Trade Signals

By Jay Holtzman. Despite the imperatives of a tight labor market and the constant drive for more profits, trade partnering has gotten a lot more lip service than serious effort. A few big builders and a small number of contractors have substantially changed the ways they work together. The majority continues doing business as usual.

"At best, 5 percent of the builders are doing this well, and another 10 percent are playing at it," says Scott Sedam, president of TrueNorth Development, a consulting and training firm based in Northville, Mich. "People opened up to partnering in the mid-'90s. But there were a lot of things being done under the guise of partnering that turned out to be the same old thing."

It's no wonder. The task — a thorough reinvention of historical relationships and ingrained ways of doing business — is daunting under the best of circumstances. The challenge is compounded by many factors: a narrow focus on short-term financial performance, revolving-door management teams, turf battles within builder organizations, trade skepticism, and a natural reluctance to give up familiar ways that, for all their shortcomings, get houses built.

"Partnering is a wonderful thing to conceptualize, but it is such a paradigm shift in the relationship between trade contractor and builder. It is very difficult to accomplish, based on the history of the industry and, in many ways, the root behavior of builders," says Mark Upton, president of Engle Homes Arizona in Phoenix, an operating unit of Technical Olympic USA in Hollywood, Fla.

"Even when you have a specific program and integrate it into your relationships and culture, most trades have been so well trained to expect the builder-program of the week' that they are hardened to change even when it can benefit them," Upton adds.

Wireless Connections

But communication-enhancing technology has made the going easier, especially among the trades on a given job. And, according to Upton, that's where the greatest savings potential lies. "When you break down the waste in the system, it is 25 percent the builder, 25 percent internal systems, and 50 percent trade to trade." That may be why builders that have enjoyed the greatest partnering success use new technology to speed and broaden communication among all the trade partners.

"It's an overused phrase, but it is all about communications," says Mike Furlow, executive vice president and COO of Beazer Homes USA. Partnering programs provide "better methods, more methods, multiple methods of communicating," he says, that "have brought us together [much] more with our trade partners." One such technology is an Internet-based integrated scheduling package Beazer is phasing in across the country.

At its Virginia division, almost all Beazer's contractors are using a new MH2 system, according to Glen Johnson, division executive vice president and COO.

When work begins on a home, a "template" for that job is loaded into the system. "It will show them day-by-day every house we have under construction so they can see just what they have to order," Johnson explains. "It allows our superintendents to track work and make schedule changes on the spot." Beazer superintendents and contractors use Blackberry hand-held devices to access the system. The super walks the jobsite, checking off what has been done, and the system automatically gives notice to contractors and suppliers confirming the lead time for their activity. It also notifies supervisors of what they need to order at a particular time and simplifies the ordering process. Oak stairs may require three days this week and 10 days next week, says Johnson. "The super doesn't have to try to remember different lead times, because schedules are automatically updated as lead times change." Beazer pays using the paperless system too, eliminating invoices, and some of its contractors have begun using it for their own accounting.

Getting Buy-In

Trade contractors' rapid acceptance of a new technology is itself a testament to the system. It also illustrates the care required to deploy and implement new technology.

Roll-out of MH2's system in the Virginia division took about a year, starting with a two-month window for Beazer personnel to learn it and work out the bugs. Then, the firm introduced the system to contractors as a big event and used it for four months before adopting the automatic-payment feature. The company started with 25 percent of its contractors online and added more each quarter until reaching nearly 100 percent.

Gains in speed and efficiency are shared across the board. Superintendents have become much more proficient at scheduling and managing their business, says Johnson. "I don't have a superintendent spending hours in the trailer rewriting schedules, so he can spend more time managing the job," he says. In addition, the roll-out brings useful technology to some of the smaller and less sophisticated contractors that didn't have the resources to capture this information.

"All in all, it has allowed us to balance our workloads much better," Johnson adds, and that clearly benefits everyone on the job.

Gaining Traction

Engle Homes, also, has turned to technology for better trade relations and efficiencies in those relationships. For two years, it has used a Web-based "job-ready/job-complete program" with a checklist that enables the builder to track inefficiencies caused by missed scheduling commitments and incomplete or incorrect work. Trade contractors answer a series of questions about each job that are entered into the system and made available via the Web. The trades can see by job, by builder, and by subdivision how much other contractors are costing them and how much they are costing others, says Mark Upton.

In addition, the company got buy-in and better results by sharing everything with the trades, he explains. This includes strategic business planning and "communicating about business initiatives in a two-way manner," he adds. "We do this so that the contractors can give us feedback, critique us, and tell us better ways to get to where we want to go." The builder recently put the system to work as it recast construction documents that were "a major source of inefficiencies," says Upton. Instead of taking a solo approach to revising the specifications and scope-of-work documents related to field practices, "We brought in trade by trade and rewrote the documents based on how they viewed the process. Then, we brought in the field to make sure that what the documents state is what is really happening out in the field. Now, these documents truly reflect those line items in a production schedule," he adds.

Two-way communication, facilitated by technology, also has paid off for a number of other builders, notably Pulte's Minnesota division. There, trade contractors, purchasing managers, area managers, supervisors, and warranty people rewrote all the division's general specifications for each one of their jobs, says Gary Grant, division vice president, construction, and a longtime champion of partnering.

Sivage-Thomas Homes has a very detailed set of specs that is continuously subject to review, explains Michael Sivage, CEO of the firm, which is based in Albuquerque, N.M. "We sit down regularly with the trades to ask if there is something we can do differently to make the product better, reduce costs, etcetera. It's almost a daily function, and we make changes pretty readily."

Behind the Screen

As positive as such results are, technology can't work to full effect, and honest communication won't take place, unless builders address intangible, human factors at the same time.

"Trust, that's the word people are afraid to use," says Mark Williams, chairman of a Pulte division trade council and president and CEO of Floor Space, a ceramic tile, stone, and floor covering company in Livermore, Calif. "We're saying, 'Let's do something radically different than the old model.' Unless we trust one another, we can't even sit at the table."

He calls the human elements and technology "all part of the same situation" and points to results such as a jump in buyer satisfaction from 81 percent to 94 percent in two years as what can happen when both come together.

Intangibles are at least as important as pay and scheduling and jobsite conditions, says Pulte's Grant. "The intangibles, respect and being honest with one another, will make you successful.

"You also need upper management that will let you do this kind of program," he says. "You need management to allow the people -- from purchasing agents to vice presidents of construction -- to have the daily contact with the trades."

The commitment, moreover, has to be to a long-term effort, one that embraces a focus on total cost, with rework, warranty, customer satisfaction, and customer referral factors included, not just initial price, says Scott Sedam. "Without question, I think orienting to total cost criteria is a prerequisite for partnering with the trades."

Grant argues along similar lines. "You can't be thinking short term," he says. "You can't get the cheapest plumber or electrician or carpenter and worry about the quality and callbacks later [simply] because the market is hot."

Partnering, though facilitated by technology, continues to be a long-term proposition. "As much as upper management has the desire to change, it is very difficult to watch over the execution and implementation of these programs at the field level where the rubber meets the road every day," says Steve Santa Cruz, president and owner, SC Design, San Diego. "You are talking about a major reconditioning after years and years of conditioning at the mid-management and field levels," he adds. "I believe wholeheartedly that it will change, but not overnight."

Builder Upton agrees. "The economics are there for the builder and the contractor," he says. "It is a very slow-moving change process, but it will happen. In 10 years, it will clearly be more the norm, and possibly the norm."

?Jay Holtzman is based in Jamestown, R.I.

Published in BIG BUILDER Magazine, September 2002