on the company.”
In addition to the bottom line benefits of increased efficiency and lower costs for office space, ACUITY's reputation in the industry has helped it attract top performers.
“From a recruiting standpoint, it's made our job so easy,” Signer says. “The word is out it's a great place to work. It's difficult because we have so many great candidates and we only have so many positions. It's a buyer's market for us.”
Money Talks Builders are tying bonuses tocustomer satisfaction scores.
Training programs will only go so far in keeping good employees. Human resource experts cite the need to provide competitive wages—and in home building that means bonuses.
Most of the country's top builders today tie bonuses to a variety of performance points. Those go far beyond meeting budgets and schedules, often focusing on customer satisfaction scores on independent surveys, zero-defect closings or orientations, and repeat and referral buyer rates. Clearly, the emphasis is on creating a positive experience for home buyers.
Village Homes of Colorado's construction manager bonuses are tied to managing budgets, schedules, home deliveries, safety, and customer satisfaction, says Marian Wright, the company's director of people services.
Bonuses for community sales managers are based on meeting or exceeding sales and closing goals, overall communication and follow-up buyer surveys, overall teamwork, and percentage of referral sales. Individual sales representatives have five levels of bonuses tied to their length of time on the job and the completion of several criteria, including a “Sales and Construction Boot Camp,” the national Certified Sales Professional (CSP) training program, and obtaining a state broker-associate real estate license.
A company-wide dividend plan is paid quarterly and annually, based on sales and closing goals, year-end profitability, and the willingness of home buyers to refer Village Homes to others, as based on Woodland O'Brien customer satisfaction surveys.
Toll Brothers pays its construction managers “decent bases and car allowances,” says Jon Downs, vice president of human resources, plus bonuses based on delivering houses on time with a minimum number of defects and positive customer satisfaction surveys.
Illinois-based Neumann Homes provides profit-sharing payouts to all its employees, based on overall company and division performance, says chief marketing officer Jean Neumann. And in 2004, the company launched a recognition trip to reward the top 25 percent of the company for exceeding established performance standards.
The company also offers a generous 1:1 match on 401(k) contributions, tuition reimbursement, a fitness club membership discount, and the ability to bank days for paid time off.
Capital Pacific Homes just recently set up an employee incentive program, tying the percentage to customer satisfaction scores “from superintendent to warranty person to sales person,” says Nedda Brown, president of Capital Pacific University, the company's in-house university program.
“We have to focus on the right things and put our energy in the right places,” Brown says. “Right now, there's a little nervousness on the part of employees with compensation [because their paychecks are being tied to customer satisfaction scores instead of the number of hours they worked or the number of houses they delivered], but I think it will provide a big motivational boost, so people [will] work even harder for customer satisfaction.”
Similarly, Charter Homes' bonus program is focused on home buyer satisfaction and net number of sales. It has created a program designed to express its appreciation to employees: “bonus bucks,” gift certificates bearing company president Rob Bowman's face, which can be spent at its virtual company store. Bowman also took all 85 employees, who could each bring a guest, on a cruise to the Bahamas.
Then there was the graduation party at the completion of the first semester of Charter University. “We took them to play paint ball,” Bowman says. “There's nothing like shooting at each other to kind of clear the air.”
In-House Training Builder universities increase skills and reduce turnover.
Construction has the highest turnover rate of any industry except hospitality and leisure—more than 40 percent above the 3.2 percent average for all industries, according to 2004 data from the Bureau of Labor Statistics.
Builders see the impact every day.
“This industry is underserved by the kind of people who can make it go forward,” says Rob Bowman, president of Charter Homes in Lancaster, Pa. “Nothing shows that more than the amount of recruiting and headhunting going on. Everyone's stealing from everyone else.”
To help keep employees, builders nationwide are using in-house “universities” to train on the skills to build, sell, and service homes and on their corporate cultures. The programs not only give builders more highly skilled employees, they give them homegrown leadership, reduced recruiting costs, and increased employee satisfaction. Atlanta-based Morrison Homes increased training hours per employee by 8.6 percent in 2003; in the same year, turnover dropped by 8.7 percent, says Hall McCallum, vice president of human resources.
One of the first classes required at Charter Homes is a program on listening. Bowman says he initially questioned the need for such a class, but listening is a core element of the company's culture, so he agreed.
“It was the most eye-opening experience of my career,” he says. Giving managers the tools to effectively listen—and be listened to—allowed the company to “move from thought to action much more quickly.”
University-style programs don't have to be labor-intensive. Capital Pacific Homes in Newport Beach, Calif., started its in-house program, Capital Pacific University (CPU), about three years ago to help its employees work “smarter, not harder,” says CPU president Nedda Brown. “We can't just keep hiring people. If we could maximize the talents of people we had, we felt we could do more.”
CPU uses e-learning companies Element K and Build IQ to offer more than 200 classes online. Plus employees can check out hundreds of CD- and video-based courses. The result last year was a 4 percent reduction in turnover, Brown says.
The fast track to the top at Toll Brothers of Huntingdon Valley, Pa., is its year-long assistant project manager training program that features a mentorship and rigorous field experience. The 100 to 150 trainees per year will be project managers with profit and loss responsibilities for a development, says Jon Downs, vice president of human resources.
“A project manager is expected to know how to buy land, take it through the approvals and land development process, and then ultimately sell the homes, build them, and deal with warranty and customer service,” Downs says. “It's an awesome and all-encompassing amount of [information] we expect them to learn.”
Houston-based David Weekley Homes created David Weekley University to teach current and prospective managers to be good leaders, critical at a company that runs on a team-based approach.
“We have a lot of folks who are tyrants in the building industry, who are not known for allowing people to reach their highest levels because of the egos of some managers,” says company president David Weekley. “This is meant to move people from that kind of top-down management style to a more collaborative, servant-type leadership.”