The greatest assets of a builder's business, say many executives, are those that leave the premises every evening. But getting the best employees to return every morning has become more critical than ever to big builders, whose plans require supporting strong sustainable growth in the home building profession.
For the broader building industry, employee retention remains a challenging fact of life. As a whole, the construction industry experiences 60 percent employee turnover each year -- a rate exceeded only by the retail industry -- according to the Department of Labor. The professional home building industry is not nearly as volatile. Yet knowing how to keep the most talented employees satisfied about returning to the companies they work for day after day is as critical to a builder's future as finding new property to develop.
When you ask home building professionals what matters most, the critical elements of successful employee retention boil down to three ingredients: a participatory culture, principled leadership, and equitable performance management. Employees at all levels are affected by the presence or absence of those three attributes, according to a recent survey completed by 267 big builder executives, sales, construction, and administrative managers. The study was conducted by BIG BUILDER magazine with The Daniels Group Inc., a consulting group in Mills Valley, Calif.
Unless builders work to strengthen the ties binding workers to the company, the business' most valuable assets may leave and not return.
Some builders are taking action. "It has been a challenge, but retention has been a particular focus for David Weekley Homes," says Mike Gentry, the builder's vice president of human resources. "We've put some real effort into it. In 1999, our overall retention was about 60 percent. We've now achieved a 75 percent retention rate."
But too many builders ignore the retention issue or are reluctant to implement changes to increase worker satisfaction, says Martin Freedland, who lectures and writes on corporate management as president of Atlanta's Organizational Development Associates. A lack of attention to employee satisfaction creates turnover even at the lower company levels, such as sales representatives and junior management, making it difficult for builders to develop "bench strength," he says. Such strength is necessary during good times as well as bad, as the strong home building economy and fervor for growth place great demands on employees. "When they're taking off, they're desperate for people. When the market starts to slide, they lay people off," says Freedland. "These great shifts either way change employee relationships." And not many builders are as aware as they should be of this, he says.
The good news, according to the Big Builder survey, is the generally high level of employee satisfaction among those working for big builders. Managers at builders with more than 2,000 starts per year report relatively higher scores about employee satisfaction compared to their counterparts at smaller and mid-size builders.
But there was bad news as well. A soft underbelly of discontent emerged in the areas of employee participation, performance evaluation, training, and executive management practices. The question for builders is, how can these cornerstone elements of a business' culture -- a participatory environment, principled leadership, and fair performance management -- be nurtured at a time when the market demand for homes is placing great demands on everyone in the building industry?
One of the keys of worker satisfaction is a participatory culture, the survey revealed. A participatory culture is characterized by a strong sense of purpose and direction, team-building, and the easy flow of information across all company boundaries, according to The Daniels Group definition.
Survey findings revealed that only 43 percent of builder employees thought that "my employer keeps me informed about the matters that impact me." And only a little more than half, or 52 percent, agreed that "people within my organization communicate comfortably regardless of position or title."
When the survey asked respondents to identify things builders could do to improve employee satisfaction, more than half of the respondents focused on communication. Suggestions included: "Communicate more openly with lower level management as to potential projects," "Communicate from top management to all levels of associates," and "Provide more information on future plans for our division."
This is more easily said than done. Jon Downs, vice president of human resources at Toll Brothers, in Huntingdon Valley, Pa., says the survey reinforces his long-standing beliefs. "I always maintained there are two essential things in any company: communication and appreciation," he says. "Give credit where it's due." But at a company that closed 4,430 homes in 2002, communication can be difficult. "You'd be hard-pressed to find any company that gets 100 percent. We get busy and we fall down," he acknowledges. "We do have a regular, formal channel of communication and weekly meetings. But even in this era of e-mail, it's hard to get the word out."
E-mail also can be a crutch that shields people from more effective, person-to-person communication. David Weekley's Gentry says that an over-emphasis on electronic media to communicate can be counterproductive. "E-mail causes relationships to deteriorate," he says. "Sending an e-mail down the hall, rather than going to talk to someone," is not effective communication, he says.
As companies expand, it will be even harder to communicate effectively and personally without conscious, extensive efforts, predicts Lou Csabay, vice president of human resources at Hovnanian Enterprises, in Red Bank, N.J., which has recently expanded through major acquisitions.
Person-to-person communication, especially from top management, is especially appreciated. "One thing that David [Weekley] does very well is make an effort to communicate directly with team members," says Gentry. "It's a tremendous investment that he makes personally, to let everyone know where we stand as a company."
Human resource vice presidents agree that the kind of leadership shown by David Weekley is increasingly found in the home building industry, which has focused on honing management skills over the past five to 10 years. Much of a company's atmosphere is set by example from the top, says consultant Bill Carpitella, of the Sharrow Group, who has worked with both Pulte Homes and Hovnanian Enterprises.
The survey's findings reinforce this view. When asked if their "manager's leadership abilities impact their interest in remaining with their organization," 88 percent of respondents either agreed or strongly agreed.
Carpitella says he sees improvement as the next generation takes over. The "old school" believed in an authoritarian, almost Neanderthal style of governance, he says. "I see now that these people have hired human resource people from other industries, and that is making a difference. They complement the lack of people skills of some home building executives."
How Am I Doing?
Even with good communication and leadership, people are still insecure about performance management, which encompasses compensation, accountability, and measurement of one's job performance. There is significant frustration in these areas, according to the survey. Employees want punctual performance reviews conducted according to known criteria and compensation commensurate with the work performed. The survey revealed that:
- Only 45 percent of employees said their last performance review was conducted in a timely way, as promised.
- Almost 45 percent don't fully understand the factors used to measure their performance.
Compensation is another area where the survey revealed dissatisfaction -- not so much at the amounts, but at whether peers received similar compensation. Builders are becoming creative when it comes to benefits packages distinguishing themselves from other employers.
"We offer generous discounts on a Toll Brothers home," says Downs, "and on mortgages through our mortgage company. We work to get a good rate for our employees; rates usually better than one can find on the Internet." Especially popular are company guest houses that Toll maintains for employees to use for their vacations.
These benefits are big retention items, says Downs. "You don't go back to your spouse and say, 'Toll Brothers has Aetna,' but you say, 'I get a 1 [percent] to 2 percent discounted mortgage and use of the company guest house.' " He insists these perks are not expensive. "But it's not a minor thing, like a free T-shirt. It's real money and a real benefit." He says the message to employees is that the company cares. "My company is like Avis -- we try harder," Downs says. And consultant Carpitella warns that CEO compensation may become a more important factor in worker satisfaction.
Bumps in the Night
Human resource managers are taking nothing for granted, especially not the strong economy. Hovnanian's Csabay says he is not complacent. "I'm especially concerned about what happens when the business goes south," he says. "Right now, there's an infectious 'you're on a winning team' atmosphere. But there will come a time when we don't have double-digit growth. How do we retain people when the industry takes a dive?"
Downs is also preparing for a rainy day. "We all agree there will eventually be some kind of [downturn]," he says. Good employee management practices will help those builders through leaner times, ensuring both employee and customer satisfaction. At the end of the day, little will work well if the finest employees walk out the door and don't come back.
|Following are steps home building executives can take to improve the way employees feel about working for you and your management team, based on a Big Builder survey of home builder employees and managers:|
To Do Today
1. Listen. Allow for regular sessions for your managers to get a chance to discuss more than the necessities of "sell 'em, build 'em, close 'em," says Ted Bellamy, principal of The Daniels Group. Encourage discussion. Ask questions. Listen long and hard.
2. Challenge. When your managers present you with a problem, rather than offering solutions, get in the habit of asking what else they need to know to handle the problem on their own. Ask who would be good members to include on their team, and get out of their way, says Carpitella, of The Sharrow Group.
3. Celebrate. Recognize as many small victories as possible. "Top Gun Awards" are valuable, but don't pass by opportunities for a quick thanks, an e-mail of acknowledgement, a comment at a meeting, or a surprise dinner treat.
4. Set an example. Employees will emulate what you do, not what you say. So, for example, be sure to conduct timely and thorough employee reviews, emphasizes Bellamy. Require your managers to hold firmly to review dates, and include this as a performance item when you review each of them.
5. Evaluate. Take a look at your training budget. Most builders spend far less in training dollars (as a percentage of revenue) than do other industries, observes Bellamy.
6. Be considerate. Avoid discussing performance issues in public settings, or complaining to one manager about another. "This comes up by accident, say, over a beer," says Bellamy. "Most managers don't even realize they're doing it."
1. Recognize the true cost of human capital. Calculate your total annual investment in the company's human assets, and budget for their further development, recommends J. Mason, of The Daniels Group. After all, he notes, it's probably the only asset you have that you don't want to turn over.
2. Familiarize yourself with employee vital signs. Understand the true opportunity cost of turnover and mistaken hires, says Bellamy. Measure turnover as you would any critical facet of business performance.
3. Create the right hiring program. "Understand the challenges inherent in every position," says Bellamy. "Manage the orientation of, and your team's adaptation to, new employees."
4. Conduct employee surveys. At least every two years. Web-based surveys may help contain costs and may encourage honest communication, according to The Daniels Group.
5. Track turnover by position and cause. Conduct thorough exit interviews. "If conducted properly, exit interviews are a tremendous way to identify problems within the organization," says Bellamy.
6. Strive for consistency in management practices. Most executives don't see (or don't believe) the impact their behavior has on the organization. Good behavior at the top leads to confident employees and predictable performance results, says Carpitella.
7. Find a coach who is a colleague. It could be someone at a similarly sized company in a different market, suggests Mason. "Ideally, it's someone who will tell you even what you don't want to hear."