HOUSES HAVE HISTORICALLY RANKED FAR higher in importance than employees in the residential building business. That started to change about five or six years ago, when top executives realized that making a big company grow and prosper requires management that knows more than how to build a house. Other competencies are required, too, and that old warm and fuzzy asset of people skills turns out to be right at the top of the list.
Putting people first doesn't come naturally to residential building. That's illustrated by the traditional role of human resources as mainly an administrative function, charged with handling the minutiae of hours, wages, and benefits. As people become more important, though, human resources is moving to the executive suite. Builders have acted on the realization of the rising value of people by, among other things, developing deeper management benches. If builders make the right human capital moves, they'll reap the rewards of growth, success, and longevity. If they don't, they'll risk their very survival.
PEOPLE ASSETS—THEN AND NOW Until recently, a builder could work decades in the industry and never trip over the notion that people were a strategic asset. That was the experience of Ed Horne, president of Wilshire Homes. “I spent the first 20 years of my career building houses,” Horne says. “I didn't understand anything about managing people.”
Human resources' role in big building companies reflects that traditional view of people. “Human resources hasn't been given a position at the big table for most home builders,” says Clint Ooten, vice president of human resources and administration for Greek-owned Technical Olympic USA. In 2002, when he was safely ensconced at General Electric, Ooten was recruited by TOUSA to take over its human resources department. He hesitated. Although TOUSA executive vice chairman, CEO, and president Antonio Mon assured Ooten that he would have an executive role, Ooten says, “Many CEOs pay lip service to the idea that people are their biggest asset. I was concerned about accepting an HR job in home building,” he says.
Due to a convergence of factors, the views that concerned Ooten have finally started to change. Those factors include the hot housing market, the tight labor market, home buyers who are more demanding, and a need for professional management.
Ooten and Horne's experiences illustrate that importance. Ooten accepted Mon's assurances of an executive role and took the job. Mon was true to his word. Ooten says, “I report directly to him, and I'm on his executive committee. We have dinner together several times a week and spend a lot of time talking about our people.”
Horne founded Wilshire Homes in 1990, sold the company to the Fortress Group in 1997, then bought it back in 2002. In the interim five years, he stayed with the Fortress Group as western regional manager. During his time with the Fortress Group, Horne was involved in the acquisition of 13 companies. “[They all had] different values, cultures, and procedures,” Horne says. “We had to find a way to make them work together.”
Through a process dubbed “Fast Track,” which involves all employees in defining and aligning common corporate values, processes, and structures, Horne learned firsthand the importance of people in a home building organization. “There must be alignment between strategic intent, strategy, structure, processes, and people,” he says.
After witnessing the success of Fast Track at Fortress Group, Horne implemented it at Wilshire Homes in 2002. It took a year, but Horne says that when employees identify corporate imperatives, they develop a powerful sense of ownership in the organization. Since more than 25 percent of Wilshire Homes' sales come from customer referrals, Horne believes his people-oriented approach to management is a success. “We define excellence and then pay people to do it,” he says.
DEEPENING THE BENCH Seating human resources at the executive table and having employees define the corporation are just two ways that big builders are responding to the newly strategic role of human capital. Builder CEOs are also acting to maintain executive stability by deepening their management benches. They want to both hire and keep the right talent.