If the recession taught U.S. home builders anything it was how to tighten their belts and get by with fewer resources: fewer employees, less land, less capital, and fewer buyers. They survived by cutting back and figuring out how to be as efficient as possible without sacrificing customer satisfaction.
Although the housing slump has subsided, many U.S. builders are still operating in a recession-era mindset. They work smarter than before the downturn, carefully considering where every dollar goes. They know from experience that customer demand is fickle, so they’ve honed their marketing and customer service skills. And, they’re embracing technology and building science in new ways to help keep costs down.
Now that buyers are back, these lean builders—especially private firms in smaller markets—are wildly successful, with many enjoying off-the-charts growth over the past few years. Their explosive gains are the big story of this year’s Builder 100 and Next 100 lists.
Employee productivity is the key to these builders’ prosperity. While Builder 100 companies averaged just under four closings per employee, the hardest-working firms’ employees came in way over those numbers—averaging nine, 11, even 17 closings for each person employed. The vitality of this group of firms is driving the industry as it sets the pace for the American economy: Combined revenue of all top 200 builders in the country grew 30% year over year, from $86 billion in 2015 to $112 billion last year.
Who are these uber-productive builders, and what is their secret?
First off, they are not publicly owned. Although public builders often tout the power of their economies of scale, analysis of the Builder 100/Next 100 data found that most of the ultra-productive firms are privately owned. Only one public builder—The New Home Co.—is in the top 10 for employee productivity.
For the most part, they are local firms that compete with larger builders in the cities where they build. They are located in varied markets across the country in places like Dallas, Salt Lake City, Nashville, Tenn., Charleston, S.C., Colorado Springs, Colo., and Indianapolis.
One characteristic that’s shared by these firms is the way their executives value employees and provide them the tools needed to do their jobs well. “We have truly dedicated and highly productive people that believe in our vision,” says Curtis Rector of Indiana-based entry-level builder Arbor Homes, which closed 852 homes last year, a 36% increase since 2014. “Our systems and processes enable them to be the best they can be.”
Happy employees are productive employees, says Michael Lucas, principal of Colina Homes in Houston, which has experienced 81% growth in closings since 2015. The company’s salaries are higher than average, he says, and workers enjoy flexible schedules and the ability to make their own decisions. “We don’t have middle management, so we depend on our employees to be professional, accountable, and to manage their communities like they own them,” he says.
At Classic Homes in Colorado Springs, Colo., which has seen closings increase by 40% a year for two years in a row, it’s not unusual for employees to stay for 15 years or more, and most trade partners have been with the firm for more than 20 years. “We are fortunate to have very experienced personnel, both in project management and in our construction managers and our field personnel,” says Douglas Stimple, CEO. “These people all intimately understand our plans, our philosophies, our scheduling, our trade base, and our policies and procedures.”
Builders like South Carolina–based Great Southern Homes that had to downsize during the recession are strategically hiring again. “We like to call it ‘putting the band back together,’” says executive vice president and CEO Mike Satterfield. This acquisition of talent helped the company quickly emerge from the downturn and expand aggressively into new markets: Today it is one of the fastest-growing builders in the country, increasing closings 96% since 2014, and opening satellite offices in Greenville, Clemson, and Myrtle Beach.
New Home Co. CEO Larry Webb personally oversees many of the hires at the Aliso Viejo, Calif.–based firm, which had its IPO in 2014. “I have always said that this business is not about sticks and bricks and land—it’s about the people who do the work of building houses,” he says. “One of my biggest responsibilities is to hire the right people and make sure they have an environment where they can do the best work of their life.”