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
