Moving to the Next Level of Profitability

The net income of the top 25% of all builders is 2½ times the net income of their peers left behind. Why settle for average when working smarter is so much more profitable?

"Regardless of unit volume, the leading profit-makers dramatically outperform their peers", reports Mike Benshoof, one of the authors of NAHB's 2001 The Business of Building study of 400 builders (builderbooks.com). "In the small volume, custom, and production builder categories, the top 25 percent of builders outperform their peers by factors of 325%, 376%, and 256%, respectively."

What do managers of high performance companies do differently that get bottom line results? To find out, business practices of NHQ winning builders were contrasted with other well-run companies who have applied for the award. The average NHQ winner ranks in the top 6 percent of profit-makers. Key areas that correlate to superior performance are:

• Top management has a compelling future vision for the company and constantly communicates it to the entire organization. Feedback from employees directs them to reinforce specific areas of the organization.

• Strategic plans lead to the company's future vision with annual goals and objectives. Monthly management meetings track strategic improvement initiatives as well as financial performance.

• Workforce training focuses on competencies the company needs to achieve the future vision. Each employee participates in at least 40 hours of training per year.

• The use of information technologies is customer driven. Emphasis is placed on internet-based customer relationship management (CRM) and enterprise resource planning (ERP) systems.

• Satisfaction is measured for customers, employees, and trade contractors. Data is shared throughout the company and used to improve results.

• Employees, suppliers and traded contractors are actively engaged in systematic improvement approaches (plan-do-check-act) to quality and productivity improvement. The best have quality assurance systems based on ISO 9000 principles.

• A balanced set of performance measures keep everyone focused on results that matter. The performance measures link directly to the company's mission, vision, and values. Results are tracked monthly and shared with everyone. Key activities and departments have their own measures that harmonize with overall company measures. Personal evaluations and bonuses are carefully crafted to reinforce the correct behaviors.

Each of these items is something that any motivated management team can bring to their company. An extra five percent of net income can make the effort worthwhile. The move to the next level of profitability is yours to make.

The Business of Building 2001 Cost of Doing Business Study