2014 Builder of the Year: Goodall Homes

When the new construction market crashed and subdivisions across the country were littered with skeletons of bare framing atop gray concrete footings, Goodall Homes started building a clubhouse for what would become one of the best-selling communities in Middle Tennessee. StoneBridge in Lebanon had 875 home sites but lacked an amenity center when Bob Goodall began building there just before the debt crisis was unleashed. As most of the industry waited out the Great Recession, Goodall decided he had to build that clubhouse so the development could get through the downturn. When prospective buyers saw a new development taking shape with a community center and a pool, he was sure it would give them the confidence to buy because the neighborhood was not going to turn into a ghost town.

“When the market was down, I was getting so excited,” said Bob Goodall, Goodall Homes’ president and owner. “I would look at housing starts since 1950 and see cycles, how long they lasted, and what happened when you came out of them. I got excited knowing that when this thing does come back, it was going to come scalding back, and we’re going to be in a good position. It didn’t happen as quick as I thought but even that helped because it gave us time to build up our systems.”

Since the beginning of the housing market collapse, Goodall Homes has had record years and grew from being the No. 13 builder in the Nashville market to the No. 2 builder. The company also has been recognized by the Nashville Business Journal since 2009 as one of the top five fastest growing private companies in the area and by The Tennessean for two consecutive years as one of the top places to work. Goodall bounced between $20 million to $30 million in annual revenue before 2008 when it closed 96 homes. This year, sales are projected to top $102 million on 363 closings. And the company started its biggest project yet: Millstone, a master planned community in Hendersonville with more than 600 single-family homes, villas, cottage homes, and townhomes.

The company’s rise cannot be attributed merely to counterintuitive tactics such as building the clubhouse, although there are prime examples of Goodall being ahead of the curve. It prepared for a surge in demand from aging Baby Boomers by marketing One Level Living—a single-level floor plan that appealed to homebuyers in all seasons of life with zero-step entries, wide doorways, and spacious bathrooms and kitchens that can accommodate wheelchairs, baby strollers, and furniture moving. Another was addressing labor shortages by adopting even flow scheduling, thus providing trades with steady work, reliable start dates, and payment every week.

Then there’s First Investments, an idea that Bob heard about from a fellow builder in his Builder 20 club. First Investments is a single-family rental company; Goodall Homes employees run the company and get a cut of the profit from leasing model homes, houses that Goodall has built as well as other properties, to renters. Rather, the builder has excelled by steadily laying the groundwork since the beginning of the downturn to change the company ‘s culture and attract talent that is self-motivated and entrepreneurial.

The Game Begins

The first step in that direction was transitioning in 2006 from a construction company with laborers and equipment to a management company that relied more heavily on subcontractors. The switch was recommended by Orlando-based SMA Consulting, which Bob and Keith Porterfield, chief operating officer, retained after meeting the management consultants at a builder show. SMA also recommended they read “The Great Game of Business” by Jack Stack. The author is chief executive officer of SRC Holdings, an employee-owned engine and engine components manufacturer that started when Stack, along with a few business partners, bought the failing division from International Harvester. Stack is regarded as the father of open-book management (OBM), whereby managers regularly share financial statements with employees and teach workers how the business works, specifically, how the company makes a profit. His method calls for turning this exercise into a game, letting employees keep score, and motivating by giving them a stake in the outcome through profit sharing and bonuses.

Opening the Book

“Bob and I read it, and I asked Bob if he believed in this. He asked me, ‘Do you believe in it?’ I said yes, and he said, ‘Run with it,’” Porterfield says.

Keith joined the Marine Corps right out of high school and after leaving the service started his own home building company in Kentucky. He moved to Nashville in 2002 and eventually landed with Goodall as a project manager. Bob had a handful of subdivisions then, and Porterfield was assigned the task of cleaning up the performance of each of them, building structure and organization into their operation.

“My management style is to give very little direction, very little detail, and I need somebody to get it done,” Goodall says. “I guess it is kind of a weakness, but it ends up being a strength because what happens is it attracts people who are high drive and high motivation.”

Selections by the Book

An easy-to-read workbook makes design center appointments more enjoyable

For a buyer, one of the joys of a new home is the prospect of making it their own through the selection of options. Then they realize that the options include items such as electrical outlets, wiring for TVs, speakers and Internet, and the mortar color for their bricks.

To help customers prepare for their design center appointment, Goodall Homes Sales Manager Ashley Crews created “The Goodall Design Experience: What to Expect.” It’s a workbook that gives customers a comprehensive overview of the selection process, complete with explanations about what they’re choosing and why. Each workbook is tailored to the home series the buyer purchased, with items that come standard and a price sheet on all their available options. It has lots of photos, and plenty of space for notes and questions they’d like to ask during their time at the design center. Customers receive the workbook about a month before their appointment, so they have plenty of time to think about their options.

“We determined the need was there because when the customers came into the design center, we were asking them all these questions,” Crews says. “The surveys they filled out later said it was a little overwhelming. We wanted to make the time in the design center more fun.”

The workbook is written in an easy-to-read style that takes into account the fact that most homebuyers don’t have much experience with topics such as fixture finishes. The book begins with exterior options, asking the question: “Imagine pulling into your driveway after a long day. What do you want to see?” Photos of several “inspirational exteriors” are included, and buyers are urged to circle the ones they like. They’re also encouraged to drive through some Goodall neighborhoods and jot down the addresses of a few houses, with notes on what they did and didn’t like about them.

Crews says that she and her team devoted a lot of time to the exterior chapter because customers seem to have the hardest time making those choices. “We just need them to tell us what they like and don’t like, and we’ll hold their hand and walk them through it when they get here,” she says. “If they’ve only circled brown brick, we know that’s what they like.”

Just introduced this fall, the workbook already has helped cut the time customers spend on design appointments by as much as half—from four hours to two—and it’s making the time they spend there more enjoyable. Customers used to spend the bulk of their appointment on deciding where to put outlets and lights. “Now, we spend most of our time on the kitchen and flooring,” she says. “It’s really night and day. We used to spend an hour on electrical. Now, it’s 15 minutes, and we’re on to the fun stuff.”

Crews says she can get a good sense of how much time she’ll need with a customer by how dog-eared the workbook is. “The more ‘loved’ the book is when they come to the design center, the faster the appointment goes,” she says.

The price sheet that accompanies the workbook helps customers come prepared with a much clearer idea of how much they’re spending. It works much better, Crews says, than the previous system, which was to create a wish list and then present the price to the customers. “We were putting a lot of options in and then taking them out,” Crews says. “Now they come to us with a more dialed-in budget. They don’t have the fear of the unknown so I think they’re willing to spend a little more money.”

Why go with paper instead of a digital version? “An app would be awesome, but paper was realistic for us at this moment,” Crews says. “Instead of sending them a PDF of 150 pieces of paper, we put it in a book they can take to dinner or sit on the sofa and go over.”

Goodall plans to do a new version of the book each quarter to reflect updates in floor plans and selections. Several copies of the workbook are kept at each model for sales agents to share with customers and real estate agents.

Crews says her favorite part of the workbook is having ample photography to show her customers. “The things we live and breathe are not second nature to the buyer,” she explains. “Grids in windows are something that people don’t pay attention to, but when I’m trying to sell them, they need to see them.”

Promoted to COO, Porterfield introduced OBM in 2007 by splitting the company into two groups—one would meet on Tuesdays, the other on Thursdays. The groups would discuss two chapters of the book at a time and teach each other how to be an OBM company. Next, Porterfield organized employees from a cross section of company departments into “tiger teams,” which devised Goodall’s profit sharing goals and payout schemes.

“Early in the recession when we were starting open-book management, there was a crisis of belief within our management,” Porterfield says. “Hey, if we got some bad news coming down the road, are we going to hold something back or are we going to be totally open book? It was unanimous that you can’t hold anything back. It turns out it was one of the best things we ever did, to be all in, open, and people rose to the occasion and met the challenges.”

One linchpin of the new culture was a weekly meeting where employees would see how the builder was faring financially. Eventually, this exercise called for a steward to handle financial reporting and scoring. Goodall might have been the only builder during the industry’s worst slump ever who secured a recruiter to find a finance guy. While going through the interview process before being hired as the chief financial officer in 2009, Rich Pankow was struck by how Goodall was a builder with the benefits of a small company that was acting like a big company.

“They had processes and procedures written out; they had documented work flow charts, they had costing. I thought they were going to be paying more for supplies than the big boys, but to my surprise they were competitive,” Pankow says.

Pankow is a product of the financial management training program with NVR, the national builder based in Reston, Va., and previously worked with Arthur Anderson and KPMG. He took the arduous task of presenting balance sheets and income statements to another level.

“We were used to seeing our financial reporting in analog,” Porterfield says. “When Rich got here, it went to HD.”

The OBM planning process starts with zero-based budgets assembled by employees for their respective departments. Each group also includes someone from outside the department to provide a fresh perspective and allow an opportunity to cross-train across the company. For example, the group compiling the budget for construction overhead will include project managers and someone from marketing and sales.

At least once a year, the financials and budget are presented by each budgeting group to all employees with pie charts. If the company’s macro pie chart for the year is one dollar, that dollar is then broken into expense items for the cost of goods, lot costs, sales and marketing, construction overhead, administrative overhead, warranty expense, and so on. Every slice is also broken into its own pie, which graphically shows the expense categories that are contained within that slice.

Today, the regular OBM meetings gather twice a month and are kept to an hour. The sessions are held in the training room, a big open area with white boards lining the walls. One stretch of boards has a breakdown by month of budgeted and actual figures for sales, closings, and gross profit. At the start of each gathering, every sales person stands up and shares the gross margin and gross dollars for the sales they had during the last two weeks by lot number, house plan, and community. “It is a good positive motivator because everyone wants to do well,” Porterfield says.

Another wall is lined with several white boards displaying bar charts with customer satisfaction percentages or net promoter scores (NPS) per salesperson and community. The builder used to measure customer satisfaction through third-party surveys that simply asked customers if they would recommend Goodall Homes to a family member, friend, or colleague, just yes or no. By 2008, the company achieved a 100-percent rating. A huge accomplishment, yes, but what did that figure really mean for future sales?

True Customer Satisfaction

Then Porterfield read “The Ultimate Question” by Fred Reichheld. The book laid out a different approach for surveying customers, called net promoter scoring, which today is used by large corporations such as Southwest Airlines, Walt Disney, and Trader Joe’s. Instead of yes or no, net promoter scoring asks customers to rank the likelihood to recommend on a scale of zero to 10 with 10 being most likely. Survey respondents who grade the company nine or 10 are deemed promoters. Customers who grade seven or eight are neutral or passives, and those that score the company six or below are detractors. The company’s net promoter score is calculated by subtracting the percentage of detractors from the percentage of promoters. Top companies score between 50 and 80 percent. Goodall’s score is in the mid-60s.

But even that is not good enough. “I don’t care if our score is zero or 100. What the customers are telling us and what small thing can we do to incrementally get better, that is what is important,” Porterfield says. “We don’t want anybody coercing anybody into a good score, so we purposely try not to put any (payout incentives) on customer surveys. We want honest feedback so we can make improvements.”

One such improvement resulted from learning that the builder’s design process was overwhelming clients with too many decisions to make. Employees developed a workbook that customers now use for budgeting and to preview options before their selection appointment.

15 Steps to Higher Sales: How Goodall Homes More Than Doubled Sales in Five Years

What did Goodall Homes, a small, local builder going head to head with the nationals, do to increase sales from approximately 147 in 2009 to about 425 in 2014? In a word, everything, says Chris O’Neal, vice president of sales and marketing, and Todd Reynolds, his sales director.

Here are 15 elements that helped propel sales for Goodall Homes. Some steps are unique to their location and might be difficult to replicate, but others are sales management strategies that can make a difference in any company in any market.

1. They expanded their land position. In 2010, when O’Neal joined Goodall Homes, the company built in just two counties. They took advantage of the economic downturn and depressed land values to expand into counties with good school systems and desirable developments, making them attractive to a wider range of buyers.

2. They added new product lines. In 2010, Goodall Homes had two product lines—single-family homes and condominiums. Their primary customer targets were first-time and move-down buyers. Since then, they have added villas, cottages, and townhomes. “When I first started here, we had lower price points,” O’Neal says. “As we expanded into communities with higher per capita income, we had to bring new product to the market. We’ve also put emphasis on enhancing front elevations and what we put into the homes. As we entered counties south of Nashville, which are the most affluent in the state, we needed to do that.”

3. They hired managers from national builders. O’Neal, Reynolds, and sales manager Ashley Crews all came from NVR. Between them, they also have experience at Centex and Beazer Homes. “We’d be remiss to not lean on that experience,” O’Neal says. “From a sales standpoint, the training we received there was a foundation for what we do here.” They also learned the value of having a customer relationship management program for keeping track of prospects; Goodall now uses the Lasso CRM program to help stay on top of customer contacts.

4. They played to their management strengths. O’Neal and Reynolds took the elements of sales management and divided them according to their personal strengths. “I really like process and structure,” Reynolds says. “I like getting the models started, going through checklists. Chris is better at sitting through long meetings. Both of us had always had to sacrifice time in the field or time in the office. This way, one of us can be in the field almost all the time. I can say that we are in the field with our sales team probably double of any other competitor. That, to me, is the number one thing to get sales. We train our people, watch them in action, and teach them. My wife says I should have been a coach. That’s what I do. I review a video shop with a sales person—I love doing that. It’s like watching game day footage."

5. They raised the bar on their marketing. Going up against the public builders meant that Goodall needed to up its game on its appearance. They changed the company’s logo, revamped its website, upgraded marketing materials that went home with customers, and took things up a notch in terms of model merchandising. “We brought that up to the same level as the large public builders,” O’Neal says. “We knew we could grow. We needed to make sure the marketing materials matched that.”

6. They invested in an online sales consultant. O’Neal says that Goodall Homes wasn’t the first builder in 2010 to do this, but they made the commitment to support it. “The online sales presence needs to be just like another community,” he says.

7. They improved their signage. It may seem like a little thing, but O’Neal says that when they asked customers how they found out about Goodall Homes, the top three answers are Realtors, the website, and signage. He says the company does signage well, but his team expanded on it. “It’s basic stuff like pointer signs,” he says. “We make sure they’re legible, easy to understand, and without too many words.”

8. They were picky about who they hired. O’Neal and Reynolds have a rule that they must be in 100 percent agreement on hires. They look for results-driven people with high integrity and a strong work ethic. People who can sell when the market is up and when it’s down. “We interviewed a lady a few years ago who worked in recruiting at a community college,” Reynolds says. “She made 100 calls a day because she knew for every 100 calls she made, she’d schedule 10 campus visits, and have one student decide to enroll. She knew her numbers. We tend to look at things like that.”

9. They are fanatical about training. Before sales associates begin to work with customers, they’re exposed to every department in the company and the entire building process. They complete an eight-step field training program that covers everything from greeting customers to shopping the competition. Video shoppers and customer surveys provide additional training opportunities.

10. They empower their sales associates. Reynolds says that he constantly tells his sales associates, “This is your neighborhood; you own this business; you make the decisions.” That message, he says, “makes them feel like it’s really theirs. They understand the impact of the decisions they make. You hire right; you trust people, give them knowledge like that, and they’ll do something special with it,” he says.

11. They do a good job of retaining their sales associates. In 2008, Reynolds went to Bob Goodall and told him he had studied builders who had the best retention rates with their sales associates; they were all paid salaries. “I said, ‘I want to put them on a weekly salary of $500.’ He said, ‘What if they’re happy making $500 a week?’ I said, ‘I’m not going to hire those people.’” Goodall said later he was glad they made the switch because when the market collapsed, it gave the sales associates something to live on.

12. They hold sales associates accountable for key results areas. Each year the sales management team identifies seven or eight key results areas. These included making a certain number of phone calls to real estate agents every week or turning in sales contracts with no mistakes. These areas are measured quarterly in performance reviews. “We hold them accountable,” Reynolds says. “Sometimes you have people with good sales results, but they don’t know how they got them. Over time, they’re on more of a roller coaster ride. If you’re on a roller coaster ride in sales, you won’t stay very long. I say, ‘I want you to be the most boring ride in the park.’”

13. They tell sales associates how their performance affects the company. Goodall Homes’ commitment to open-book management gives sales associates full access to the pricing spreadsheet on every home. “It has every floor plan, every cost, and what happens to the margin if you add options or give incentives,” O’Neal says. “If the team is educated, they understand profit and how important cash flow is to the company. It opens their eyes to that process, and they work harder.” Sales associates are held accountable for the gross margin on the houses they sell.

14. They developed great relationships with real estate agents. About 65 percent of Goodall’s sales come from customers working with Realtors, O’Neal says. “I bet if you asked a general sampling of Realtors, ‘Who do you enjoy working with?’ our name would come up.” One way Goodall fostered that relationship was through an annual Realtor gala with a nice dinner, entertainment, and prizes, including $10,000 for the Realtor who sells the most homes. The first year, the party was held in a clubhouse in one of Goodall’s communities and drew about 100 people. Now, it’s held in downtown Nashville at the Music City Center convention center and draws nearly 200 people. “The Realtors want to get invited,” O’Neal says, “and the way to get invited is to sell a home with us. The first year we gave out the prize for the Realtor who sells the most homes, the Realtor sold three homes. The Realtor in first place this year sold 12.”

15. Everybody reads every customer survey. And “everybody” means every employee in the company. “There is no rock to hide under,” O’Neal says. “We review them every week in our operations meeting, and we review them in our company-wide meetings every two weeks.” Customers aren’t asked to give the company a high score. They’re asked to provide honest feedback. “The survey isn’t about the score,” he says. “It’s about how we can improve. Sometimes it isn’t pretty, but it has allowed us to improve and get better every day. We learn a lot from the surveys.”

Goodall’s management style also gives employees the autonomy to make decisions that directly boost the bottom line. For example, senior management does not instruct sales agents on whether they should provide incentives to buyers to get a contract or which ones to give. The agents are simply given target incentive numbers for their communities. Then the sales agents decide how much to give and how much to hold back. This year to date they held back $300,000 worth of incentives that they could have given away to hit their sales target.

“Part of that is we give them a stake in the outcome,” Porterfield says. “Everyone knows that when we hit a certain net profit percentage as a company, it’s getting paid out quarterly, with a portion deferred to the end of the year.”

Where many companies will not divulge their cash situation to employees, Goodall managers share red flags such as an anticipated cash crunch coming in the next few months. Such knowledge can emphasize the urgency to move unsold inventory and to get more aggressive with selling market homes.

“Every time we’ve thrown out a challenge and a goal, the team has responded beautifully and delivered,” Pankow says. “I really think if you just kept it internalized and not put a challenge out to the team, I don’t think we would have had the success that we’ve had.”

Hiring to Fit the Culture

Creating a culture staffed with self-motivated entrepreneurs starts with hiring the right people. Chris O’Neal, another NVR vet, was brought in during 2010 as the vice president of sales and marketing to take charge of hiring sales talent that fits with a culture of being self directed.

“The ground work was there,” says O’Neal. “I probably brought the ability to bring in talent and put high octane fuel in an engine that was already running.”

A candidate for sales consultant obviously has to be persuasive, work well with others, and have a history of performance, though not necessarily in new-home sales. Goodall hires from outside the industry because it’s more important that the individual loves to get to the finish line and achieve a goal. Candidates are pre-screened by phone before being invited in for an interview. O’Neal, Porterfield, Pankow, and Todd Reynolds, director of sales, are the four managers who will sit in the interview with the head of the department that has the job opening as well as another interviewer from another department. They’ll ask situational questions that tease out whether the candidate is driven to succeed and results oriented. The prospect is interviewed individually and by the panel. Later a follow-up interview in a more casual setting will occur just to make sure that the candidate is a good fit.

“It doesn’t guarantee success but it has allowed us to get it right more than we get it wrong, which is a good thing because there is no greater challenge than if we hire wrong,” O’Neal says.

What kind of behavior does Goodall get by hiring to fit the culture? An OBM exercise calls for breaking employees into groups to create their own mini games to identify problems they can control and find ways that will boost profit. One outcome from the sales group mini game was finding that the company was under-pricing options that were popular with clients. This year, the mini game groups pushed the company into the next level of bonus payouts by devising solutions that added $200,000 to the bottom line.

“Changing the culture dramatically changed the landscape of our company because we had some people here who were accustomed to having people telling them what to do each day,” Goodall says. “It was tough for them, so as we went through the transition, there were folks who either retired or took other opportunities. They just left the company, so we replaced all those folks with (people) who fit into this new culture. Before, when we had an opening, we would have to recruit and advertise. Now it’s kind of organic where people in our company go to people they think highly of and recruit them to come here.”

Protecting the Culture

Managers and employees attend an annual company retreat to recharge, identify challenges, and set goals. Among the agenda items is identifying threats to the company. One topic on top of that list is protecting the culture. Goodall has grown not only in terms of revenue and closings but also in locations—two offices north and south of Nashville, a design center in town, 17 subdivisions, and almost 90 employees. Being bigger with multiple locations can be a threat to the builder’s familial atmosphere and to effective communication.

One way Goodall protects that culture is by celebrating the wins. When the company meets a goal, everyone is rewarded with days off, canoe trips, an outing to a sporting event or amusement park. Employees even spent a day on Bob’s farm with a picnic and activities like skeet shooting and bike racing.

There are things that Bob Goodall is able to do that other company presidents cannot. In a market where bigger builders are buying much of the prime land, particularly in the hot Nashville market, Bob can negotiate deals where landowners and developers share the risk by holding the first mortgage. But the owners also share in the profit because as Goodall closes on a house, he’ll pay down on the dirt by giving the landowner a price that probably is more than what those acres would have fetched if sold outright. Then the owner releases another lot for Goodall to develop.

“It starts with Bob. He treats people with the utmost of integrity and takes care of people the way he would want to be treated himself,” says O’Neal. “It’s because of those relationships that we have good land deals and strong banking relationships.”

The builder used to develop all its lots. Now the company develops half the land it buys and purchases finished lots, and it does so without accumulating huge debt. Goodall has had just one financing partner, Wilson Bank & Trust, since before the downturn, and the regional banker continued to provide the builder’s capital needs during the recession. Goodall’s relationship with Wilson and the company’s financial transparency are big factors in why Bob is able to forge these deals.

The treating others as you would want to be treated philosophy extends to philanthropy, as well. Goodall Homes built and donated mortgage-free homes to two wounded combat veterans through a partnership with Operation Finally Home and is in the process of raising funds and material donations to build a house for a local pastor who operates a food bank. The company also partners with Second Harvest in providing meals during the summer months to poor children and launched the Sadie Smile toy drive in memory of an employee’s 17-month-old daughter who died after a battle with leukemia.

“Part of our culture is we go above and beyond to do the right thing with whomever we are dealing with,” Goodall says. “Having people we can trust and being trusted is critical to us and our business platform. Unfortunately, you don’t see that a lot in business, but it’s been a big part of our success especially now when developers have so many more people they can sell lots to.”