Shea Homes Arizona

Creating a Virtual Organization for Home Building with Help from FranklinCovey Learning Solutions

Executive Summary

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This case study examines how Shea Homes Arizona successfully implemented The 7 Habits of Highly Effective People®, The 4 Roles of Leadership®, What Matters Most® (now FOCUS: Achieving Your Highest Priorities), and other FranklinCovey learning solutions, significantly contributing to:

Improved implementation of Total Quality Management processes, tools, and measurements
Increased trust, collaboration, and communication among Shea Homes and its subcontractors in the traditionally adversarial home building industry
Decreased number of building days and an increased percentage of defect-free homes
Improved home-buyer satisfaction and increased sales from customer referrals
Energized spirit within Shea Homes Arizona as the company continues to grow

Imagine you're a major home builder in the greater Phoenix area, which consistently ranks No. 1 or 2 in total housing starts, just ahead or just behind Atlanta. In 1999, housing starts in the valley reached 36,000, well above forecasts. Similar growth is predicted each year through 2005.

Next, consider the challenges all builders face: constructing quality homes, reducing cycle time and costs, improving customer satisfaction, and working effectively with subcontractors and suppliers. Keep in mind that the market is extremely competitive, where no homebuilder has a 10-percent market share. And remember that the industry is traditionally very adversarial, where distrust and conflict among builders, subcontractors, and suppliers contributes to defects, rework, delays, increased costs, and dissatisfaction.

Now picture a different kind of builder and community developer-Shea Homes Arizona-which has transformed its business by improving the way people communicate and cooperate with each other. These efforts, which encompass Total Quality Management (TQM) practices and FranklinCovey learning solutions, garnered Shea Homes Arizona the National Housing Quality Gold Award for 1999 and landed the company on the cover of Professional Builder magazine.

The magazine's editor in chief, Heather McCune, points to the following business results of Shea Homes Arizona:

Overall customer satisfaction rating in 1998 was 87 percent, up one percentage point from the previous year
Sales from customer referrals in the same year were 18 percent, a three-percent increase over 1997
Seventy-six percent of the company's homes were delivered defect-free at buyer orientation, an eight-percent improvement over the previous year
Building days-the weighted average number of days for all series homes from trench to city final inspection-dropped to 112, an 11-day improvement over 1997 averages

A Revolutionary Approach to Enhancing People's Lives

Shea Homes Arizona is a subunit of J. F. Shea Company, Inc., one of the oldest and largest privately held heavy construction operations in the country, with headquarters in Walnut, California. Shea Homes has been a fixture in the Arizona marketplace since 1989, when it purchased the assets of Knoell Homes. There are now seven divisions of Shea Homes: three in California, one in Colorado, one in North Carolina, Shea Homes Arizona, and Active Adult. Each is an autonomous organization.

"Our mission statement is 'Enhancing peoples' lives through the construction of the finest homes and communities in America,'" says Buddy Satterfield, president of Shea Homes Arizona. "We will typically move in 2,000 families a year. At any given time we have over 700 homes under construction. And that means at any given time we have 3,000 to 4,000 people working on job sites."

What's revolutionary is the way subcontractors, or TradePartners^TM in Shea speak, work together within the virtual organization. At Shea, TradePartners^TM are an extension of the organization and are treated as such.

Initial Focus on TQM

According to Satterfield, the challenge back in 1992 was fulfilling the company's mission in the exploding, highly competitive Phoenix market, and in an industry plagued with distrust and infighting.

"The construction industry is typically one of kick butt and take names," Satterfield says. "Five or six years ago, not only were the various trades not friends, they were enemies. All they were doing was protecting their own turf, not sharing ideas, not working together to build homes better, faster, cheaper. They were just causing rework for the subcontractor who came after them."

In 1991, Shea Homes Arizona senior management initiated a TQM effort to boost the number of zero-defect homes and increase customer satisfaction and resultant word-of-mouth referrals. Selected employees, including vice president of construction, Paul Kalkbrenner, who was then a construction superintendent, was asked to dig in and learn TQM processes, tools, and measurements as an extra set of duties.

"We began to embrace TQM in 1992," says Kalkbrenner, who ran his own construction company for 20 years in Park City, Utah; Las Vegas; and in Phoenix. "However, there's no way you can implement TQM and then ask the trades to come join you somewhere down the road. The best way to implement TQM is to do it together from the start."

Shea approached the reputable subcontractors they were working with in the valley with the concept of pursuing the TQM path together. Kalkbrenner explains, "Our thinking was 'Look, the valley is growing and the demand for qualified skilled craftsmen is outpacing supply. The trades have more work than they can handle. We're going to be in a struggle for the same people to work at our job sites. We must create an environment where we work together effectively and enjoyably, where Shea Homes becomes the builder of choice.'"

In 1993 Shea Homes established a monthly TradePartner workshop, where Shea began sharing business measurements with the trades, including sales figures, cycle times, warranty work completed, zero-defect home deliveries, and so on. In turn, the trades shared a specific process improvement by explaining what they used to do, what they've been doing since learning TQM tools and processes, and the outcomes.

"Through this process," says Kalkbrenner, "the trades realized they shared many of the same problems, and that by working together, they could improve their own portion of the building process and the overall end product." This initial cooperative effort led to the building of the Shea Learning Center, complete with a kitchen and cupboards full of snacks and drinks, where TradePartners could train in TQM improvements.

Expanding Efforts with Effectiveness Principles

During this early TQM experience, a number of Shea employees, including Kalkbrenner, read The 7 Habits of Highly Effective People by Stephen R. Covey. They began promoting the book among Shea employees and TradePartners, suggesting how the principles could further improve business practices and efficiencies. Later, Kalkbrenner and others attended First Things First®, the FranklinCovey time and life management workshop now called FOCUS: Achieving Your Highest Priorities. Kalkbrenner became a certified facilitator of the program in 1995 and began teaching Shea Homes superintendents and TradePartner^TM personnel.

The next step was conducting a pilot 7 Habits® workshop with Shea Homes management and 14 to 15 owners of TradePartner^TM companies. The response was overwhelming. "It was a home run," says Satterfield. The company scheduled the 7 Habits training programs all the rest of 1996 and through 1997.

And it continues today. Indeed, the 7 Habits training has become a key curriculum at Shea University, the company's training organization, and a core requirement for every Shea employee. Other FranklinCovey training programs available at Shea University include Introduction to the 7 Habits in both English and Spanish, The 4 Roles of Leadership® (formerly Principle-Centered Leadership®), What Matters Most, and Building Trust^TM. Shea University programs are available to all Shea Homes employees free of charge and on company time. Trade Partners^TM can also attend with fees subsidized by Shea Homes.

"We now have over 150 trained facilitators, half within Shea Homes and half within the TradePartners," says Satterfield. "A number of TradePartners have built learning centers patterned after ours and are also facilitating TQM, the 7 Habits, the 4 Roles, and other programs."

In Retrospect

"If we had it to do over again," Satterfield says, "we would have started with the 7 Habits training, followed by TQM initiatives. I think we'd be even further along in our business improvement efforts, and all the other training we've offered would have greater impact with a foundation in the 7 Habits."

Kalkbrenner agrees. "It's clear that the 7 Habits, the 4 Roles, and other FranklinCovey training have created an environment for us to excel. Every meeting we have begins with a 7 Habits team building exercise. Whether it lasts five minutes or 20 minutes, it absolutely sets the stage for the productivity of that meeting, and it gives people permission to work together in a spirit of cooperation."

He concludes, "There's no doubt in my mind that our continuing improvement in homebuyer satisfaction scores, cycle time, and zero-defect deliveries is a result of TQM efforts conducted in an atmosphere of we can do this together-this is a win-win approach."

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Habit 5 and the Tower of Babel-A TradePartner's Perspective

Talk to Terry Hawks, training advisor at Chandler, Arizona-based Sharp Drywall, Inc., about the impact of FranklinCovey training, and he'll cite a biblical analogy with a twist. Hawks, a certified facilitator of The 7 Habits of Highly Effective People and The 4 Roles of Leadership®, has witnessed dramatic improvements in human relationships among Shea Homes TradePartners^TM by applying universal principles of effectiveness.

"The people working on the Tower of Babel were doing what we do every business day, building a structure. Things were humming along because they all spoke the same language. When that changed, the whole concept fell apart. In reverse, the 7 Habits principles have provided the diverse TradePartner^TM organizations a single language of mutual respect and cooperation that helps us work toward the common goals of improved quality, less rework, and greater customer satisfaction."

Hawks says it wasn't uncommon in the late 1980s and early 1990s to have fist fights on the job site among builders and trades, usually over very petty issues. "When Shea Homes first teamed with the trades to implement TQM measurements and tools, we started seeing incremental improvements. But frequently those TQM measurements were used to support adversarial positions. It was as though spreadsheets had replaced fistfights. However, once we all clued in to the 7 Habits culture, improvements took shape at light speed."

Hawks points to a specific example of cooperation between trades as a result of practicing Habit 5: Seek First to Understand, Then to Be Understood^TM. He says Sharp Drywall and the primary electrical TradePartner were engaged in a war of words over how the newly hung drywall covered the receptacle plates where light switches and outlets were supposed to go. Electricians would have to punch two or three holes in the new drywall to find the plates. This slowed their work and caused repeated repair work for Sharp. TQM measurements confirmed that both TradePartners^TM were losing a lot of time and money, which also impacted Shea's timely completion of new homes.

"By practicing Habit 5," says Hawks, "both trades came to understand we were after the same thing-a mutually efficient process and home buyer satisfaction. That's when we agreed to reach a third alternative, a better solution than either of us could come up with on our own."

According to Hawks, the electrical TradePartner^TM invested in a computer-aided design system that preprints on the blueprint for each house every electrical outlet location. The system helped electricians reduce their own errors and rework. What's more, the dry wall crews could now mark where a receptacle would be covered by spray painting an x on the floor before the drywall went up.

"This process has saved the electrical TradePartner^TM and us tens of thousands of dollars. It's also saved a lot of time and money for Shea and has helped produce higher quality homes," says Hawks. "It's because we took the time to understand where each other was coming from."

Hawks facilitates twelve to fourteen 7 Habits programs each year, as well as The 4 Roles of Leadership®. He typically teaches employees of the other TradePartners^TM, such as Mesa Verde Concrete in Phoenix or a large framing outfit, Younger Brothers Construction, located west of Phoenix in Glendale. In turn, these TradePartners^TM facilitate programs at Sharp Drywall. The arrangement fosters cross-communication of ideas and solutions, and enables the TradePartners^TM to resolve issues without burdening Shea Homes all the time.

"Interaction among the trades at this level is truly unique in the home building industry," says Hawks, who has traveled to Shea Homes offices in Northern and Southern California and in Denver, kicking off FranklinCovey programs in those locations.

He concludes, "The principles we teach and live by are like overlaying TQM measurements and tools with an entire culture template for improved behavior and cooperation. The results are real; they're nothing short of phenomenal."