Growing a healthy home building company nowadays is a bit like feeding an animal that devours anything thrown in its cage. What else can it eat, and how can its size and appetite be managed?
The exponential growth in the home building industry places voracious demands on those in charge of hunting talent and managing their company's appetites. "Normal recruitment" at Hovnanian Enterprises, in Red Bank, N.J., is about 800 employees a year, and future growth calls for 200 to 300 new hires a year above that, according to Lou Csabay, Hovnanian's vice president of human resources. And Toll Brothers is searching for 1,000 new employees a year who will work at more than 200 distinct locations, says Jon Downs, Toll's vice president of human resources.
Where will these people come from? Who else is trying to hire them? "Take care of your people and they will take care of you," advises consultant Martin Freedland, president of Organizational Development Associates Inc. in Atlanta. But how do you take care of such a large beast? In today's market, it's an all-source, multi-media effort, encompassing the Internet, traditional newspaper ads, employee referral reward programs, and good word-of-mouth.
But there are some worrisome signs, says Freedland. The prevailing culture at the largest builders is "eat your young," or grow at all costs, he says, acquiring land and employees at a gallop. Is it possible, in this time of exponential growth, to train, develop, and care for an ever-larger number of employees?
Recently, Big Builder spoke with several vice presidents of human resources at big builders about recruiting issues. They spoke frankly about the challenges and cautioned of a growing topic: "I think diversity has to be on our minds," says Mike Gentry, vice president of human resources at Houston-based David Weekley Homes. "Far more of our home buyers are going to be minorities, more today than three years ago, and more in three years than today. We have to show that we're identifying with the communities that we're dealing with."
Are builders up to the challenge?
Get 'Em Young
The first step is easy: find and hire good people. But even in the current soft economy outside the home building industry, this is harder than it sounds. Consultant Freedland recalls a study conducted by McKinsey & Company in 1997 entitled, "The War for Talent," which predicted that within five years, all companies will be competing for talented people aged 25 to 45. "These are the people that you want to bring into the industry over the next few years, and you're competing for them against Microsoft and GE," he says.
If he had to boil down recruitment to a bumper sticker, Mike Gentry of David Weekley Homes could do so. "Support your managers," he says. It's important to leverage the presence of managers in the field, where they hear about dynamite salespeople, great contractors, or strong supervisors. "They should move" to recruit those people, says Gentry. "We actively engage our hiring managers to make sure they know that good recruiting is their responsibility. After all, they know what it takes to do the job."
A good relationship with a manager is important to retention. "People don't leave companies. They leave their managers," says Gentry. "We see it time and time again in exit interviews." People might talk about leaving for more money or different opportunities, but it frequently boils down to a souring of a personal relationship with the manager to whom that person reports. "It always boils down to that personal relationship," says Gentry. But if the manager is engaged in hiring that person, chances are better that the relationship will grown stronger, not weaker, over time.
But it gets harder to support managers as a company grows bigger, acknowledges Gentry. So the bumper sticker for the second car could be "Screen Your Recruits." Candidates at David Weekley Homes are taken to "career specialists," otherwise known as human resource professionals, for preliminary screening: a background check and a cognitive skills test.
This saves the manager from the burdens of administrivia, notes Gentry, and also allows experienced professionals to conduct "behavior-based" interviews, rather than chit-chat about schools or sports. Interviewers should ask candidates about what they've accomplished, says Gentry. Questions should focus on difficult situations. "What was your behavior, what was the outcome?" says Gentry. "The best predictor of future performance is past performance. Talk to candidates about what they've accomplished."
Some builders have already switched into high gear. Strategic initiatives, such as college recruitment programs, will be in place by year's end, says Hovnanian's Csabay. The company's Web site, and all new media, are aggressively leveraged. Toll Brothers is ramping up its recruiting effort of the young by monitoring specialty job boards, career builders, and career Web sites such as Monster.com, CareerBuilder.com, and Hotjobs.com. "I probably get 30 percent of our hires off the Internet," says Downs. "I go on the Web and make sure search engines are popping our jobs up. I constantly test our whole presence on the Web. I make sure that if anyone is looking for home building, our company name pops up."
One advantage of e-recruiting is that it is easy to monitor where good candidates come from, and which Web sites refer the finest students. It's easy to set up a "linking relationship" with professional schools or career sites, head hunters, and schools' job fairs.
The oldest recruiting technique is still the best: Ask good employees to recruit their friends. After someone has landed his or her first job, 70 percent to 80 percent of the next job searches are done through networking, says Freedland.
Some of the best people are already employed and not looking for work. These are "passive people" who are not searching the classifieds. "We're continuing to refine our recruitment of the passive person," says Gentry, of David Weekley Homes. The company has launched several recruiting initiatives and staffing goals. It now monitors where its good candidates came from, setting up a formal tracking system and employee referral program.
"Good people refer good people," says Gentry. "One thing we have to do going forward is charge our managers with recruiting and retaining people. We're getting much more strategic and much more focused." Managers have specific numbers that the company would like them to meet, he says. "We've done a lot of things internally, putting in good selection tools to make sure we've hired the right people."
Gentry remembers his hiring process well. "When I interviewed, in November 2000, I knew nothing about home building," he recalls, after years in the oil industry. "I interviewed with at least six people. There was a full-day evaluation with a consultant. There were role plays for half a day, and then another half day of testing. It made me feel good about the company," he said. "They did their due diligence." He was "thrilled" when he was offered the job as vice president of human resources. "And after all that effort, if they don't at least make me an offer, I'm going to be so ticked."
One side effect is that the company has improved its retention rate significantly, going from a 52 percent retention level to a 75 percent level over the past few years. "Now we're going to the next level of fruit on the tree," he says.
At Toll Brothers, referral reward programs are well-established. "I'd always prefer to give money to our employees than to a headhunter," says vice president Downs. He adds that employee referrals keep down the cost per hire, even when the company goes after candidates aggressively. "We pay employees $1,000 a referral," he says. "For three [successful] referrals, an employee gets a trip to an exotic island. We then encourage the new hires to refer other people."
Executive recruiting firms have their place, of course. "But it's important to partner with the firm so it becomes an extension of who you are," says Bill Carpitella, of The Sharrow Group. "It should reflect your culture and your environment." Developing a relationship with a head-hunting firm can pay big dividends, he says, but only if the relationship is managed well and the precise needs of the company are well-explained. "What I profess very strongly is that it's not the number of people, it's the quality of the people," he says. "Referral programs are OK, but they generate the 'B' players, typically. If you really want a person to come in and stay, then get the 'A' player," he says. "That's what a good search firm is about."
Builders are aware they're increasingly competing with other professions for talent, and competition for the best can be fierce. Downs, of Toll Brothers, notes that competition is coming from new quarters. "The main problem area for us is the mortgage industry," he says. "There is very rapid growth there." Of course, there is rapid growth in the building industry as well, and that can make it challenging to keep a finger on the pulse of the entire company. "The company is getting bigger," says Downs. "So we can offer more opportunity. But it's a crazy world out there, and competing companies can sometimes offer better packages and better opportunities, particularly to lower-level employees in the field."
Builder 100 Employment
Source: BUILDER magazine, BIG BUILDER projections
|Keeping Up: Demand for employees, before turnover, is expected to grow 36 percent by 2005, according to BIG BUILDER projections.|
Hovnanian's Csabay observes that below management level, "We're competing with non-home builders for information technology professionals, finances, office services, sometimes in architecture or purchasing, and even HR itself."
But Csabay says he feels that competition from those outside the industry has a silver lining in that it forces builders to look at best practices in recruiting in other businesses. "The home building industry has long been too insular," he says. "We have not looked beyond builders to find out what other companies' best practices are. We ask, 'What's Pulte doing, what are the top 10 doing?' That doesn't serve me well because [home building is] an industry that hasn't been too innovative in terms of human resources," he says. "We should benchmark against the Microsofts and General Electrics" to learn to recruit and retain the top talent at all levels.
When builders as a whole gain a better reputation, when compared to "sexier" industries, recruiting may become easier. But consultants note that only one residential builder, David Weekley, has ever cracked Fortune magazine's list of "Best Companies to Work For."
"Now that David Weekley has appeared there, other builders are trying to rise to that challenge," says Freedland.
A Hopeful Horizon?
Ten to 12 years ago, builders were a revolving door, says David Weekley's Gentry. But as builders grow, they cannot afford to lose and replace so many people. They have had to hone their communication and management skills. "We went from a successful [small] builder to a size that demanded a successful management style," says Gentry.
Hovnanian's Csabay notes that builders are increasingly examining their internal hiring practices to provide better customer service. "We want to hire people who will reflect the complexion of their communities," he says. Diversity in recruiting is one of "the hottest things" on his desk right now, especially as new immigrants from Asia and Latin America start to drive some of the market for new homes.
The issues are not new, nor are they unique to the building industry. "I came out of 14 years in cosmetics," recalls Csabay. Be it face paint or wall paint, recruiting certain people was difficult until the image of the profession changed. "I couldn't recruit any males [in cosmetics]; it was a female-run industry," he says. Cosmetics has changed, he says, as it raised its profile in finance and sophistication. But the home builders' image has yet to change. Csabay says he can't remember how many minorities he saw at NAHB conferences or trade shows, "or whether I saw any at all," he says. "So it's the industry, and that's a big challenge."
Downs, of Toll Brothers, sees small-step progress in recruiting for large home builders. "A lot of other industries have suffered tremendous job losses," he notes. "But not home building."
Recruiters can measure and support the growth of the beast. But when it comes to recruiting, builders who want the best talent have to sharpen their claws and become predators. "Decide you want the best," says Freedland. "If your [vice president] of construction is very good, if your salespeople are very good, it will make a difference," he says. Find the best people, attract them, and the animal will begin to purr.
Estimating the Need
There will probably be a demand for more than one million single-family homes per year across the nation -- for the next 10 or 20 years, says Jon Downs, vice president of human resources at Toll Brothers. How many people does a builder need to keep pace with that demand?
Downs has done his own analysis. "We now hire well over 1,000 people per year," he says, "and that number will probably increase 10 to 15 percent a year for at least the next few years." One thousand people a year is his "floor," he emphasizes.
Consultant Bill Carpitella, of Atlanta's The Sharrow Group, who worked for several years with both Pulte Homes and Hovnanian Enterprises, says that putting people first, as Downs does, is the best way to grow. "The people should drive your programs, your systems, and your growth strategy," Carpitella says.
But how do you know how many people you will need? Carpitella suggests a rough formula. First, look at your past three years of employee turnover and average it. Absent any anomaly, that's the base number of employees you will need, he says. So if you experienced an average of 22 percent turnover, and you had 100 people, you will need to hire 66 people every year.
But all is not static, of course. Builders are becoming increasingly aware of the benefits of training and technology. These should save on employee hiring. "Take construction," suggests Carpitella. "If you spend $200,000 on training, you expect some lift in the competencies in the people who took the courses. If you're averaging five homes for each construction person on the payroll, then after training you average 5.5 homes per person, your hiring can drop down 5 percent."
This is not an exact science. But it does allow a builder to project growth responsibly, says Carpitella. Most companies have a three-year strategic growth plan, aiming for a certain amount of market share or mapping where to go regionally or nationally. If you're building 500 homes in Orlando, and you expect 15 percent growth in that city, then it's important to hire the people to support the growth, says Carpitella. If you see an opportunity to go to Tampa, and you buy an existing builder there, how many of those people will you keep? There should be a strategy, even in times of explosive growth, he says.
After 11 years at Toll Brothers, Downs has seen a great deal. "Five to 10 years ago we had such a tough time staffing," he recalls. The high-tech industry, then beginning its boom, was snapping up many engineers, marketers, and anybody that moved. Downs studied their methods. "Cisco Systems had 600 internal recruiters working for them" at the height of the boom, Downs recalls. Now, with the glow of the dot-coms diminished, more reliable industries such as home building are taking off. The question is how to support relatively high levels of growth in a sustainable way, knowing downturns can happen.
Mike Gentry, vice president of David Weekley Homes, is familiar with booms and busts and their toll on human resources. "I came from oil field industry," he says. "Talk about an industry that's been through ups and downs." The attacks of Sept. 11 definitely had an impact on growth, says Gentry. "But there were no mass layoffs. We didn't grow as much as we could have grown had [the attacks] not happened." Planning for the future must take such catastrophies into account.
The key to sustainable growth is good information, he says. "The better information we have, the smarter people we can attract to help the business survive in this globalized economy. I think we have better information today than we had 10 years ago, or even five years ago. We're able to commit and predict; and not overextend ourselves. We've become much better at predicting the future, if you will."