Gold: Benchmarking the industry

On the northern edge of the Olympic Peninsula in a small town with a funny name is a progressive builder with lofty goals. Estes Builders isn't interested in just being good; it wants to be great. "No matter what thing we're working on, we look to be in the top 20 percent nationally. We're benchmarking against the best in the country," says company founder and president, Kevin Estes.

Based in Sequim, Wash., Estes Builders received a Gold Award in the 2007 National Housing Quality Awards, the only company to achieve such recognition this year.

Even more remarkable is that the NHQ Award, which recognizes companies that focus on improving business processes, favors large companies with more resources to develop sophisticated systems. Estes Builders achieved this recognition while only closing 37 homes in 2005.

The Sequim market is nearly 85 percent active adult, and most competitors build three or four homes per year. A couple of production builders moved in from Seattle, but Estes Builders' market .knowledge allowed the firm to thrive while the new players struggled to match product to customer need.

Although the company has grown from just over $6 million in annual sales in 2003 to approximately $11 million in 2005, it did so with no increase in staff or overhead, delivering profitability well above industry averages. Those financials combine with a customer satisfaction profile that has 72 percent of its customers writing endorsements and more than 95 percent of its trade partners calling the company the best to work with in the area.

That kind of performance begins with clear leadership. Kevin and Jo Anne Estes founded Estes Builders in 1990. The two established a core value: "We endeavor to have a positive impact on everyone our company chooses to interact with." The value didn't evolve over time, but, as Kevin says, "started right out of the chute. We wanted to establish it straight from the start. We didn't involve team members because we wanted to be the ones establishing values for the company."

The central values support a company constitution that delineates the bases for decision making. Among the elements are:

• People are the most important asset
• Continually improve
• Measure what is important
• Be a systems-driven company
• Keep promises

Those ideas inform all aspects of the company, but in many ways, it is Estes Builders' approach to evaluating and selecting strategic initiatives that most readily captures both the essence of the company and the reason the judges awarded it gold.

In the process of measuring performance, Estes identifies areas where the company is performing less efficiently than others. Recently the company initiated a 15-step process to improve its landscaping score on the customer satisfaction survey. It was the lowest scoring element, and the firm set a goal of increasing the score from 3.3 to 4.1 or higher on a scale of 6. A quality team of employees assembled a strategy, and within one quarter the company had raised its score to 5.3.

Most strategic initiatives are two to three year projects and don't see quite such astounding results. The results of employee evaluations showed an opportunity to improve how the company recognized employees. This improvement process focused primarily on managers, and the result was the creation of the Going the Extra Mile program, known as GEM. In this program, any manager or employee who sees someone going beyond the parameters of his or her job will notify the president and the manager. All recipients get immediate recognition; the company scores in this area rose from 3.89 to 4.14 out of 5.

That focus on employee and customer satisfaction — and the careful measurement of it — has also driven other changes in the company. For example, a team of employees reviewed every change order during an 18-month period. The result of the review was the "Design and Option Questionnaire," which is a checklist an Estes employee reviews with homeowners early in the planning stage. The questionnaire ensures small detail items get early attention and don't cause change orders later.

That level of communication with homeowners extends throughout the planning and construction phases in a well-established (and well-followed) system of phone calls, letters and meetings. At the end of the process, Estes Builders is managing the customer's expectations. During the hand-off to warranty, Estes ensures customers know that a house is a complicated structure and changes will occur. Although the warranty program handles that, he gets more specific. "I take them to trouble spots and say, 'You're going to have a drywall crack here,'" he says. He then assures them that the company will be there to handle it.

Estes Builders also allows employees to make decisions that improve homeowner satisfaction. "We instruct our people," Estes says, "to ask, 'What would you do for your mom? Would you fix it for your mom? If so, fix it for the customer.' We also use the 10 minute rule." If you can do it in 10 minutes, do it.

The underlying core values of the company extend to ensuring employee and trade relations operate just as smoothly. Estes Builders surveys employees twice a year to determine what areas the company needs to focus on.

Employees must like Estes Builders, because no management or key employee has ever left the company. Such loyalty extends to the trade partners; the implementation of systems has allowed Estes Builders to work with trades on quality improvement using objective measurements. Twice a year warranty trends are analyzed, and Estes Builders addresses recurring issues during biannual trade meetings.

The company also surveys the trade partners annually and develops quality improvement programs to address problems identified by the survey.

All trades are evaluated annually on field performance, bid requests, invoice procedures and warranty issues. Trades performing exceptionally are recognized at the annual meeting; poor performers set up improvement programs with Estes.

For that devotion to improvement and the introduction of systems to achieve it, Estes Builders has achieved two notable rewards. First, 95 percent of the company's customers would recommend the company to a friend. The other is the NHQ Gold Award.