New Homes: Raising the Quality Bar

Few homeowners have heard of the annual National Housing Quality (NHQ) Awards, and that’s a shame. Winners epitomize the best of what it means to be a customer-focused builder and homeowners can use the program’s lessons to vet any builder, regardless of whether they participated.

The awards are an independent program sponsored by Professional Builder Magazine. Builders who participate must agree to an intense, time-consuming application process, which includes about 80 hours completing a questionnaire that delves into all aspects of the business. Judges select the best applicants for a two-day site visit, when they probe even deeper, including confidential talks with employees, subcontractors and homeowners. Then, they spend about 20 hours writing a detailed report for each applicant regardless of whether they won.

Judges work as unpaid volunteers. They’re on a mission to improve the building industry by helping each applicant deliver high quality homes and a great customer experience. To that end they act more as consultants than fault finders. “Our goal is to help,” says Serge Ogranovitch, NHQ’s executive director. “We tell applicants what’s good and what’s bad and most of them use our feedback to make improvements.”

That was the case for DSLD Homes, a Southeastern builder that will complete approximately 2500 homes per year. It applied for the NHQ Award in 2013 but didn’t make the cut for a site visit. It won gold on the third try two years later, but only after implementing the judges’ suggestions.

The problem wasn’t build quality, says DSLD partner Saun Sullivan. The key to winning was strengthening the company’s internal business systems. “A builder with great systems is more likely to do what it promises to do,” says Sullivan. “However less-than-great systems can ruin the homeowner’s experience even when they’re getting a great house.”

He finds that today’s customers demand a great experience. “Their expectations of the builder are similar to what they would want from a high-end resort,” Sullivan says. “It doesn’t matter how great the room is if no one is there to take your bag when you pull up to the entrance you’re not going to be happy.”

Growth Opportunity

Most applicants strike out their first time at bat, but win on the second or third try after making fundamental changes. In fact, the opportunity to get feedback on how to improve the company is why most apply.

“Our applicants get a lot of free consulting,” says Tom Gillespie, a Chicago-based NHQ judge with more than 35 years of industry experience. Gillespie is a former Gold winner, like most NHQ judges, who can offer real-world, in-the-trenches advice.

That advice is based on their experience as builders, as well as the patterns they see among applicants. “A big pattern I see is that the best builders have processes that guarantee quality,” says Kevin Estes, a Sequim, Wash. homebuilder who won a Gold award in 2009, and has served as a judge ever since. He has scrutinized about 22 builders and estimates that just 10 to 15 percent of them had those processes in place on the first round.

Estes finds that for most builders, the first thing they need to do is implement a formal quality assurance program. “Builders really wants to deliver a quality product and are quick to correct serious issues,” he says, “but most lack systems for documenting small errors and preventing them from re-occurring.”

Those small issues can have a big impact on customer experience. Things like how smoothly doors operate and how well the HVAC system controls humidity can make or break a homebuyer’s opinion of the builder.

The NHQ process motivated Estes to create such a program, which includes checklists to gauge quality at every stage: framing, insulation and drywall, and finish work. His warranty claims fell by 70 percent, a sign of more satisfied customers.

NHQ also requires winners to have a formal warranty management system and to document their response time to warranty requests. “We want to confirm that they seek and act on customer concerns,” says Charlie Scott, another long time judge and former Gold winner. He adds that, to qualify for an award, builders must be working with a third-party survey company to gauge customer satisfaction.

Other areas judges scrutinize include trade and employee relations. “A lot of builders don’t take full advantage of their trade contractors’ expertise,” says Estes. Since going through the NHQ process, however, he actively seeks their advice at the planning stage. “It makes the trade a more integral part of the team, which motivates them to send their best people and do their best work.”

Scott echoes this sentiment. “A homebuilder needs support from a team of developers, staff and trades all working towards a common goal. The more collaborative they are, the more value the customer will get.”

Lessons for Homeowners

For the homebuyer, the NHQ Awards underscore how great business’ processes lead to consistent results. “They ensure that every customer gets the same experience,” says Estes. Because of this, he says that when choosing a builder, it’s worth taking time to ask about their processes. Questions he suggests include:

“Do they use purchase orders when buying materials and labor?”

“This is a sign that the builder does things systematically,” he says. “A systematic approach to things drastically reduces the likelihood of cost overruns.”

Do they have a formal quality assurance program? He says to ask what documents and checklists they use to ensure quality at critical job stages.

Do they use a third-party survey firm? A number of companies will survey builders’ current and past customers, then give that builder feedback they can use to improve their results.

Do they offer clear payment schedules? Clear, non-negotiable payment schedules keep the builder financially sound. A financially sound builder will most likely get the job done on time and within budget.

Are responsibilities easy to understand? A process-oriented builder will help the homeowners understand who is in charge of the job at each stage, who to call with concerns, and how long a response will take.

The goal of these questions is to get some indication of whether the builder communicates well, pays attention to details and has repeatable systems for getting things done on time and according to plan. The value of those qualities goes beyond the building project.

An example of the value and power of the NHQA is that while 50 percent of home builders went out of business between 2007-2012, over the past 25 years, more than 95 percent of NHQA recipients are still in business,” according to Denis Leonard, an industry consultant based in Bozeman, Montana. In other words, a process-oriented builder will likely be around to service any warranty requests.

While NHQ aims to help builders maintain healthy businesses, its long-term goal is to raise the bar of quality among builders. “We see our winners as the cow bell for the market,” says Scott. “They lead the way in terms of product quality, operational success, business stability and customer satisfaction.”