The PeopleZone by Talon

Ch-Ch-Changes

2011-07-27T14:22:00.000-07:00

Just gonna have to be a different man.

Time may change me; but I can't trace time.

David Bowie’s hit from the ‘70s could be an anthem for the current times. Companies have been forced to adjust, adapt and ally in ways never envisioned before. Take a look at how some companies are making the change...

Pulte (for sale housing) appoints Avalon Bay CEO (for rent housing) to its Board of Directors. Could this portend a move into rental housing for volume builders?

National homebuilders Lennar and Toll Brothers open real estate investment funds for distressed properties. Evidently, REO = ROI.

Westinghouse teams with Lennar on solar homes. Too bad “Sun City” is already trademarked.

Panasonic considers building smart homes in one of their Japanese factories. An app is sure to follow.

The Bill & Melinda Gates Foundation funds a $42m initiative to reinvent the toilet. No kidding. Talk about being flush with money.

Google invests $280m in SolarCity to help homeowners put in solar panels. And, they’ll know where and how you spent every kilowatt.

DR Horton launches new micro-home project (Division 43) on a 1/3 acre, urban infill site. No job too small for this industry giant.

SunCal trades development services for 180 acre tract of land. Why buy when you can barter?

It's Not About the Money

2011-06-08T08:44:00.000-07:00

The constant stream of negative news in our industry makes it difficult to motivate employees and sustain morale. To borrow a line from “American Pie” (the song, not the movie), there seems to be a lot of “bad news on the doorstep”. It’s become a daily challenge for owners and executives to keep their teams focused and energized. However, don’t think hope has taken the last train for the coast; there are steps you can take that are simple, sustainable and require little or no money. Read on...

Understanding What Truly Motivates People

A really smart guy by the name of Dr. Frederick Herzberg led a study in the 1960’s and identified six factors that truly motivate people.

Feeling of Achievement
Recognition / Status
Continuous Learning
Responsibility
Meaningful Work
Advancement Opportunity

These motivators become self-evident when employees take the initiative without being asked, go the extra mile or become intensely focused on their work. And, they vary from person to person.

Notice how money is missing from the list above? That doesn’t mean it’s not important. Herzberg found six drivers that aren’t motivators but when overlooked, lead to dissatisfaction among employees. He calls them “hygiene” factors:

Salary / Compensation
Job Security
Supervision / Mentorship
Policies / Procedures
Work Conditions
Interpersonal Relationships

What You Can Do

First things first: let's recognize that two of the significant Hygiene factors– Salary and Job Security, are big question marks at the moment. As much as you would like to pay your employees more or assure them job security, the market conditions might not support it. That’s the cold, hard truth so no need to dance around it.

However, there are many things employers can do for their employees that have nothing to do with that. As Dr. Gary Williamson, an industrial psychologist with PSP Metrics notes, “Five of the six motivators have nothing to do with money or promotion, therefore there is no reason (for an employer) to not provide them.”

Step 1: ask your employees to force rank what matters most to them among the following motivators: Feeling of Achievement, Recognition / Status, Continuous Learning, Responsibility, Meaningful Work.

Step 2: do the same exercise for the Hygiene factors that you as an employer have control over: Supervision / Mentorship, Policies / Procedures, Work Conditions, Interpersonal Relationships.

Remember, these twelve drivers vary from person to person and can change over time. Recognition and Achievement might be high on the list for someone in his/her 30’s but shift to Meaningful Work as they mature. Your goal is to learn what really matters most to each employee today... the top 1-2 drivers for them in both categories that you CAN control... and do something about it.

Want to learn more? We came across this entertaining video that demonstrates what we’re talking about. Enjoy! http://www.youtube.com/watch?v=u6XAPnuFjJc

Credits:

“One More Time: Answers for Motivating Today’s Employees”, Dr. Frederick Herzberg, courtesy of PSP Metrics.
Dr. Gary Williamson, Managing Partner, PSP Metrics, Pittsburgh, PA

What Makes Companies Successful

2011-02-28T09:45:00.000-08:00

Ever wonder what makes some companies more successful than others? Some insights were offered by David Gardner (cofounder of the Motley Fool) in an interview with business writer Will Deener. Gardner's stock picking strategy includes more than just what's on an income statement or balance sheet. The financial data has relevance, but he places as much or more emphasis on the following: what really makes a company tick...

What is the company’s culture?
What is the value of its brand?
What is the personality of the management team? Does the CEO embrace a sense of humor? Tip: people perform better when they work with people they like.
Is the company innovative and creative?

Gardner: “It may be hard to express those things as a number, but they’re a lot more tangible and real than a lot of things on an income statement. If you can’t make people smile or laugh, it doesn’t mean you’re a bad person, I’m just not interested in your company."

Regarding the ability to innovate or be creative: Gardner likes to invest in companies that have the ability to disrupt competitors through innovation. Example: Netflix, which blindsided its main competitor (Blockbuster) with a different delivery model of the same product. Since entering the movie rental arena in 2004, Netflix share have risen from $17 to $220 while Blockbuster struggles to reinvent itself and simply survive.

PS: if innovation is something you thrive on, check out Different by Youngme Moon. It's chocked full of case studies similar to the Netflix example.

Timesharing Your Expertise

2011-02-16T08:26:00.001-08:00

Had an interesting discussion with a survivor from the RTC days. In the late ‘80’s, this gentleman was laid off from a civil engineering firm he’d worked with for the past ten years. Full time jobs in his field were in short supply and when they did surface, the competition was fierce due to the oversupply of candidates. He landed a few consulting assignments here and there while he continued his search for a full time position, but nothing of a consistent nature. He desired a more certain future... if not a full time job, then at least some type of recurring work he knew he could count on and look forward to. Any of this sound familiar?

Well, the solution he came up with proved to be unique, timely and cost efficient. Rather than pursue piece-meal assignments on a scattered schedule, he “sold” his services for one day a week to four companies, none of which needed a full time employee but all needing extra help. Just as today’s companies are doing more with less people, these companies could easily justify this arrangement to avoid overloading their regular staff. Plus, they knew what they were getting in terms of expertise each week and tailored the workload according to this person’s skill sets.

Our friend didn’t replace his income 100% nor did he reap the benefits of a full time employee, but the fractional strategy helped him survive the recession of the late ‘80’s. He also expanded his sphere of influence by working with four companies vs. one and was able to use them as references when the need arose. Best of all, he no longer faced the uncertainty of what lied ahead in the weeks to come.

There’s something for companies to learn from this story, too. We’ve made this case before: there is an amazing wealth of talent sitting on the sidelines, just waiting to be tapped– if not permanently, then part time. Not just line staff, but senior level executives from companies known for best practices. What would your company gain by hiring the former Corporate Controller from a national real estate developer for one day/week for a few months? Or, the former VP of Customer Service from an award winning home builder? Tap into the brain trust while it’s available.

How to do that? Well, we’ve got some ideas on that which we’ll be sharing soon. Stay tuned.

Drilling Down on Steve Jobs

2011-01-25T09:23:00.000-08:00

We've said it many times before: if you really want to understand a candidate you must dig deeper than their initial answers. It's called "drilling down", and while it may sound interrogatory, it simply means understanding the Who, What, Where, When, Why and How to an answer. The exercise has equal value in sales situations: solicit this information from your customers and it becomes much easier to address their needs.

A good example is provided by Bill Conaty and Ram Charan, authors of "The Talent Masters". Imagine how helpful it would be to understand Steve Jobs... as a candidate or customer... to the degree described in this post.

2010 in the Rear View Mirror

2010-12-22T09:01:00.000-08:00

As 2010 draws to a close, we hope the new year offers greater opportunities for all our friends in the real estate industry. To that end, we've highlighted some of the more popular posts and industry topics below. Best wishes for a better 2011, from all of us at the Talon Group. Bob Piper, Rodney Hall, Tony Cleveland and Jean Mason.

Loss Share Agreements: the FDIC's strategy to avoid repeating the fire sale days of the RTC period. Bundle distressed bank assets in a portfolio, sale to an investment group with a five year protection period against loss (up to 20% of the portfolio value). Learn more about it or risk not being invited to the dance in 2011/2012.

More things FDIC. The FDIC and its approved subcontractors (RAC's) went on a hiring spree this past year and most likely, will continue the pace through much of 2011. Don't make the mistake of thinking all the jobs are finance and accounting related; there's work to be done in all facets of the industry. This post addresses employment opportunities with the FDIC, while this one focuses on those with FDIC approved subcontractors.

Repositioning Your Business or Career. Developing new products and services could be critical factor for survival in the years ahead. Here's how one builder/developer addressed the situation.

Purpose Driven Networking. Launch an effective networking campaign without becoming a pest to everyone you know by starting here.

The Problem with LinkedIn Recommendations. Heavy on superlatives, light on specifics. Most have the objectivity of your mother. Here's a better way to solicit recommendations from past co-workers or bosses.

The Naked Interview. With a title like that, it's bound to be more fun than a regular interview, right? Strip away all the typical interview questions and try this if you want to really understand a candidate.

Our Favorite Interview Question. Self explanatory... read about it here.

Lesson Learned in the Search Business. Also known as Talon's School of Hard Knocks. Save yourself time and pain by learning what we learned (the hard way) over 25 years.

We Asked You: "How has the industry changed in the last 25 years?" Here's what you had to say.

Best Reads. Two books captured out attention this year. "Different" by Youngme Moon talks about separting your product, service or brand from the competition. This short clip sets the tone. Also, check out "Getting Naked" which makes the pitch for greater authenticity and transparency in business relationships.

Skinny Offerings at Fall ULI

2010-10-21T22:41:00.000-07:00

We hoped to hear some great insights (if not encouragement) at last week’s ULI meeting but there wasn’t much to go around. The short version: we’re still in for a long slow recovery, so don’t expect to see huge improvement anytime soon. The lone bright spot appears to be the multifamily sector. With occupancy rates hovering above 90%, apartment projects are cash flowing and lenders feel comfortable enough with the underwriting to lend on them. As far as any other real estate category, it’s persona non grata. Here’s what we heard:

Capital Sources

Pension Funds & Insurance Companies: no interest in participating in blind pools or anything with comingled financing. (For some crazy reason, they want to know what they’re investing in before they commit money. Yet another "new normal". )

Private Equity Groups: appear to be sitting on more money than the Swiss banking industry but have been slow to put it in play. Reasons abound, along with pointed fingers: hurdle rates are too high, the best deals are tangled up or owners (read banks) are not willing to absorb the impairment to market values (read “what a willing buyer is willing to pay”). As one hedge fund veteran described it: “We’ve initiated letters-of-intent on 40 deals this year and have yet to complete one of them.

Foreign Capital: One regional homebuilder enjoying success in the fast recovering Mid-Atlantic region said private equity groups, along with a few regional banks who weren’t heavy in real estate before, have been pursuing their business. Regardless, he said he’s seen more than a few deals completed this year with capital sourced offshore, through groups in Japan and Germany. Will this become more common? Do they interpret underwriting differently than their domestic peers?

Hardest deals to finance

The blind pools and deals with comingled financing mentioned earlier, along with distressed properties or anything that has hair on it (e.g. unresolved regulatory issues), are next to impossible to finance at the moment. Of course, those metrics describe the majority of the deals out there, but who's keeping track? Creative underwriting won’t help; it’s like putting lipstick on a pig. Until something happens that allows re-pricing of these assets, they will continue to be pigs in the eyes of every capital provider... no matter how well you dress them up.

Key to success for new projects

Using entrepreneurial skills to bring distinction to a project over what is already out there. For community developers, is there a deeper role the information center can play in the community versus just a purveyor of collateral materials? What about a day care center exclusively for residents in a first time buyer community? Or, an on-site medical center in an active adult community? (If any of this resonates with you, check out “Different” by Youngme Moon.)

Smaller tracts with shorter build-out cycles appear to a the honey hole. (Check your redneck dictionary for that term.) Ten reasonably priced deals with 100 lots per community carry far less risk than a bargain basement purchase of a single 1000 lot PUD. Deals that don’t require massive upfront investments for infrastructure and can begin booking sales sooner are like a warm Snuggy to capital providers. Five to ten year build-outs no longer work for most of these firms, no matter how much data you plug into the proforma. One private capital player said he’s even skeptical of three and four year projections; he wants to see deals that can be bought and sold out within a few years.

The Chairman's Report

Finally, we were hoping to hear some really good scoop from Sheila Bair’s address. Ms. Bair is the Chairman of the FDIC and the holder of all things secret in that department. For the most part, they remained secret. She gave a confident, eloquent speech that lasted fifteen minutes, followed by another 15 minutes of Q&A. When all was said and done, her 30 minutes of face time yielded little in the way of specifics: no action plans, no strategy, no policy direction. But gee whiz, she sure sounded impressive on the podium. Maybe that’s why she’s parked in Washington DC; she sounded like a politician!

Turns out there were better panels to sit in on. Earlier this week, Builder Magazine posted a much more informative article on deals that have been done with the FDIC and how they were structured. We’ll save you the trouble of looking for it; check it out here. Next time, we'll study the program agenda a little better. Click here to read the Builder Magazine report.

Repositioning Your Business or Career

2010-10-18T07:42:00.000-07:00

The reports coming from last week's Fall Meeting of the ULI point to a long, slow recovery, or as Ivy Zelman once described it, a "canoe" rather than a broken "W". The extend & pretend recovery will continue to force many builders and developers– i.e those without access to public money– to the sidelines for the foreseeable future. So, what happens when a talented management team finds itself blocked from their normal line of work? The answer: attack the issue the same as a real estate project in need of repositioning: develop new product and services to address the "new normal".

Perhaps the best example of this can be seen on Lakewood Real Estate Solutions new website. LRES is comprised of the former management team of Lakewood Homes, founded in 1990 by Buz Hoffman. For the last 20 years, Lakewood has been known in the Chicago market as an industry leader, offering superior housing product and thoughtfully planned communities. During their reign, Lakewood attracted some of the best talent in the Chicago market, the same talent that now comprises Lakewood Real Estate Solutions. When the recession and resulting credit crunch pushed them to the sidelines, they chose to leverage their in-house talent as a workout team, helping banks and institutional owners with distressed real estate assets.

That alone isn't necessarily headline news; after all, many professionals in our industry are trying to do the same thing. The differentiator in their case is a unified team with a proven track record, combined with a website that is simple and delivers a crystal clear message. We first learned about it when one of their first blog posts, "Buzzwords" arrived in our Inbox. The email announcement captured our attention for two reasons: it was clean and attractive, but also lent a positive feel to an otherwise discouraging business (workouts). We also like how they invested the time and energy to develop a professional, multifaceted website. Everything about it smacks of professionalism.

Whether you're a one man show or a team of talented people, you might want to consider doing something similar to what Lakewood has done. It will require some investment, but there are plenty of off-the-shelf products to quickly build something similar to what you see on Lakewood's site. A $1500 investment and monthly fee of $40 (for web hosting) should get you there. (Check out Adobe's Business Catalyst, a suite of services that in addition to web site development also includes blog posts and email campaigns.)

Before you balk at the cost, keep in mind that promoting yourself and your experience has never been more important. If the latest reports for a long, slow recovery are an indication, short term contract gigs might become de rigueur. A multifaceted site like this helps people find and learn about you. One other benefit– it lends greater credibility to your job search when you've been "consulting" for over a year (or longer).

Check out Lakewood's web site and feel free to post your comments; they would appreciate the feedback.

Pony Rides and the Great Real Estate Recession

2010-10-06T10:01:00.000-07:00

The forecast continues to look bleak for real estate development of any kind, but particularly the commercial real estate markets, which appear headed for a financial tsunami. The numbers are large enough to cast a shadow over every facet of a recovery, even when divided by two. Somewhere in this pile is a pony, i.e. opportunities for investment and employment, assuming you know where to look. (Check out our prior posts on the FDIC/RAC's, for one.) The point: real estate projects (distressed and otherwise), will still need to be analyzed, managed, leased, sold, finished, marketed, etc. provided you connect with the right buyers and sellers. Here's the state of the union and best guesses for what's coming. In coming weeks, we'll talk about how to ride the pony.

$38 billion – the remnants from failed banks that the FDIC is trying sell, ranging from virtually worthless mortgage backed securities to office decorations such as plastic Christmas trees.
$1.4 trillion – the total original value of commercial real estate loans due to reset between 2010 and 2014, nearly half of which are underwater, i.e. the borrower owes more than the underlying property is worth. (Congressional Oversight Panel Report
40% - the decline in commercial property values since 2007.
$280 billion – the additional loan losses that will need to be absorbed based on extrapolating the last two points.
94% - the portion of failed banks (since 2008) that had real estate loans as their largest category of delinquent debt. Construction loans accounted for 23% of the total. (SNL Financial)
35% - portion of which real estate loans comprise the total loan portfolio of most banks.
95% - portion of real estate loans comprising the total loan portfolio of Imperial Capital Bank in La Jolla, CA.
33% - amount of total U.S. deposits held by Bank of America, JP Morgan Chase and Wells Fargo following consolidations and acquisitions, up from 21% in 2006. (SNL Financial)
280 – the number of bank failures since 9/25/2008.
829 – the number of U.S. banks currently on the FDIC problem watch list. (Standard & Poor).
2932 – potential number of bank failures over the next decade (Keefe, Bruyette & Woods.)

Tip of the Month: Indeed.com

2010-09-23T09:24:00.000-07:00

If you’re in job search mode and not familiar with Indeed.com, you should be. Indeed.com is a free service that scours the top job boards and Fortune 500 companies for new openings daily. To give you an idea what I’m talking about, today I searched for “Real Estate” as a keyword in the following markets and this is the number of advertised openings that came back:

Dallas, TX: 2040
Houston: 984
Charlotte: 638
Phoenix: 977
Washington DC: 2979
Atlanta: 1264
Chicago: 2286
Denver: 789
San Francisco: 2246
Los Angeles: 3886
Orlando: 549
Miami: 1085
Las Vegas: 386

If you care to add it up, that's 20,109 openings in those thirteen markets alone. Granted, not all will be real estate specific roles and only a portion might be a match. However, shrinking the total to 5% or 10% still leaves a decent number of job leads... not to mention the opportunity to identify companies you didn't know of before.

Indeed will also notify you when a new position is posted in your area which meets your personal interests or criteria, so you don’t have to recheck it every day. This is truly a great service, especially considering the price of admission (FREE!).

Cover Letters - Less is More

2010-09-15T08:12:00.000-07:00

Talon Tip: keep your cover letters and introductory emails short. Imagine someone reading it on a smart phone with a small screen. Here’s a draft I helped someone with earlier this week (the original was three times longer):

- - -

Dear Mr. Hall,

Thank you for your time today. Per our discussion, I am interested in a Chief Financial Officer position. A brief recap of my experience:

Acme Homes: three years as CFO of this $100M homebuilder
Chesterfield Homes: ten years as Controller for this regional builder.
Deloitte & Touche: seven years experience in public accounting and tax advisory

I’ll be happy to forward a full resume upon request or, feel free to view my public profile on LinkedIn.

Thanks again for your time and interest.

John Doe
jpdoe@hotmail.com
555-712-9758

Real Estate Market Update- 9/2/10

2010-09-02T08:14:00.000-07:00

"Are you seeing any improvement in the market?"

That's the most common question we hear from people lately– inside and outside the real estate industry. Here are some of our observations based on market data, first hand accounts and listening to OPO (Other People's Opinions). We don't recommend using this to re-balance your retirement account, but at least it will provide a glimpse of what we're seeing and hearing.

First things first, without question we've seen an uptick in search activity this year. It's not surprising when you consider the meltdown of 2008-2009; it would be hard not to post a respectable gain. Regardless, our search activity for the four months of May to August was reminiscent of the go-go years of 2006 and 2007. We actually broke a sweat!

Is this a sign of a recovery? Who knows. Our search activity remains confined to a small group of builders and developers who cleared the impairment hurdles or were lucky enough to sidestep legacy debt issues. In several of these instances, they are hiring in multiples: one client retained us on five searches YTD, another on four. It's been a long time since we've seen nine searches from two clients.

"Confined to a small group..." could also read "which leaves a large group sucking wind on the sidelines". Some appear to be highly cautious and conservative, others paralyzed by the lending freeze that blankets our industry or from being boxed out on land positions by the big builders. How much longer they can withstand these challenges remains to be seen.

Meanwhile, a hiring campaign has been underway at the regulatory agencies (FDIC, FNMA) and the subcontractors they work through (RAC's). For many in our industry, this could prove to be the safe harbor (employment-wise) while waiting for the storm to pass. We posted on these job opportunities (and how to pursue them) twice before. If you missed them, here are the two links: FDIC Part I and FDIC Part II

Another common trend during market corrections is the rise of small start-ups. Weak employment motivates many real estate professionals to create their own opportunities, usually by banding with a handful of peers to offer turnkey solutions to banks, institutional owners or by raising seed capital to do deals under the new basis thresholds.

One thing is becoming clear: to survive (prosper?) in our industry today it helps to have an alternate strategy. For some, that might be a Plan B or C... and some of which have yet to be defined.

Behavioral Interviewing, in simple terms

2010-08-24T09:08:00.000-07:00

“The best predictor of future performance is past performance”

If you've ever been in an interview and heard a question that started with "Tell me about a time...", then you've experienced a behavioral interview question. Behavioral interviewing is said to be 55% predictive of future on-the-job behavior, while traditional interviewing is only 10% predictive. As a result, more companies are adopting Behavioral Interviewing methods. Don't let the name intimidate you; the process is quite simple. All you need to remember is "STAR"; is that simple enough?

STAR serves as an acronym for the outline of a behavioral interview question and stands for:

Situation / Task
Action
Result

In a behavioral interview, the objective is to learn about a candidate through a series of questions that draw on his/her past experiences: situations faced, actions taken, results delivered. If an interviewer wants to learn about a candidate's managerial experience, he might ask "What was one of the more difficult employee situations you've dealt with in recent years." From this starting point, a skilled interviewer can delve into a variety of questions: What were the circumstances surrounding it? What actions did you take? What other actions did you consider? What led to follow the path you took? What was the outcome? Given the opportunity, would you have done anything differently?

As you can see, this one question can lead to long list of other questions. It's possible to spend 5-10 minutes on one question with the STAR outline. This is when an interviewer begins to truly understand a candidate: how they identified the problem, assessed the situation, determined a course of action, experienced the results and what they learned in the process. Best of all, everything is based on a candidate's first hand experiences, not speculation or educated guesses on how they would handle something. As one of our partners is prone to say: "One is fiction until proven to be fact. The other is just plain fact."

One final thought: candidates should not feel obligated to come up with a stellar result for each question. A candidate's most valuable experience might have had a less than favorable outcome. However, this usually requires encouraging a candidate to speak openly and assuring them that a negative result does not necessarily demean their candidacy.

FDIC Opportunities, Part II- Navigating the RAC List

2010-08-09T18:33:00.000-07:00

One of our recent posts focused on employment opportunities with the FDIC. However, most of those require prior experience with bank workouts and represent only a small portion of the total opportunities. For most real estate professionals, the gold mine of opportunities is with firms approved as primary subcontractors for the FDIC. These are the firms that actually manage the assets, determine values and strategies for liquidation, etc. For example, CB Richard Ellis is said to be targeting 600 new hires nationally for FDIC related projects. As more real estate portfolios end up in FDIC receivership, new positions will continue to surface with FDIC contractors requiring expertise in general operations, sales and marketing. Here's a strategy on pursuing those opportunities, sometimes before they've even been posted.

Step 1: The FDIC Receivership Assistance Contractors (RAC's)

The FDIC has published a list of firms approved to help with the management and liquidation of REO assets. The list is divided according to specialty or disciplines, some that appear to cross over each other. Your first task is to build a spreadsheet with the companies and contact names that could apply to your field of expertise. Don't be surprised if you end up pulling contacts from four or five of the listed groups; that alone should give you 30-40 potential employment contacts.

Step 2: Use Jigsaw.com to go beyond the immediate list

Here's an example of how to expand your reach with the RAC list: scroll down the RAC list to the second group that's focused on Owned Real Estate (ORE). The first subcontractor listed is CB Richard Ellis' Dallas office. A general email address is provided as well. You should certainly send your information there but I'd recommend going one step further by identifying one or two others in the same CBRE office whose titles indicate some involvement with asset management or liquidation. Using an online directory like Jigsaw will save loads of time and help you quickly identify who's who in a company. The monthly fee of $25 month is a bargain and allows up to 150 contacts to be pulled each month.

Don't stop there: use Jigsaw to determine if CBRE has an office in your local market... for example, Phoenix. Look for anyone in the Phoenix office with a title related to asset management, REO, distressed assets, FDIC, etc. If you find two or three potential contacts there, you now have 4-5 potential networking contacts vs. just one from the primary list. Repeat this for all the companies in your primary groups and soon you'll have 100-200 names on your spreadsheet. Note: make sure you capture the following for each contact: name, company, title, mailing address, email address and phone.

Step 3: Send each an email but don't attach a resume

Emails with attachments from unknown senders tend to get sidetracked by spam filters. You want to share the key details of your experience quickly and simply, without the need to open an attachment. Hence, we present the "Blackberry resume". It's clear, concise and can be easily read on a smartphone. Best of all, it's almost impossible to miss the keywords which really matter. Here's an example:

John... please keep me in mind if your future needs require a Phoenix based real estate finance professional. A brief summary of my experience:

VP Finance- Gables Residential, a nationally recognized multifamily REIT
VP Investments- Brookstone Capital, debt and equity partnerships for real estate projects
Sr. Analyst- Deloitte & Touche, specialization in real estate and manufacturing

BSBA- University of Arizona
MBA- Arizona State University
Licensed Real Estate Agent, Arizona

I'd be happy to forward a complete resume if you're interested. I'm available on a contract or full time basis. Thanks in advance for your consideration.

Bill Smith

bill.smith@anywhere.com

602-333-5555

Step 4: If you don't receive an email reply, send a resume by mail one week later

Your mail follow-up should include a cover letter that is virtually identical to the one above; the only change would be to the closing paragraph ("I've attached a complete resume..."). Resist the urge to ramble or write something longer; it will do more harm than good. The cover letter needs to clearly define who you are, what you do and where. Keep it short and sweet for maximum impact. The goal is to detail your experience in as few words as possible.

Lessons Learned in the Search Business

2010-06-28T14:45:00.000-07:00

We've learned our fair share of lessons after 25 years in the search business. Some were learned the hard way, many times more than once. Save yourself time and trouble by heeding these tips.

The best indicator of future performance is present & past performance. The shrinks refer to it as direct behavioral observations. We call it the Duck Theory: “If it walks like a duck...”

Direct observations are better than inferred ones. The fact that John describes himself as a “people person” is encouraging. However, if he frequently slams his co-workers and supervisors during the interview process, it’s probably not true.

“How did...” trumps “How would...” Hypothetical questions tell you what a candidate might do, whereas behavioral questions... focused on past actions... yield what they actually did. One is fiction until proven to be fact; the other is just plain fact.

Recency, Recency, Recency. Like the adage "location, location, location" the best history is recent history. What someone did five years ago is less important than what they did last year.

Rarely is anyone as good or bad as we think they are. Also known as the “divide by two...or three” rule.

Everyone has hot-buttons which skew their objectivity, i.e. the attributes we like to see in people. Recognizing yours will help maintain objectivity.

Never make a hire / no hire decision based on any one thing, whether it is an accomplishment or failure, praise or criticism, good or bad reference.

If you don’t know what you are looking for, how will you know when you find it? The better you define what success should look like in a position, the easier it will be to assess those abilities in others.

The more comfortable both parties are during an interview, the more open and authentic each will be. That means no more trick questions or acting like an armchair psychologist. Give candidates an outline of what to expect as well as “permission” to flip a question back to you at anytime, or to ask one of their own. (Learn more in our post The Naked Interview.)

The interview and hiring process should be like a courtship: it starts with Attraction (dating), evolves into Assessment (learning about each other) and concludes with Acceptance (proposal). And like a marriage, it takes Adaptability & Alignment of expectations on both sides to make it work over the long haul.

If a candidate needs more than 24-48 hours to accept/decline an offer, then something in the prior statement was not handled correctly. An effective interview process comprises more than one visit and plenty of opportunities for both sides to learn about each other. The decision should be pretty clear by the time an offer is made. Taking longer than a day or two will not make the decision any clearer or easier. Imagine proposing to your spouse and hearing “I really appreciate the offer. Do you mind if I take the weekend to think it over and get back with you?”

Counter Offers tend to be short-lived solutions. Case in point: employee resigns in order to pursue another opportunity. Employer offers him a raise, bonus or promotion to entice him/her to stay, but never forgets how the employee leveraged the situation to his/her advantage. The relationship is never the same. It’s also a poor way to go about getting a raise or promotion. Historically, the relationship sours within twelve months and the statistics bear this out.

FDIC Employment & Acquisition Opportunities

2010-06-03T16:47:00.000-07:00

Similar to the RTC days, the best avenue for real estate professionals to secure gainful employment in the near future might be with the FDIC. To date, the Fed has given banks a long leash to curtail an onslaught of failures; hence, the "extend and pretend", "pray and delay" monikers. As the economy shows signs of strength, the Fed will begin flexing it's regulatory muscles and require banks to address the deals they've been nursemaiding for so long.

Until those assets are re-traded, no one knows for sure what the total impact will be. However, when you consider there's an additional $2 trillion of commercial real estate debt due to reset between 2011-2013, half of which is valued less than what is owed, it doesn't look good. Clearly, the FDIC is faced with becoming the largest REO owner and employer in the nation. So, if you're in the job market or looking to acquire real estate assets at great prices, get ready.

The Hiring Side- "We've Only Just Begun"

The FDIC is hiring. And, like the old Carpenters' hit, it's just the beginning. In addition to the FDIC, there are the 100+ third party contractors (known as RAC's) who have contracts to support the FDIC's asset management and disposition activities. Many of them will need specialized talent, too. Some of the candidates will come from banking, some from real estate, some from other industries altogether. To see a complete list of third party firms by industry segment, check out the FDIC Receivership Assistance Contractor list.

Applying to the FDIC for an opening is no slam dunk. A separate online application must be completed for each position. Don’t make the mistake of applying for one position thinking the FDIC will consider it for other openings, regardless how similar they might appear. You must submit a separate application for each position of interest. It’s time consuming, but necessary. Some tips on completing the applications:

The FDIC uses a scoring system to determine fit with a position. It is important that the language in your resume and the your answers on the application match as closely as possible to the job description. For example, if the job description requires “entitlement” experience but you use the term "approvals" in your resume, it may not receive as high a score. Certainly, don't embellish; just make sure you’re speaking the same language. This might mean rewriting your resume to better match the each opportunity.
A background check will be required on each application as well, but you can copy and paste much of the information to speed the process up. Park the answers (in order) on a separate document as you complete the first application, the go back to it on additional applications.
If you have any prior experience with the RTC, banks or federally approved workout firms (RAC's), be sure to note that; it is considered a huge plus. Again, don’t assume the folks at the FDIC will recognize a company’s name and draw the right conclusion; instead, spell out the relationship, duties or role. Learn more about the application process.

The interview process itself is rather impersonal. Once your application has been approved for consideration, a brief phone interview is conducted with someone at the FDIC. Assuming the visit goes well, a conditional offer is made subject to final approval and completion of your background check. Don’t be surprised if you are formally hired before you ever meet the person who will be your supervisor.

Good news on compensation: the FDIC is paying market rates. Depending on the position applied for, qualifications and compensation history, the base salaries can range from $100-175k, plus bonus incentives and/or overtime. Each position has a defined compensation range (e.g. $105-125K). The initial offer will always be made at the lowest number; however, if payroll history is supplied demonstrating you are accustomed to making more than the low end, the local office has the option of increasing the offer by up to 25%

FDIC Careers posts positions currently available directly with FDIC offices nationally. Click on View All Vacancies to see the full gamut of needs. To search opportunities with both the FDIC and it's approved contractors, go to Indeed.com. Enter FDIC in What field and City or State in the Where fields.

The Buy Side: Acquiring Assets

The FDIC has a history of selling their assets at 94% of appraised value regardless of what the previous value of the asset was. Obviously, the key driver in the deal will be the appraisal. Given recent challenges in quantifying property values, this could be deal breaker for either side.

FDIClistings.com is a good site to start looking for potential deals. Prescient and the other asset managers have more than 1000 brokers that will list assets on behalf of the FDIC so look through local channels as well.

The Roseview Group works on various bank assets prior to the FDIC getting their hands on a bank. When they dispose of assets, they are interested in the following from a buyer: surety of execution, a desire not to be re-traded, an interest in not being nickel and dimed, a buyer that has a target asset in mind, and someone that will purchase without reps and warranties.

Asking for a list of all assets "for sale" is usually ignored. The RAC's get thousands of tire kickers and they ignore most of them. The surest way to get their attention is to have one troubled asset acquisition under your belt, and a specific new acquisition target or pool in mind.

NOTE: We'll continue to update this post with additional information so be sure and check back.

The Naked Interview

2010-05-24T13:36:00.000-07:00

The next time you enter the interview arena– as a hiring manager or candidate– you might want to try getting naked first. OK, not in the literal sense but as described in the business bestseller “Getting Naked”, by Patrick Lencioni. Lencioni’s book addresses the three things that tend to sabotage client loyalty:

Fear of losing the business
Fear of being embarrassed
Fear of looking inferior

The solution: using transparency and authenticity as the foundation for consulting or selling environment– or, as Lencioni says "getting naked". No more posing, posturing or saying “the right things” in order to make the sale. His recommendation is to focus on understanding a client’s needs, helping them find solutions and speaking the truth – even when it might put the relationship at risk.

The book affirmed something we’ve felt is wrong with the interview methods many companies rely on. See if this sounds familiar:

A candidate is invited to interview with a company. Other than knowing the position to be filled and essential requirements of the job, nothing more is shared in advance. The candidate is expected to enter the interview arena “blind,” hoping for the best and speculating on what might be asked.
The interview itself is largely a pop-quiz process with the company representative asking the questions, the candidate answering.
The candidate leaves the interview clueless on how well he/she might fit the position.
On the way home, the candidate invariably thinks of answers – if only they'd had more time to think about it.

That last point is especially true of behavioral interviews, where candidates face questions beginning with “Tell me about a time when...” and, for whatever reasons, none of the best answers spring to mind. Too much is left to spontaneous discovery. As a result, both parties potentially lose: candidates fail to share their best experiences and companies miss an opportunity to learn about the candidate.

Our solution is contrary to most interview formats. Borrowing from Lencioni’s theme, we call it the “Naked Interview.” It’s purpose is to conduct the interview in a more transparent manner. No pop quizzes. No trick questions. No trying to see how candidates react under pressure situations. In fact, we suggest giving candidates an outline of the interview in advance, including the top two or three objectives for this position. Here’s how it might play out...

The Naked Interview

Acme Manufacturing is interviewing candidates for a VP Sales for their East Coast Region. The the top objectives for the new RVP Sales in his/her first year of employment:

Help select and implement a new CRM program.
Identify and assess expansion into three new markets.
Assess the abilities of the incumbent sales team and determine if and where changes should be made.

Dan Smith, a Regional Sales Manager with another company, is one of the candidates being considered. A few days before the interview Dan receives this call:

“Dan, this is Bill Jones at Acme Manufacturing. We’re looking forward to meeting with you and want to give you a heads-up on some key things we want to discuss our time together. Besides the typical sales management duties, we have three overriding objectives we need this person to accomplish in his/her first year in the role:

1. The first involves CRM programs. We want to spend some time talking about your experience with CRM programs, what’s worked and not worked, etc.

2. Second, we want to investigate expanding our services into some new markets. So, any experience you have with identifying new markets. assessing their potential and supervising the start up operations will be of interest to us.

3. Third, we’re not sure if our sales team needs upgrading or simply better training. Therefore, we’ll want gain a solid understanding of your experience in terms of hiring, training and assessing sales teams.

4. Last, I want to reserve some time to answer questions you might have. Give some thought to that and send me your questions in advance of our meeting. I want to make sure I’m prepared to answer them thoroughly.”

Can you see how this strategy might reduce stress on both sides of the interview table? The candidate enters the interview arena looking forward to the visit, not anxious. And, the hiring manager has a much better opportunity to understand the candidate's experience as it pertains to their key objectives.

Traditionalists might say this gives the candidate too much information on the front end, raising the potential for researched or canned answers. However, since we’re basing the discussion on “real time” experience... i.e. the candidate’s past experiences... it is consistent with behavioral interviewing practices. And, drilling down on each topic will ferret out puffed-up answers. Look at the number of questions we can spin the CRM discussion topic alone:

Was the program in place when you started or implemented afterwards?
If after, were you part of the selection or design team? Walk us through that process. How long did it take to implement? What were the challenges?
Is it better to buy an off-the-shelf program or develop from scratch, and why?
What impact did having a CRM program make? How were you able to quantify the value?

Let’s face it, ask enough questions about any single topic and the truth will rise to the surface soon enough. A candidate’s direct experience and knowledge will become readily apparent.

Appropriate for Candidates, too!

Candidates can steer this process too, although to a lesser degree. If you find yourself headed to an interview, ask the hiring manager to describe the top two or three objectives for the new hire in the first year of employment. Then, be prepared to make comparisons to your own experience and how it speaks to those objectives. Or, ask what he/she most wants to learn about you in your time together. Either way, this will go a long way to enhance the interview experience for both parties.

Market Update- May 2010

2010-05-03T19:34:00.000-07:00

Tell the Troops: The Battle's Not Over

Had an interesting discussion with a Division President of a high volume, national builder. One of his employees recently requested a raise and the Division President was trying to determine market rates for her position. In the course of our discussion one thing was clear: his team had been selling, building and closing lots of homes this year, due in part to the (now expired) homebuyer tax credits. Increased sales and a return to profitability– no wonder employees are thinking it's time to ask for a raise. However, no one should be misled into thinking things are "back to normal". Potential challenges remain, lurking like a storm on the horizon. No one knows for sure whether the storm will pass by or head straight down Main Street.

Therefore, this Division President continues to manage his overhead judiciously which doesn't leave much room for pay raises. However, he can't assume his employees are tracking the economic forecasts like he is. The take-away: Now that the home buyer tax credit window has closed, it's a good time to remind your team that our industry is a long way from being out of the woods. As much as raises might be deserved, survival is still the name of the game and that rumbling in the distance might be thunder. Managing overhead and expenses today might well fund shelter from the storm tomorrow.

Upbeat Attitudes at Spring ULI

Wow! Talk about turning a 180– the energy and attitudes at Spring ULI in Boston were a dramatic improvement from six months ago. With a nod to the conservative forecast above, no one dared claim victory over the recession. However, it was clear that deals were being done, people were busy and there was plenty of forward looking discussion. The one which caught my attention more than any others was given by James Chung of the consumer research firm, Reach Advisors. Some highlights:

Asian American, Hispanic and Mixed Race families will experience significant growth in income, home ownership and as a percent of overall U.S. population. In terms of income earners, Asian Americans will pass White families as leaders of the pack.

Gen X buyers place far more value on community attributes than premium home features. However, they were not afforded the same income opportunities early in their careers as their Boomer parents. Therefore, builder must adapt their product and communities if they hope to tap this segment.

Today, women with equal education earn 79% of what their male peers earn. However, within the next ten years women will earn 1.5 times more than their male work peers. Women are already earning 100-120% of what their male counterparts earn in certain cities. The residual effect is that many of these women will continue down career paths for longer periods of time meaning longer time before marriage and starting families.

White (non Hispanic) families will decline as percentage of population growth and income leadership. In terms of income alone, Asian American families will become top earners yet their percent of homeownership is (today) far lower than their White counterparts. Hispanic families will also see a notable increase in home ownership potential.

To see the complete presentation, drop me an email or visit the website of Reach Advisors.

Social Media staffing: The beginning of a trend?

2010-04-27T12:49:00.000-07:00

Dallas developer devotes staffer full time to blog and tweet

08:59 AM CDT on Tuesday, April 27, 2010

By SHERYL JEAN / The Dallas Morning News
sjean@dallasnews.com

Kendall Shiffler spends hours each day on blogs, Facebook andTwitter.

Also Online

Link: Lower Oak Lawn blog

It's her job as social media maven for Lower Oak Lawn, a new residential and retail development in Dallas' Design District between the Trinity River and Interstate 35 East.

Through a blog, loweroaklawn.com, and other social media, Shiffler has quickly become the voice of the Design District. By focusing on what's going on among the area's many design showrooms, art galleries and denizens, she hopes to attract people to Lower Oak Lawn, which has 1,000 apartments and plans for five restaurants (the first one opens Wednesday), a boutique hotel and trails.

Developer Mike Ablon's research showed the target resident was a tech-savvy, 20-something urbanite. So he shortened Lower Oak Lawn to LOL, which means laughing out loud in the social networking world. He also added built-in flat-screen televisions and iPod docks and speakers to the apartments at Alta 1900 Lofts, one of three apartment complexes there.

It's unusual for large companies and even rarer for small businesses to have a marketing person devoted to social media. Ablon's company, PegasusAblon Properties, has 20 employees.

"There isn't anything like this in the industry, so we had to invent it, and to do that you have to be committed," Ablon said. "We hired Kendall on LinkedIn. You want someone who lives in that world."

Shiffler, 25, worked in the city of Dallas' international economic development office for two years before joining PegasusAblon in September. For the job, she had to write a blog post about why she loved social media, submit how many social networking friends and followers she had, and post a blog item about LOL.

Small businesses have lagged in using social media because they don't have the staff or time, said Janet Wagner, director of the University of Maryland's Center for Excellence in Service. That's changing: A study by the center found the use of social media by small firms doubled to 24 percent last year in the U.S.

SOCIAL MEDIA TIPS FOR SMALL BUSINESS

1. Know your target audience or customer.

2. Develop a social media marketing strategy.

3. Make sure your website or blog has the best search engine optimization.

4. Find the right voice for your business.

5. Join Facebook, Twitter and YouTube.

6. Join LinkedIn and other professional networking sites.

7. Start a company or personal blog.

8. Integrate social media into your traditional marketing.

9. Research what your competitors are doing.

10. Address negative feedback immediately. Don't ignore it.

An Economic Recovery without Job Growth?

2010-04-25T20:34:00.000-07:00

Is it possible we're headed for an economic recovery without significant reductions in unemployment? Scott Burn's column in today's Dallas Morning News makes a case for it. Read on:

Sometimes a single statement can be so loaded with import that it just stops you.

That happened recently when I interviewed economist David Ranson. A consulting economist for H.C. Wainwright, a research firm serving investment managers, Ranson has spent years examining how markets tell us things – if we listen. I've learned to take his anticipation of our economic future very seriously.

I asked him three questions. His answer to the third question opens the door to possibilities that few are prepared to think about, let alone discuss.

What kind of economic recovery will we have?

"I can see double-digit GDP growth, and I strongly believe the recovery will be V-shaped," Ranson said. "We'll have positive growth but weak employment.

"That's not the conventional wisdom, which is often shaped by mood. Recent growth figures, for instance, were greeted with worry by journalists and many economists. But I think we'll get even higher growth figures in the next two quarters.

"Unfortunately, that doesn't mean employers will hire new workers. Productivity is rising, but much of it may be because employers aren't hiring. This is very bad socially.

"You see, employers have choices," he said. "They can choose a large workforce of average workers. Or they can choose a smaller workforce of above-average workers. An employer who sees employment as a losing game – more government regulation, more taxes and more hassles – isn't going to be eager to hire. I think that's what's happening now."

That sounds like an increasingly winner-take-all economy, I said.

"Yes, that's the way we're going," Ranson said. "The economy will recover lost output. But it will sputter out. We'll go back to subaverage growth as the government takes up more of our economy.

"That's the message of history. We had our best growth after demobilization following World War II. But government was smaller then. In the future, we'll have a larger government and perhaps growth of only 1 percent [a year], down from 2 percent.

"Unemployment will stabilize at a pretty high rate."

How can people protect themselves?
"In recent history, we've depended on stocks and bonds to securitize wealth. But those are both vulnerable," Ranson said. "So now we're at sea. David Swensen's answer is tangible assets. [Swensen is the highly regarded manager of the Yale University endowment.] We can now see capital flowing to the real – to productive assets rather than paper assets."
The important thing to remember here, he noted, is that human beings have relied on other stores of value at other times – things such as gold, silver, commodities and real estate. After relying on paper assets for more than a century, he said, we may be revising our notions of safe ways to store wealth.
If he's right, we're heading for what some will call an "asset quake."
--
Scott Burns is a syndicated columnist and a principal of the Plano-based investment firm AssetBuilder Inc.

Leadership in Tough Times

2010-04-08T20:01:00.000-07:00

The burden of the economic recovery extends beyond unemployment statistics, business failures and the erratic financial markets. It forces us to modify our behavior on several fronts, personally and professionally. How it impacts the leadership role was a topic of discussion at a recent industry association meeting. Here are the highlights:

Communicate (more often)

It’s not enough to simply communicate with your team– for maximum effectiveness it must occur frequently. This goes a long way to curbing speculation and helping team members stay focused.
Withholding relevant information leads to speculation, rumors and hearsay. If bad news lands on the doorstep, better to share it than not.
Share only what needs to be shared; don't over-inform. People deserve to hear the truth, but not beyond the facts that pertain to them.
Take internal audits to gauge team members’ state of mind: what are they feeling, what are their needs, what can you do to support them?
Tip: It’s perfectly fine to not have answers to every question or comment; listening is the first step to being an effective leader (and probably the most difficult for people in leadership!)

Model the Right Behavior

You don’t have to be the first to arrive and the last to leave every day, just make sure you’re not a LIFO– Last In, First Out.
Do more than is required and not just in your area of responsibility. Pitching in to help others– above or below your rank– is the at the heart of servant leadership.
Remember, nothing kills morale more than a leader labeled as “Do as I say, not as I do.”

Engage the Team

The ability to adapt to changing environments or market demands is critical to the success of any business. The same is true of the people on your team. Help them break free from the routine by encouraging feedback.
Step 1: make certain everyone understand the basics well and are pursuing those standards consistently. No need to try building on a weak foundation!
Step 2 : keep everyone focused daily on the “work at hand” or in Zen terms, “being in the moment”. This helps minimize distractions, gossip and needless speculation.
Step 3: ask for input, ideas and feedback then, actually try some of them. Celebrate the successes (loudly), no matter how small the impact. In times like these, your team needs every win it can get.

Our Favorite Interview Question

2010-02-23T09:07:00.000-08:00

If you've been in the workforce for any period of time, you've either asked or been asked some great questions in an interview. Here's one of our favorites, why we like it and what we look for:

"What are the two worst business decisions you've made and what was their impact on the company's profit statement or balance sheet?"

One of our clients posed this question to finalists on a C-level search we handled more than fifteen years ago and we've used it ever since. On searches that don't involve P&L roles, it can be modified to "your area of responsibility?". We look for two things in the answer:

Authenticity & Objectivity. It's amazing how often we hear people skirt this question with "Gee, I can't think of any really bad decisions I've made". Meaning he/she is (A) uncomfortable talking about his/her past mistakes, (B) a low risk taker, (C) lacking in awareness or (D) way overdue for a doozy of a mistake. Pick any of the four options and it's safe to say you probably don't want that person joining your team.

A Proportionate Response. Is the answer proportionate to the candidate's past level of authority and responsibility? A C-level candidate should cite a much more significant example than a mid-level manager and vice versa. If it doesn't match up, then the four reasons above are probably at play again.

A prime example of this surfaced from a candidate we interviewed for the search above. He told us about a large project he bought for his company several years earlier. It was going through a lenghty entitlement process and the front-end investment was growing each day. It was clear the project would be a home run once it cleared entitlements but with a difficult township involved, it was uncertain when that would occur.

This candidate was pressed by his CEO to make a decision on staying the course and hope the project cleared entitlements (or) selling it now with partial entitlements and get out. Either way, it was clear his future with the company was on the line if things went south. His gut told him to stay the course, but logic told him to play it safe and sell the project. He went with the latter and while not a home run, his company still made several hundred thousand dollars profit.

So, where's the grand mistake? Our candidate went on to explain that soon after the sale, the township elected a new mayor that was more pro-development. The project cleared entitlements on the next pass and went on to become the #1 selling project in the state for several years. As the candidate put it, the "lost income opportunity" was in the multi-million dollar range. In the interest of "playing it safe" he cost his company millions of dollars and recognized that.

Point: Many candidates might not have considered this a "bad decision"; after all, the project still made a profit. However, this candidate saw beyond the short term profit to recognizing (and admitting) the missed long term income opportunity. We found his candor insightful and refreshing. So did our client, who hired him as their new President.

OK... your turn. Tell us about your favorite interview questions and we'll share them in a future post.

Subscribe to our e-newsletter to stay abreast of new opportunities.
The Talon Group
Bob Piper, Rodney Hall, Tony Cleveland & Jean Mason

The Reality of Perception

2010-02-21T18:11:00.000-08:00

A recent newspaper article included a statement by Phil Rosenzwieg, the author of "The Halo Effect". Skipping to the point of this blog, Rosenzweig stated a host of psychological studies have shown the extent to which arbitrarily telling a person they have either excelled or failed at a task shapes their memory of the task: people told they succeeded are far more likely to remember their team as tightknit and their team leader as competent and inspiring. Those told they failed remember team squabbling and ineffectual leadership.

"Shapes their memory" jumped off the page. How often do homeowners have one negative customer service experience with their builder and forever rate his overall product quality as below average? Or as managers and leaders, one off-handed comment to an employee (and long since forgotten by you) surfaces again years later as a bone of contention? Sound plausible? How about familiar?

Contemporary employment regulations have taught us to be respectful and even cautious about what we say and do to others, and rightfully so. That's not where I'm going with this. I'm referring to the seemingly innocuous statements or actions which we learn (often too late) were quite damaging. If you want to do your own litmus test, try asking your spouse about it.

As a nation, we are in fragile times, economically and politically, domestically and abroad. As an industry, the environment is primed for miscommunication and missed expectations. Let's keep that in mind as we interact with our customers, employees and vendors. Rememer: the actions and words you use today will determine what people think of you tomorrow.

Linked-In Recommendations

2010-02-21T18:10:00.000-08:00

We've noticed the growing popularity of capturing recommendations from former supervisors and peers, especially to display on LinkedIn. Virtually all come across more as a tribute than a professional recommendation, going on and one about what a great person the subject is... how he/she is a superb leader, strategic thinker, self starter, team oriented... blah, blah, blah.

Two problems with this: First, what are the odds someone is going to post or advertise anything less than a stellar reference on themself... which makes the recommendation somewhat suspect in the first place. Second, the recommendations tend to be way too generic, lacking substance and speficity. How many times do you need people to say you "are a great person"?

Try this and see if it doesn't lend greater credibility to your recommendations. Let's imagine "John", a former VP Sales for a national builder... wants to add recommendations to his LinkedIn page or resume. Rather than make a blanket request to former peers and supervisors, he asks his Controller friend to write about a specific project they worked on together which demonstrated strong financial analysis acumen. Next, he gets his VP Construction friend to write specifically about John's construction knowledge. Following this pattern, John's former Division President might speak to his understanding of the broader P&L picture. A former Sales Representative writes about John's training and management abilities.

Whenever possible, these "recommenders" should include specific examples or projects, as that is what makes the believable. Otherwise, the entire concept of getting recommendations becomes a revolving mutual admiration society.

Consulting, SWAT Style

2010-02-21T18:08:00.002-08:00

Within the last week we received calls from two seasoned home building professionals who are experts at what they do. The first was a former VP of Customer Care for a home builder known for having outstanding customer satisfaction. The other was a former President & CEO from an award winning green builder. These guys share two things in common: they are both leaders in their field and unfortunately, unemployed.

As a means to an end, both gentleman plan on consulting until permanent opportunities appear again, which could be awhile. Rather than just hang a shingle out as a "consultant for hire", they should each package a turnkey program to offer to builders. The entire program might last only 3-5 days and be highly affordable. Quick, fast & effective. Sort of like a Navy SEAL for BuilderOps.

Let's face it... builders are not anxious to spend money these days and most consultants need several weeks or months to implement their programs. However, if these guys could demonstrate their ability to deliver specific services (and value) in just 3-5 days, more builders might be willing to take the plunge.

For those of you in similar situations, where to start? Assess how much time you spent performing the duties of your previous job, then build incremental programs around each. Examples: A former VP Sales might offer a three day program which helps builders determine market strategy, competition analysis, product selection, etc. and a five day program working with the salespeople in the models. A former Purchasing Manager might have a two day program that reviews a builder's budgets and a four day program to help set-up a PO system. In other words, don't position it as a consulting catch-all, but rather specific services which can purchased individually. Then, figure out how much to charge for each.

Do Incentives Work?

2010-02-21T18:08:00.001-08:00

No doubt most employees are happy (if not thrilled) to have jobs these days, especially in our industry. Long gone are the halcion days of huge bonuses based on stratospheric profit participations... but no one seems to be complaining too much about the loss of incentive income. Now that profits are flatlining in most markets, should companies adjust their incentive programs or stay the course? And, to what degree do incentives (cash or otherwise) drive employee performance in the first place? Before you try to answer these questions, check out out "Why Incentives Are Effective, Irresistible & Certain to Backfire", from the January issue of Fast Company. Another one worth checking out is "Punished By Rewards" by Alfie Kohn.

Market Update- Sept. 2009

2010-02-21T18:07:00.000-08:00

My partners and I continue to field some form of the question “Do you see things picking up?” If only the answer were as simple as “yes” and “no”. Here’s some random observations of what we’re seeing and hearing:

Yes... there has been an uptick in activity and to some degree hiring. Is it an indicator that our industry is heading into recovery? Honestly, it is too soon to tell. Let’s face it: the market went into panic mode a little over a year ago. Since then, there has been little activity of any kind. Call it a market paralysis. Wait long enough and sooner or later someone will have a hiring need or want to invest in something. That is what I think we’re experiencing now... an uptick spurred by pent-up demand and special programs rather than signs of recovery, especially on the hiring side.

Meanwhile, banks are still sitting on real estate debt like chickens waiting for eggs to hatch, hoping something better looking will evolve. Add to that the commercial real estate loans that will soon need to be renegotiated amid an environment of stricter loan-to-values and declining appraisals. Can a recovery really get a fresh start with baggage like that? We’ll see.

On a more positive note, the builders and developers who have survived the write-downs and still have money (or lines to money) are on the hunt for land. In the past week we’ve heard reports of one builder staffing eight land acquisition positions and another looking to staff three or four in the coming months. Once again, we see this as the payoff for a few fiscally conservative players rather than an indicator of long term recovery.

At the market level, former Division Presidents are starting their own companies with subordinated lot deals through developers they know. The big question is whether the banks will play along when real debt is needed once again.

Yes... some positive things are happening. Let’s celebrate the small wins when and where they surface. However, I wouldn’t be too quick to order a cake.

ULI Fall 2009 Meeting Highlights

2010-02-21T18:06:00.001-08:00

Just returned from the ULI Fall meeting in San Francisco. The event was well attended by approximately 6000 real estate professionals. Speakers included a wide range of experts such as Ivy Zelman (a leading research consultant on homebuilding), Ron Terwilliger (retiring Chairman of Trammell Crow Residential) and Bill Emmott (Editor in Chief at The Economist). If I had to summarize what I heard in two words it would be “jobs creation” as the key to a sustainable recovery. Here are the quick takeaways:

The Economy

Non-performing loans continue to rise, trailed by a similar amount of loans “at risk” due to slow/no payment.
Inflation will rise from 1% to as high as 3-5% in the next five years.
Of the thousands of ULI professionals surveyed during the Fall meeting, 65% feel the recovery will be a “broken W”... meaning a long trend line of improvement on the back side.
Some of the positive rebound we’re seeing could be due to recovery from an over-correction of the markets, stemming from last year’s panic. Companies rushed into cutbacks in starts, staffing and budgets to counter the situation and quite possibly– cut too deep.

Unemployment

We’ve lost 8mm jobs over the last two years. It is critical to the recovery that we have a public policy that fosters jobs creation. Buy-side programs like Cash for Clunkers and the current tax credits for home purchases, while helpful, will not sustain a recovery over the haul; reducing unemployment will.
A significant portion of the unemployed will not be re-hired into the same roles. Instead, new roles are likely to emerge over the next three years that may not exist today.
It will be late 2013 to early 2014 before full employment recovery occurs.
The good news: we still have over 100 million people who are employed and need places to live. While they may be more cautious now with their buying decisions, it doesn’t replace the fact they still have needs. For several years now the American consumer has lived beyond his means and now must pay the bill. The days of consumers buying on a lark or without making comparisons are long gone– which most experts agree is not necessarily a bad thing.
Recommendation: train your salespeople to diligently counsel buyers, arming them with convincing data on why it is in their interests to buy now vs. later. Salespeople should be experts on every facet of homeownership, tax credits available and mortgage programs.

Residential leads the Recovery

Housing was the first sector to take the hit and will be the first out to lead a recovery. Extension and expansion of tax credits certainly helps, but once again “jobs” are the key to sustaining a long term housing recovery.
Equally important is the ability for builders to obtain AD&C financing, especially for the local and regional builders. The public builders left standing have far greater resources and can afford to sell at near break-even margins in order to ride out the downturn. This places significant pressure on the smaller private builders, who absorb higher costs across the board but are unable to recover those costs through higher pricing.
Expect the public builders to aggressively buy-up the majority of finished lot inventory in major markets– even if they already have ample land on their balance sheet. Strategy will be to sit on any raw land on the books and hold for long term recovery while building out newly purchase finished lot inventory. This too will put additional pressure on local and regional builders who lack similar resources.
In spite of the bleak economic news, demand for housing will remain. Expect a 13% increase in housing starts in 2010 and higher numbers in 2011 and 2012.
Recommendation: Smaller builders need to demonstrate a unique selling proposition to the customer in order to counter price differentiation with the big builders. Higher grade amenities alone may not accomplish this due to appraisal difficulties (more on that later).

The Lender Side

Government sponsored financing at both the consumer and banking level, has “bought” us some of the recovery.
Moving forward, two options appear to exist: Option 1. The more government aid is utilized to bolster banks, the longer the recovery process will be– albeit with less pain. Option 2. The sooner foreclosures are dumped on the market the faster recovery will occur– accompanied by more immediate pain and bank closures.
5.6 million mortgages are in imminent foreclosure or "at risk", meaning 60 days past due. If all of them reach foreclosure, home ownership will drop to 63%. This is no longer a sub-prime issue, as 41% of these mortgages are prime, non-jumbo loans.
In spite of the government sponsored modification program, only 9% of delinquent loans reach that process.
Bank failures will increase as the Fed becomes more confident in the economy and therefore, less willing to extend support.
As more banks fail, the FDIC will struggle to absorb the losses and will require additional governmental support.
Problems with commercial real estate loans are just now beginning. (The graph one economist used to show the potential debt “at risk” was downright shocking; imagine a trend line that shoots straight up in one year– in this case, 2010.) This becomes a potential cancer on the balance sheets of banks; whether or not the cancer is curable will vary with each patient.
Pension Funds and Insurance Companies are in better shape and should recover slowly over the coming year.
Whatever the timeline is for recovery, some banks will opt-out of real estate lending altogether or, limit their loan portfolio to projects with shorter time lines for completion. Speculative projects or those early in the entitlement and planning process will have a much more difficult time getting funded– banks will foresee too much potential for problems before build-out.
Recommendation: builders with should approach their lenders with multiple solutions in hand. Don’t wait on them to help you figure it out.
Recommendation: offer to help lenders workout their other problem projects, either on a fee basis or as help-in-kind. This might also give you the inside track on short sell opportunities.
Recommendation: of the deals considered for acquisition, avoid the ones requiring preliminary approvals or which required significant debt commitments. Look for the “A” projects further along in their life cycle so you can hit the ground running.

Appraisal Challenges

New appraisal processes are stripping new home values of value-added features such as lot premiums. Instead, appraisals are being made on a strict price per square foot basis without much consideration for upgrades or lot premiums.
Recommendation: Builders must rethink their pricing structure if their product or community relies on upgrades or lot premiums as a profit tool. Simply put, the new appraisal environment focuses heavily on straight price per square foot formulas.

American Fallen Soldiers

2010-02-21T18:05:00.000-08:00

This is the first time I’ve used this blog platform for topics unrelated to the housing industry or human resources, so please bear with me. Last night I attended a presentation at the American Fallen Soldiers project. Started in 2007 by artist Phil Taylor, the project aims to provide every family of a fallen soldier with a framed original portrait of their fallen loved one that fully captures their appearance and personality. There is simply no way I can do justice to explaining it in this space so I encourage you to visit the project's website. The testimonials from the families receiving portraits will give you a sense of the impact it's had on their lives. Phil receives no payment for his work, contributing up to 80 hours of his time on each portrait. However, the project incurs other expenses such as professionally printed copies on canvas for family member who do not receive the original. Phil personally funded the project the first year but its has grown beyond the means of one person. Therefore, a 501c3 non-profit organization was created to continue funding the project. I encourage you to visit the site, if for no other reason then to remember and honor those who paid the ultimate price for the rest of us. If you feel called to make a donation, I know they would appreciate it. Learn more at American Fallen Soldier Project.

Purpose Driven Networking

2010-02-21T18:04:00.000-08:00

The opening sentence in Rick Warren's bestseller "Purpose Driven Life" sums up a common mistake most people make in their approach to networking: "It's not about you." A good example of this is reflected in the email below, received this week from a job seeker. (The text has been edited for confidentiality.)

Dear Recruiting Professional,

I contacted you several weeks ago regarding a Senior Real Estate Position. I am following up to see if any new positions have opened up. I have attached my CV and a PowerPoint Presentation as a support document. I have over 26 years of experience in Real Estate Development, Construction, Design, and Property Management. Please let me know if I can provide you with any additional information. I look forward to hearing from you. Respectfully, John Doe

Does this mean I can expect to receive a similar follow-up from John in another 2-3 weeks, and every 2-3 weeks thereafter? Clearly, John is anxious to find employment and simply trying to stay top of mind, but at some point reincarnations of this message become redundant and as much as I hate to say it, unwelcome.

A marketing expert once described most advertising as an uninvited, unwelcome intrusion into our lives, whether the media is TV, radio or web based. (Hence the creation of DVR’s, satellite radio and spam filters.) However, once in awhile an ad campaign comes along that entertains the recipient or provides some other value added component. Have you ever stopped a conversation to point out a funny or heartwarming TV ad or forwarded an online ad posted on YouTube?

Networking should follow a similar path. Rather than repeatedly calling your network or sending emails to see if anything new has come up, give the recipient something of value. Here's a value-added approach John could use to stay on my radar screen in a more welcoming manner:

Bill, I thought you might be able to use this information for new search opportunities. I ran across them while conducting my own job search in Dallas. None of them are a fit for me, but might be of interest to you or someone else:

- ABC Development is looking for a VP Sales.
- XYZ Communities is looking for an Entitlement expert.
- Acme Homes is looking for a Purchasing Manager.

I'm continuing to look for my next opportunity as CFO or Controller for a Dallas based company, so please keep me in mind if you hear of anything.

Respectfully, John Doe

In a similar fashion, John could group his address book by functionality: Sales & Marketing professionals, Accounting & Finance professionals, Production & Purchasing professionals and General Managers. If John runs across an insightful article or web posting that might be of interest to one of those groups, he sends it to them. Hint: utilizing RSS feeds from a handful of websites will provide a constant stream of forward-worthy articles. Or, John might share a "lesson learned" from his own career experiences.

Another option: target senior managers at companies you would like to work with and send them helpful suggestions or tips. Example: a retail site acquisition specialist mentioned he was trying to get connected with a major specialty retailer in the area. He made the off-handed comment that he could greatly improve their market position by improving their locations over where they are now. I suggested he demonstrate that by sending the CEO an analysis of their current locations and what he would do if placed in charge of their real estate department. Yes... he might be giving away his expertise but you can bet he'll get the CEO's attention. He'll have provided something of real value while also demonstrating his knowledge and capabilities. (Tip: to identify who' who in a company check out Jigsaw.com, an online directory of business professionals.)

Remember: the more your networking campaign is viewed as a gift rather than an intrusion, the more inviting (and effective) it becomes. Make it about the recipient first, you last.

Lesser Known Job Search Tools

2010-02-21T18:03:00.000-08:00

Every day we hear about online tools to help job seekers. Here’s a few worth checking out that aren’t as widely known:

Indeed.com. Indeed is probably the simplest search engine for staying abreast of new employment opportunities in your area. Enter the keyword criteria which applies to you and Indeed will scour thousands of company career sites and job boards for posting that match, then send you an email alert whenever a new post is made which matches your criteria. Cost: Free.

MyXpertise.com. Launched earlier this month, MyXpertise was designed to help individuals promote their business, skills or experience and be easily found by anyone wishing to connect with them. Search results are ranked by date of registration. The sooner someone joins the directory, the higher his/her information appears. Cost: Free, both to search and join. Best of all, no network of peers required to link through either.

Jigsaw.com. Jigsaw provides C-level, VP, Director and Manager Level business contact information for thousands of companies across the nation. Cost: $25 per month. However, the subscription charge is worth its price many times over if you’re trying to determine “who’s who” in a company and their contact information, including email address. While the accuracy of the data continues to decline (due to layoffs), it’s still better than researching from scratch.

Web 2.0 Primer for Builders

2010-02-21T18:02:00.000-08:00

The exponential growth of Facebook, Twitter and online blogs offers undeniable evidence that the world has adopted new means of communication. This phenomena is no flash in the pan; the sooner you adapt to these tools the more likely you are to prosper in your career or business. Unfortunately, many of us don't know where to begin. Here are two books that are good primers for the understanding how these tools work and how to utilize them to promote yourself, your company or your product.

Viral Loop: From Facebook to Twitter, How Today's Smartest Businesses Grow Themselves by Adam L. Penenberg. A thorough analysis of how networks form and grow, starting with examples from the early Tupperware organization up to Twitter and Facebook.

Crush It! Why NOW Is The Time To Cash In On Your Passions! by Gary Vaynerchuk. The writing is a little rough around the edges, but as the author himself puts it– so is he. Regardless, he does an excellent job explaining how to utilize Web 2.0 tools to promote yourself or your business. Recommend reading this one after Viral Loop.

Final Note: as I'm writing this I noticed an article on the HousingZone website about Collins Builders in Jacksonville, FL using texting as a market tool. How timely. If you missed it, click here.

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The Talon Group: Bob Piper, Rodney Hall, Tony Cleveland & Jean Mason

Your Last 25 Years in Home Building

2010-02-21T18:01:00.000-08:00

Several weeks ago we shared our observations of how the home building industry has changed over the last 25 years. Several of you replied back with you own thoughts. Here's what you had to say:

What I've noticed is more volume builders coming into smaller markets displacing what had traditionally been local builders. I can see a scenario where large portions of a number of markets (even small ones) will belong to volume builders because they don’t face the financing hurdle independent builders do. As I sat at the Presidents round table at a recent State HBA Meeting the remarks from the group had more to do with the inability of their members to get financing (even for presales) than anything to do with their local associations.My sense is that the volume builders will (fill) this void and for the next few years, back away from performing their own development as they capitalize the hoards of developed lots that the developers (or the banks) could never sell to independent builders and will likely partner with developers in the future with some sort of profit sharing agreement – more like merchant banks. — Eric Coffey

I hope that effective construction management will not come solely from the colleges and universities in the future; it just cannot take the place of progressively developed sensibilities in the builder/developer environment. This is a profession requiring the broadest skill set of any I know. — Bill Mayben

I’ve been disappointed at how conventional most builder/developer firms became. Many companies just followed other builders, or a formula– resulting in a series of paint-by-number projects and homes that the consumers ultimately put in one category, and compared solely based on price. In an effort to appeal to the broadest customer base it appears that real innovation and evolution took a back seat. Now, with nobody to copy, they are really stuck. Many actually believe the market will return to what it was, and that they can continue as they were. It appears that the company that is able to innovate may capture the market again. This speaks well for creative architecture, evolutionary home and community design and specification, and offerings that can make a long-term positive difference in the lives of residents. — Bill Mayben

The most important changes I have seen involve the “standardization” of housing plans, specifications, processes, budgeting, workflow, measurement, organizational structure, training, customer relations, and an attempt to commoditize land. As Standardization starts to merge with Centralization of processes and decision making, the opportunity for smaller homebuilding firms to tailor their product offerings and business processes for targeted consumer groups will allow them to compete effectively against larger public competitors. — Peter Tremulis

You were spot on with some of the critical path and relational selling methods that evolved over the years. As you know, some of the "tried and true" formulas are no longer in play. What happens next? Who is seeing around that curve into the future? One small example, how does social networking play into the sales process? — Nelson McDonald

The profile of a Sales Consultant has changed. The top sales professionals today are people who ask the right questions and listen to the answers. Trust is the essential component to build the relationship between customer and Sales Consultant. If a salesperson does not have great listening and problem solving skills, today’s customer will not bond with them. This isn’t much different than what salespeople seek from their own managers. I have interviewed hundreds of Sales Consultants over the years and NEVER has one of them said they want to leave for more money. They want to leave because of how they are treated. It saddens me when I hear about managers who don't value their people or take time to coach their team. It is a talent that is needed to keep a happy, productive and energized team in today’s market. — Millie Regal

In my early years, I kept knowledge of my college degree between my production manager and myself (he also had one). Very few others were college graduates. That changed in the 1990s to being a “must have” requirement for being hired. The same happened on the sales side, too. In prior years, a real estate license would suffice. Design Centers came on the scene as revenue and margin generators. Lastly, the life of a good floor plan grew shorter each year, as new designs & features were demanded. Who would have imagined granite as standard in a Fox & Jacobs home? — Jerry Whelan

Volcker hit the nail on the head. Business school majors are now either all Finance/Accounting or Marketing - very few in Purchasing, Supply Chain, Operations or Management. Everyone wants to “make it” by “manipulating minds or money.” No one wants to produce anything any longer. That is a huge problem. — Scott Sedam

I remember hearing from "old timers" after the crash of the early 80's that business would never be like it was in the mid to late 70's. They were right – it was better. Then came the calls in the early 90's that business would never reach the prosperous levels of the mid to late 80's. Right again they were – it was significantly better. Remember just a few years ago when there weren't enough qualified people around to build the record number of new homes people were bidding up to buy? Now here we are again. Let's just hope that by the time history repeats itself (again), that we've regained a degree of balance at the decision making table. Because without expert input from real home building experts, it could get awfully costly to learn that houses don't just build themselves. — Joe Keppler

There seems to be a significant push in our industry recently to have better systems and processes to compensate for a perceived lack of understanding of what really drives our business: people! There are those who think that if we have the right “Manual” we should be able to execute and achieve success. Instead, the focus should be on culture, training, and enabling people to make decisions, learn from their mistakes and take care of the customers. — Name withheld by request.

The Internet has changed everything. Buyers are more educated than ever and probably know as much about the product and community as the sales agent greeting them. Sales agents need to be perceived as more of a resource in the process (and heaven forbid they actually BE a resource!) Going Green is another big change. Builders must be thinking and building this way (and communicating it better to the marketplace) to be competitive ... especially in the higher end product. Home designs are also getting more and more "open" with space emphasis in the master suites, kitchens, and family rooms. Curb appeal is more important now than ever, certainly more so than in the 1980's. Lastly, master-planned communities have become the best opportunity for a builder to sell real quality of life as a value. This also forces builders to get back to the core of our business– building homes for families, instead worrying about dividends and stock price. — Shane Johnson

What is truly amazing to me is how little we have changed in 25 years. My first computer weighed about 50 pounds and cost $3,200. Today, that computing power can be purchased in any simple electronic device weighing a pound or two at a cost of $200-$300. During that same time, we have not made comparable advances in the homebuilding industry. We still build houses primarily with 2 x 4's, and we waste interior space like crazy. Our energy efficiency is laughable. No other industry would have survived this long without changing their product more than this, and (shelter) is the most important commodity there is, besides food and water. — Ken Mitchell

Our industry has transformed into a “Starbucks” environment (one on every corner), with more of a focus on absorptions rather than profitability. — Eddie Servignon

The Talon Group
Bob Piper, Rodney Hall, Tony Cleveland & Jean Mason
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Truths & Tall Tales from the Builders Show

2010-02-21T17:58:00.000-08:00

When Tom Kranz told us he was heading to Las Vegas for IBS we asked if he would compile a report on what he heard and observed. Formerly a Managing Director with GMAC/ResCap, Tom now heads up his own consultancy, Housing Capital Partners. Here’s Tom's report:

Economic Outlooks and other Abstract Speculations

Economists presented and declared the recession over, inflation would not occur, mortgage rates will not be over 6% by year end even if the Treasury stops buying the securitization bonds of Freddie and Fannie, and that by 2011 closings will reach 1 million (or more) by 2012 or 2013. There were some non-believers in the audience.

Despite the declarations from the economists, three panelists (a developer, homebuilder and a capital provider), are planning for future higher inflation.

The argument for higher inflation is the extreme amount of monetary and fiscal stimulus. The argument against higher inflation is due to over capacity of every resource. Time will tell.

The experts are still saying that the US needs something like 1.5MM new homes built every year to keep up with household formation. Meanwhile, 40% of builders surveyed said that they expect to expand in 2010 and 46% expect to be able to increase prices.

Show Me The Money

The NAHB recognized that obtaining financing is the number one problem facing their members right now and hastily, but in a well done fashion, put together a program for money to meet builders, called the Partnership Pavilion (similar to Meet the Money at PCBC.) Lots of conversation. Not sure how much money flowed. Capital remains an issue.

The Partnership Pavilion includes a web-based clearinghouse of capital providers and those seeking project finance. While there are bugs to work out, most expressed interest in seeing the concept perpetuated.

As a lender participant in the Partnership Pavillion, my advice to builders was to look locally. There were several stories where even banks (a credit union in one case), especially those with unburdened balance sheets from past year’s problems (e.g. newly formed / didn’t participate in boom) and with a specific interest in bettering the community, were willing to put up dollars. Finding the unburdened balance sheet lenders is the key.

Among the regulated lenders I talked with, all said that they are lending….but ONLY “strategically,” whatever that means, which IMHO means you’re not likely to get any.

Don’t know the accuracy of this statement but came from a credible source: There are 760 banks on the FDIC/OCC watch list that are expected to fail, yet the Feds only have the capacity to deal with less than 250 failures. Things are probably not going to get easier anytime soon.

Industry Trends & Strategies: Something Old, Something New

Sales agents have to generate their own traffic by going back to the “old ways” of targeting neighborhoods/apartment buildings, putting flyers on cars, donuts to Realtors, etc. Guerilla Marketing is in vogue.

Social media (e.g. Facebook, Linkedin, Twitter) is much more important today than the old methodologies that included radio, print and TV, perhaps accounting for as much as 33% of sales.

The average new home size has decreased from 2309 in ’07 to 2094 in ’09. On a similar note, Meritage announced smaller, more efficient home designs during the show, joining others like KB, Shea, etc. with similar offerings.

Meritage’s CEO stated that despite the historic higher value usually placed on new homes vs. existing, he absolutely will only buy a piece of dirt today underwritten against resales.

For privates, don’t go head to head against the publics’ balance sheet because when they need to drop the price to create velocity, they will, and you’ll get creamed. Go where they’re not.

This environment is the “New Normal.” Get used to it.

Report courtesy of:
Tom Kranz
Housing Capital Partners

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The Talon Group
Bob Piper, Rodney Hall, Tony Cleveland & Jean Mason

Building on Bright Spots

2010-02-21T17:55:00.000-08:00

As our nation and industry continue to work through some big challenges, it's normal to get mired in what got us here. That's great for avoiding the same mistakes going forward but does little to spawn positive, immediate improvement. In their new book "Switch", Chip Heath and Dan Heath offer a road map to overcoming insurmountable ostacles, sooner rather than later. Take their story about Jerry Sternin:

Jerry's employer, Save the Children foundation, sent him to Vietnam in 1990 to develop a program to fight malnutrition. Once there, he found were the common issues attributed to malnutrition: widespread poverty, poor sanitation, unclean water and lack of education about sound health practices. Separately, each could take years to overcome; combined, it could take decades. In Jerry's case, the government gave him six months to make a difference and offered very little support.

Rather than tackle the Herculean tasks, Jerry took a different approach by asking this question: Were there any kids who were healthy and thriving despite such poor conditions? To find out, he visited fourteen villages and found a handful of healthy kids whose defied the conditions. He began to document what these families did differently from the others. His findings– minor changes in diet patterns and sanitation habits– were not only simple but also readily available to to all families in the village. They shared their findings throughout the village and within six months, 65% of the children were better nourished. Soon, other villages adopted the program and now over 2.2 million people in 265 Vietnamese villages have been postively impacted.

The lesson: we face some enormous challenges going forward, most of which are beyond our individual control. However, if we each make an effort to find things (however simple or small) that are working and replicate them, collectively we can move the mountain. Think of it as finding the bright spots and going towards the light!

"Switch" goes on sale February 16th. For a sneak preview, check out this month's issue of Fast Company.

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The Talon Group
Bob Piper, Rodney Hall, Tony Cleveland & Jean Mason

25 Years in Home Building & Real Estate

2010-01-14T13:25:00.000-08:00

The New Year is a landmark for Talon as we begin our 25th year in the search business. During that time our industry has taken quite a ride: the meltdown of the '80's, followed by boom times in the '90's and now the current state of affairs. Here are some of the changes we've observed during that time:

The Career Track to Division President. In the 1980's, most Division Presidents for home building companies were promoted through the construction ranks. By the mid-90's, the shift was on to promote finance and accounting professionals to profit center roles. Today, you would be hard pressed to find a DP with an early career in construction. This brings to mind something Paul Volcker said in his speech at the Spring ULI meeting: "Over the last 30 years our colleges have graduated far more financial engineers than civil engineers. Perhaps that is one of our problems." No question that home building has become BIG business, but somewhere along the way, the drive for volume and revenue seems to have replaced the central theme of our industry. Perhaps that is why we often define volume in terms of closings or units, rather than houses.

Builders became Developers. Most builders in the 1980's focused exclusively on bricks & sticks; land development was left to development companies. Builders who bought and developed raw land were rare. A divisional pretax profit in the $3-5mm range was quite respectable. Then, the '90's came along and volume builders discovered they could better control their pipeline by developing land in-house. The additional land profits didn't hurt either. Soon, single market divisions were generating $10-20mm in annual pretax profit, with a few mega-divisions hitting $50mm+. Of course, what takes you up can also take you down. The root cause of financial failure for builders in the late '80's and again in recent years had more to do with land than it did bricks & sticks.

Path to Riches: When we first started recruiting Division Presidents the compensation packages were fairly consistent: $100-125k base + 100% bonus. "Gee whiz," we thought, "can you imagine someone making $250k just to run a home building division?!?!" Of course, once builders began developing land and generating profit, as described above, the compensation plans began to look like third round NFL draft money. Of course, that's now changed - again.

From Critical Path to Relational Selling. The sales blueprint 25 years ago was the Critical Path: Meet & Greet, Qualify, Demonstrate, Site & Close. Salespeople were counseled to NEVER deviate from this time-tested model. That lasted for 10-15 years, until someone discovered buyers were actually real people with opinions and feelings. Soon relational selling was all the rage, with a focus on building trust & relationships with prospects. It will be interesting to see how this evolves with the growing move towards online sales and marketing.

Your turn- what changes have you seen over the last 25 years?

The Talon Group
Bob Piper, Rodney Hall, Tony Cleveland & Jean Mason