Groundbreaking research a few years ago from Stanford University economist Eric A. Hanushek focuses on school teachers, but it could apply equally to "talent" in home building.
Why? The force of talent underpins strategy, culture, and process—three business areas every company would consider in their control versus not in their control.
This is why the findings of Hanushek's analysis—"How Much is a Good Teacher Worth?"—are instructive. They quantify specifically the variability spectrum of measurable outcomes of a good teacher vs. an average teacher vs. a poor teacher. Here's the math:
"The magnitude of variation in the quality of teachers, even within each school, is startling. Teachers who work in a given school, and therefore teach students with similar demographic characteristics, can be responsible for increases in math and reading levels that range from a low of one-half year to a high of one and a half years of learning each academic year."
Talent and effectiveness vary widely among teachers, but also among home building associates.
When home building leaders speak of the word talent, they're speaking of a pain point. Almost every company is pushing hard to accelerate community count openings, expand their number of "stores," and broaden their offerings beyond the A-lot, higher-end homes into second- and third-tier price neighborhoods. At the same time, they're doing so in a context of narrowing margins.
So, is home building cycle-bound and stuck in Albert Einstein's definition of insanity, doing the same thing repeatedly and expecting a different result in this area of the pursuit and retention of talent? Time will tell.
Builders are poaching people from one another, from a talent pool that's constrained for the same reasons that the trade labor pool is constrained—there's no pipeline of new talent from the downturn, and many people left the business. High salaries are dangled in front of people, sometimes deservedly, and—given Hanushek's analysis—some of it not.
Digital agency PayScale's marketing chief Tim Low notes that, even as skill sets morph and evolve, the tools and transparency of opportunities are changing how talent matches up and gains traction with opportunity. Some of the examples are outside the direct disciplines of home building, but the issues are thematically and directionally spot on.
For a clear understanding of that dynamic, most of us need only to look at our own companies. Simply put, we want talent, but our business goals and cost bases may conflict with paying for it. Lip service is not a strategy. We have to better understand who is a 1.5x producer and who's a 0.5x producer, and fix that, not just talk about it. Attracting and retaining the 1.5x producer results in 100% better outcomes than hiring the 0.5x producer.
Payscale's Low says it well: "The foremost challenge appears to be in the simple words of Oliver Wendell Holmes: ‘There is something much more scarce and rarer than ability. It is the ability to recognise ability.'" To that we'd add, "and to pay for ability."
Let's take that notion of individual talent and scale it up, to the size of our organizations. Whether it's a team at a jobsite or a corporate headquarters enterprise, the logic holds. Is our organization operating at 0.5x, 1x, or 1.5x?
The problem with having to work and make a living is that we are prone to define excellence around what we do rather than to set the bar of ambition higher and challenge ourselves to get there. It's human nature to reverse engineer a company narrative to lead us to where we are currently and call it excellence.
Our BIG BUILDER issue here is a cover-to-cover challenge. We're defining excellence as a minimum of 1.5x results, and providing ideas, development tactics, a strategic blueprint, and examples of how you can get there.
We thank Huber Engineered Woods for underwriting this exploration of thought leadership around centers of excellence in home building. Their support was financial, but the nature, substance, and content direction of the issue was editorially driven.