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Builders Say Quality Matters, Raises Productivity, Profitability
 The NAHB Research Center’s National Housing Quality (NHQ) Certified Builder program, a quality assurance program for builders of all sizes, increases productivity, customer satisfaction and profitability, according to two of the programs’s initial participants.
The two builders, Grayson Homes, a small production builder based in Ellicott City, Md., and KB Home Las Vegas, gave their assessment of the program during a press conference at the International Builders' Show in Orlando, Fla. last month.
Both builders said the progam, which formally was launched in January 2005 and has grown from three initial participants to 26 builders nationwide, has resulted in measurable inprovements in their productivity, home buyer satisfaction and their bottom lines.
The NHQ program is a certification-based program for builders who have implemented and documented quality management systems. The program requires a rigorous annual review of the builders’ systems, a process designed to advance consistency and quality in building practices. The program also includes trade contractor participation.
Fostering Consistency
Cynthia McAuliffe, president of Grayson Homes, said her company has experienced a significant increase in customer satisfaction — and a corresponding decrease in warranty spending — since she implemented the NHQ program.
McAuliffe said home buyer satisfaction at settlement has risen from 95.7% to more than 98% since the program was implemented. The percent of customer lists signed off at settlement, she said, has increased from 95.3% to 97%.
“This program has given us consistency, and consistency is gold in our business,” McAuliffe said.
McAuliffe said warranty spending has decreased 43% — from $242,000 in 2003 to $137,000 in 2005 — because of the progam. She also said she believes the higher levels of customer satisfaction have helped increase her profitability.
Before Grayson Homes implemented the NHQ certification program, McAuliffe said her net profits were about 10.4%. Since, the program was implemented, the company’s net profits have jumped to over 18%, she added.
Reducing Production Time
Douglas Eddie, quality manager for KB Home Las Vegas, said the program has resulted in his division achieving and maintaining a customer satisfaction rating of 95%, the highest in the company’s history.
In addition, he said KB Home Las Vegas was able to reduce its average cycle time by 24 days because the program helped him increase the effectiveness and efficiency of his trade contractors.
Eddie, who characterized his company as a “management company” relying upon trade contractors for the production work, said his division developes eight acres and averages 75 closings a week “To get quality at that rate of business is a challenge,” he said.
Eddie said his division has reduced warranty callbacks by 28% and landscaping warranty callbacks by 41%. In addition, he said KB Home Las Vegas has been able to reduce the need for crews to return to houses to work by 50% since the quality assurance program was implemented.
“We were able identify the reasons behind quality defects, their root causes and the processes that fostered them, and we were able to implement changes,” Eddie noted. He credits the improvements to the NHQ program’s rigorous documentation and review requirements.
Michael Luzier, NAHB Research Center president, said the program has grown in the year since it was formally introduced and now includes builders in 18 states. Of the 26 builders participating, he said, 20 companies have NHQ certifications.
“In a competitive market, one of the ways builders can differentiate themselves is through the quality of their products,” Luzier said. “The NHQ Certifed Builder program allows them to pro-atively address production problems.”
Frank Alexander, NHQ program director at the research center, said more builders are beginning to focus on quality because consumers are becoming more savvy and demanding better quality homes. In addition, he said builders also are focusing more on quality because of an increase in construction defect litigation in some areas of the country, and the limited availability of general liability insurance and a subsequent increase in insurance costs.
“The NHQ Certified Builder program is working because builders have acknowledged the industry’s issues and are using this quality management business tool to help resolve them,” Alexander said.
In addition to the builder program, the research center has a companion and complementary program for trade contractors, the NHQ Certified Trade Contractor Program. More than 2,000 contractors are currently participating. Of those, 229 have earned NHQ certifications.
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