Moving to the Next Level of Profitability

This article first appeared in the PB April 2001 issue of Pro Builder.

Edward Caldeira, Director of Quality Services, NAHB Research Center

The net income of the top 25% of all builders is two and a half times that 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,” says Mike Benshoof, one of the authors of NAHB’s 2001 study of 400 builders, The Business of Building (builderbooks.com). The results of the study, shown in part in the table below, are staggering.

Key areas that correlate to superior performance, as noted in a comparison of NHQ winners and past applicants of the award, 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—at least 40 hours per year for each employee—focuses on competencies the company needs to achieve the future vision.

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 subcontractors.

Employees, suppliers and trade contractors are actively engaged in systematic improvement approaches (plan-do-check-act) to quality and productivity improvement.

A balanced set of performance measures that are tracked monthly keep everyone focused on results that matter.

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.

“Moving to the Next Level” seminar presentation slides are posted at www.nahbrc.org/quality. Questions? Call the Research Center’s ToolBase Hotline (800/898-2842).

PB Topical Ref

Management

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