Without Near-Term Rate Relief, Firms' Bottom Line Relies On Team
Left: Sheryl Palmer, Chairman, President and CEO of Taylor Morrison
Right: Phillippe Lord, CEO of Meritage Homes Corporation
Histories of any business sector – technology, financial services, consumer products, auto, retail, materials and mining, you name it – enter inflection point phases where strategic leaders either get out of their own way or don't.
Homebuilding is not exempt. Now is such an inflection point.
At a macroeconomic confluence – currently DBA "The Great Reset" and "The Great Resignation" — of the future of work and the future of homebuilding's frontline worker human capital capability, raw forces are kicking up not later, but now. The tipping point is now, on the brink of a tough, challenging stretch for homebuilders for all the reasons that are so well known.
In that moment of inflection, the kernels of survival and a prosperous future are part and parcel of a business culture that has endured adversity over and over.
Here is one of one of those kernels. What it reflects is industry leadership that steps past regarding itself as victim of policy conditions, unfair economics, and massively misplaced generational values, work ethics, and work-life-balance trends.
It's the simple fact that – so far – two of the business' strategic leaders, Meritage Homes ceo Phillippe Lord, and Taylor Morrison chairman, ceo and president Sheryl Palmer have joined 2,200 CEOs and founders of other organizations in a pledge crucial to the ongoing resiliency and capability of their companies:
Their pledge to the CEO Action for Diversity & Inclusion is to:
- Cultivate environments that support open dialogue on complex — and often difficult — conversations around diversity, equity and inclusion
- Implement and expand unconscious bias education and training
- Share best-known diversity, equity and inclusion programs and initiatives — as well as those that have been unsuccessful
- Engage boards of directors when developing and evaluating diversity, equity, and inclusion strategies
What's more, word is Meritage Homes ceo Phillippe Lord has made a specific point of retiring use of a commonly used term, "a good cultural fit" in his or his human resources team's reference to team member and future team member potential, productivity measures, and ultimate career path capability within Meritage. Instead, Lord has memorialized a different term consistent with the firm's commitment to its core values.
Cultural contribution."
It may seem like a small, barely noticeable change, but think about it. "Cultural fit" implies that new team members fit themselves into a business culture that's already set in its ways, its composition, its practices, and its systems. "Cultural contribution," rather focuses on how an individual can make contribution to the team's core values.
The term, and the pivot point it reflects, carries that kernel of resiliency to where it can sprout come what may in the near future.
Words like "cultural contribution" matter. Their bridges to what mean the most and do the most work to bridge chasms that separate people when it comes to the notions like ones Meritage espouses as consistent with its ability to succeed as a homebuilding competitor:
We are proud of the diversity in our team and are committed to the ongoing and intentional work to achieve inclusive excellence, including the long-term goals of attracting diverse talent and forming strategic relationships. The company is dedicated to learning, improving its practices and challenging its employees and leaders to recognize and leverage our differences for the greater good of the team and the organization. In order to uphold our core values, we will expand our commitment to diversity, equity & inclusion (DE&I), which we believe will drive change throughout our organization as well as strengthen our business and competitiveness in the entire homebuilding sector."
DE&I and their sibling acronym, ESG have become polarizing. At their roots they relate to something shared at the deepest level.
Here's how and why.
The English language mint has endowed few three-word combinations from the get-go with such instantaneous and enduring power.
The bottom line.
First "attested in 1832," the term is GAAP and FASB sacrosanct – a life, death, health and fitness, or life-support sentence for a business. Practically the same could be said of the term's metaphorical clout and wide applicability.
By the 1980s, the term the bottom line took on a figurative sense to mean the most important facet of a situation or the outcome of a situation.
It may rank – say with The American Dream and "self-made-man" – as among this nation's most evocative, regenerative, dynamic, and iconic cultural brands. Bottom line, it's part of an American origin story grab-bag of the fruits of hard work open and available to all, a gift that keeps on giving.
What it is and what it isn't stand as irrefutable. So sturdy is its meaning is that we've taken to using the term not just as a noun – a definable object with commonly recognized characteristics – but as a verb and an adjective, describing action and attributes. Too, the bottom line grows richer, literally, with time, weathering widely varying conditions intact and ever ready for what's next, never really mellowing or losing its teeth with age. What's more, one of its constantly astonishing qualities of resiliency is that while its power as a metaphor may be boundless, nothing could be further from abstraction than the bottom line.
It's concrete, unwavering, intolerant of latter-day pie-in-the-sky mumbo-jumbo. It's the bottom line or it isn't. That's that, and it's hard-wired to a repeatable narrative – start with nothing, slave, toil, and go to any length necessary to get ahead of the rest and succeed. Horatio Alger and thousand and thousands of people in homebuilding and countless associated business ventures live within the hard, concrete reality of the bottom line, within which nest flint-chiseled, time-tested, tried-and-true bedrocks of business behavior:
- Do what you say you're going to do
- Only do or say what you'd have your mother know you're doing or saying
- What comes in [what people pay for a new home] needs to be more than what goes out [amounts paid for land, labor, materials, fees, and lending]
- Never stop striving; and never listen to anybody who tells you you can't do what you need to do to succeed.
Which brings us to today. Fierce focus among business leaders – stewards as they are of their respective enterprises' bottom line – fixes on what to make of the latest, carefully camouflaged words from on high ... namely, Jackson Hole, Wyo., where Fed chair Jay Powell addressed the Federal Reserve Bank of Kansas City's annual summer gathering of global central bank strategists.
Restoring price stability will take some time and requires using our tools forcefully to bring demand and supply into better balance,” Mr. Powell said in a speech on Friday. “While higher interest rates, slower growth and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses.”
He then added: “These are the unfortunate costs of reducing inflation.” – New York Times [free link]
Signal or noise, many homebuilding enterprise leaders can not help but heed the words of Jay Powell for the way they'll either help or hurt their firm's bottom line – certainly for the next 12 to 36 months at least.
Others, we know, because we know many such homebuilding strategists and operators and entrepreneurs and constantly straddle a minimum of two time periods – the present and the three-to-five-year future – devote time, dollars, and resolve to shaping and igniting growth in the self-same bottom line, beyond the next quarter, and beyond the next fiscal year.
Navigational bearings – from a strategic and fiduciary responsibility standpoint – require that homebuilding's business leaders account for means of production – land and location, people, materials, factory capability, etc. – and model what it will take to sustain value creation across time to secure bottom line results.
Securing and engaging human capital capability – for homebuilding – drives the bottom line insofar as the engagement, productivity, and performance of people play a role in builders' means of production.
This is not about hiring or training or compensating people who can not or will not contribute to a company's culture of success. It's precisely that, based on merit, on competitive drive, on the bottom line.
If you put the following four constructs in a list, one stands out, not because it doesn't belong together with the other three, but because whoever named it didn't have a very good sense for what people can get and embrace and act on.
- The bottom line
- The Golden Rule
- Common sense
- ESG
Yes, one of the terms has a branding challenge.