Adapting Baldrige to the Housing Industry

Senior leaders often ask, “How will my investment in a criteria/award program impact my company’s bottom line?” This is a polite way of phrasing what they’re really thinking, which is, “What’s in it for my organization?”

For senior leaders in the home-building industry who have invested in the National Housing Quality Award (NHQA), an award and education program modeled after the Malcolm Baldrige National Quality Award (MBNQA), such investment has led to growth in sales during the recession, expansion into new markets, and customer satisfaction, which has reached 100 percent for some builders.

For 2014, French Brothers of Alamogordo, New Mexico, earned a Bronze NHQA award.

Developed in 1992 from a Department of Energy grant, NHQA’s goal is to inform and educate builders about the leadership needed to create customer- and quality-driven companies. It is now part of the National Housing Quality Program, sponsored by Professional Builder magazine.

NHQA Director Serge Ogranovitch said that more than 90 percent of NHQA’s 100 award winners are still in business, and he attributes this to quality management systems and well-managed companies. A study of NHQA winners from 1993 to 2009 showed metrics such as gross profits of 12 percent to 20 percent, construction costs vs. budgets of ±1 percent, cycle time reductions of 15 percent to 50 percent, zero defects at closing of 98 percent, defect reductions of 11 percent to 75 percent, referral rates of 30 percent, and trade satisfaction of 94 percent.

NHQA uses criteria based on the basic concepts of the Baldrige Criteria for Performance Excellence, a management systems framework but adapted to the home-building industry. For example, instead of a focus on suppliers as in the Baldrige Criteria, the NHQA criteria focus on trade relationships and support. Like the Baldrige Criteria, the NHQA criteria are very customer-focused, says Ogranovitch.

Denis Leonard, who has been both an examiner for NHQA and MBNQA, says NHQA builders use the criteria with quality management tools and techniques to drive performance improvement. “[NHQA builders] have a strong focus on strategic planning, employee empowerment, trade relationships, and of course, the customer,” he says. “Evaluating your business against the Baldrige-based NHQA criteria can help you identify areas for improvement just as these builders have done.... [To be profitable in 2014, home builders] need to focus on... reducing waste, rework, warranty costs, improving cycle time, everything that can make us more effective and efficient in all aspects of our business and in every home we build, and quality management tools and techniques are how that can be achieved.”

Ogranovitch says he reviews the Baldrige Criteria every year to see what changes have been made and what new concepts should be adopted as improvements to the NHQA criteria. He said NHQA is now looking at adding the use of technology into its criteria, since technology is impacting every aspect of home building, including online checklists, details and specification sheets, payments, and tutorials.

Ogranovitch adds that he returns to the Baldrige Criteria when he “wants to see what’s going on. I truly believe that the people involved in doing Baldrige and helping to guide Baldrige are truly good thinkers in industries and quality management. If they have ideas and concepts that would be beneficial for [NHQA], I want to be aware of them. I want to stay current.”

Use of criteria as a management framework has not been an easy concept for many home builders, who tend to be entrepreneurial in nature, says Ogranovitch. Such builders were more used to taking notes and acting on their own experiences and instinct when making management decisions. But builders who have embraced the NHQA criteria like the standardization and the strengths and opportunities pointed out in feedback reports. “They like the idea of having an industry’s best practices there to help them,” Ogranovitch says.

The NHQA evaluation process is similar to the one used by the Baldrige program. NHQA examiners are management and/or industry experts whose evaluation requires them to answer 147 questions gleaned from builders’ 17-page applications. The examiners score each application, and a high-enough score sends three NHQA examiners to a 1.5-day site visit of the builder to validate the content of the application and to find opportunities for improvement. A final phase of the site visit is a customer satisfaction survey given to the builders’ customers from the last 12 months to ensure that the builders’ customers are still satisfied.

“Lots of builders really love [the NHQA process and criteria] because they see it as a process to improve their companies,” says Ogranovitch. Builders often apply for the NHQA multiple times because of the feedback reports they receive after the process. Like Baldrige applicants, many builders use their NHQA feedback reports as “a guideline for marketing and strategic plans,” he says, because the reports include hints and ideas on how to improve. Such feedback reports, Ogranovitch adds, contain $30,000 worth of consulting for much less. “The value is wonderful.”

How would you adapt the Baldrige Criteria for your industry or organization?

First published Jan. 9, 2014, on Blogrige.

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