Trade Partner Councils Pay Off for Home Builders

This article first appeared in the PB January 2010 issue of Pro Builder.

Sidebars:
Steps to Forming a trade partner council
Trade Partner Council Pitfalls to Avoid
Also See:
Trade Partner Council Meeting: First-Person Account

Do you want to improve the efficiency of your home-building business? What about reducing waste and saving money? Want to give a big boost to customer satisfaction and referrals? If the answer to any of the above is yes, then you might want to consider forming a trade partner council (TPC).

Home builders that have championed trade partner councils (TPCs), and industry consultants who have helped put them together, say having one can pay off with a host of benefits for the builder, and probably even more for participating trades. They'll also tell you that it takes a concentrated effort, cooperation and ongoing dedication to make it work.

“It empowers our tradepartner base in a collaborative environment to achieve shared objectives. It builds camaraderie, shared vision and purpose,” says Chip Merlin, vice president of operations for K. Hovnanian/Landover Group, Chantilly, Va. “It taps the intellectual horsepower as well as the operational experience of the entire channel that works our manufacturing line. It also facilitates trade-partner-to-trade-partner collaboration.”

TRADE PARTNER COUNCILS that thrive can attract a large conference room full of participants, as the K. Hovnanian Mid-Atlantic TPC has proven with over 300 people attending their recent bi-annual meeting held in Bethesda, Md.
Photo: David Scott, Hearth and Home Technologies

Merlin has been long involved with K. Hovnanian's Mid-Atlantic TPC, which is a combination of the Virginia and Maryland councils. The Virginia TPC was formed in 2003; Maryland's in 2005. They're still going strong (see “Fly on the TPC Wall,” page 30).

Trade participation in and commitment to the concept is what can make or break a TPC. Trades that put forth the effort to make it happen discover that it has its rewards.

“Trade partner council membership affords a window into the inner workings of their client,” Merlin says. “This knowledge is a powerful tool, allowing trade partners to refine their product, service and value proposition.”

Serge Ogranovitch, senior partner with the Potomack Group, Locust Grove, Va., explains that the objective of a TPC is to draw the builder and trades into a mutually beneficial relationship. But as he points out, “That's often easier said than done.”

Two-way street

It boils down to the simple fact that builders and their trades and suppliers need each other to survive and grow their businesses, which has been even more challenging in today's market.

“Individually and collectively, trade partners have the expertise that builders need to build quality homes as effectively as possible and to the quality level that exceed the builders' customer expectations,” Ogranovitch says.

Ogranovitch, who has helped create several TPCs, suggests that establishing trust among the builder and the trades is the key to making a TPC work well and thrive.

“Trust, or lack of trust, comes to mind when discussing trade councils,” he says. “In order for a council to be successful, the builder needs to be trusted by the trades,” he says, adding that trades also need to build trust between each other.

This trust can occur, but it takes time. “There needs to be a mutual desire to provide a quality product that exceeds customer expectations,” Ogranovitch says. In addition, he says, quality management processes promoting “first-time quality, every time” home delivery must be embraced by both the builder and trades.

Commitment is another essential ingredient for launching a TPC and keeping it intact. Both Merlin and Ogranovitch point out that if there's lack of dedication from either party, the council will become ineffective or fall apart.

“In order to put a trade council in place, the builder must make strategic management decisions that involve establishing and adhering to policies and procedures,” Ogranovitch says. “They need to have made the decision to involve the trades in their continuous improvement process as a full partner, and be willing to establish a true two-way communication process.”

Benefits of a TPC

Is it worth the effort? Those who have been involved in trade councils for many years say the rewards are real. They include:

Reduction in waste
Reduction in expenses
Reduction and even elimination of job-site accidents
Improvement in production scheduling and cycle times
Improvement in customer satisfaction
Improvement in quality
Delivery of homes with zero defects
Improvement in communications and camaraderie between everyone involved in the home-building process
Pride for everyone involved by achieving best-in-class results.

“The focus is to do something to improve yourself and your company,” Merlin told a gathering of over 300 people at the most recent Mid-Atlantic TPC meeting. “Everyone walks away with something that ultimately benefits the home buyers.”

Steps to Forming a trade partner council

We examined the structure of K. Hovnanian's Mid-Atlantic TPC, and asked Serge Ogranovitch of the Potomack Group in Locust Grove, Va., who has assisted builders in creating TPCs, to give us an idea of what it takes to set one up. Here are the main points:

The builder and its trades/suppliers must commit to a TPC, and the trades need to run it. Builder leadership support is essential, but they must be careful not to dominate.
Establish a board of directors. Typically the board consists of three to five members. Ogranovitch says none of the builder's staff should be board members. Get the “right people” involved in TPC leadership, ideally one senior person from each of the trades.
Establish a mission statement of purpose for the TPC that includes principles and beliefs as well as vision statements. Establish priorities. Create by-laws that are ratified by participating trades.
The board, council members and builder reps should hold regular meetings separately, as well as together. Example: Annually the Mid-Atlantic Trade Partner Council holds six board meetings, four “quality walks” in the field, four to six executive board meetings, an annual golf outing (very popular), a holiday party for the board and biannual meetings for all TPC members.
Keep meetings organized and agenda-driven.
Set goals and objectives with accountability attached. Example: Decrease callbacks by 10 percent and increase job-ready status by 20 percent.
Set up a formal means of communication. Example: The Mid-Atlantic TPC has a member newsletter as well as a Web-based portal that centralizes information and document exchange.

Experts say launching a TPC is not easy. Unless the builder has someone on staff familiar with creating one, it helps to have an experienced consultant to assist.