The new division president of a major homebuilding company spent a week at his new office with the individual he is replacing becoming acclimated to the organization and the local market specifics. On the last day the departing president tells him, “I have left three numbered envelopes in the desk drawer. Open an envelope if you encounter a crisis you can’t solve.”
Three months pass by and there is a major “situation” where ‘you know what’ hits the fan. The new president remembers the parting words of his predecessor and opens the first envelope. The message inside says “Blame your predecessor!” He does this and gets off the hook.
About half a year later, the company is experiencing a serious drop in sales, combined with major production problems. The president quickly opens the second envelope. The message read, “Reorganize!” He fires the marketing director, sales manager, the advertising agency and the construction manager and with a new staff on board and a new enthusiasm throughout the company, sales rebound and the construction issues are corrected.
At the end of the first year another crisis occurs and he opens the last envelope. The message inside reads “Prepare three envelopes!”
I went to the doctor last Monday as I was experiencing some problems with my back. After an examination he prescribed an anti-inflammatory and a heating pad and five days later the pain was gone. I would not suggest that this was a miracle cure as I have a chronic problem with my L4, L5 and S1 discs which is a common cause of Sciatica, typically manifested by a pain running down one or both legs in a pattern determined by the sciatic nerve. But nevertheless, I was quite happy that the pain was now gone, that its cause was nothing more serious and that I had made the decision to promptly seek the aid of a professional in the medical field instead of procrastinating in the hope that a healing would occur spontaneously.
This entire incident could probably have been avoided as my disc problem is not new and when it last was bothering me I visited an orthopedist who recommended a regular course of exercise to strengthen the surrounding muscles. But when the pain went away last time after a few weeks of following the prescribed course of action, I became complacent and the exercise program was soon forgotten.
It would therefore appear that the homebuilding industry and I share a common history. When the housing market was strong in the first few years of this decade we forgot the “course of exercise” that had been prescribed in the last downturn. And when the market slowed down we were unprepared for the pain.
But here is where the homebuilding industry and I differ. Even though most markets have now probably bottomed-out and recovery is on the horizon, most builders and developers are still suffering pain yet they refuse to visit the “doctor”.
When I started as a consultant with the Greenman Group in 1980, my “practice” was primarily limited to “obstetrics” – we were retained to assist in the healthy birth of new communities and developments. We researched and analyzed the market, prepared the development strategy, served on the team as the marketing ombudsman representing the prospective purchasers while working with the land planners and architects, and assisted in directing the creation of appropriate marketing and sales programs. And we rejoiced at the healthy birth of these new communities and the resulting sales.
Certainly we were involved in community repositioning and workouts but that was a relatively limited portion of our business and typically there were obvious corrections and improvements that could be made which would get the community back on track. But lately, a substantial portion of my practice has shifted to the field of “oncology”.
In many of the developments which I have recently examined, the lack of proper strategy and the less than optimal tactical implementation have created situations that are neither simple nor easy to correct.
Some of these developments can be brought back to health with a proper plan of treatment that includes diet (pricing adjustments), exercise (sales and marketing corrections) and medication (product revisions and positioning).
Other communities are more problematic and the best that can be provided is palliative care to ease the pain and suffering, reduce the bleeding and, hopefully, keep the patient alive until the market conditions improve. While the plan of treatment is similar to the one above, the cure is beyond our control and the builder/developer needs to be made aware of that reality.
Yet other communities cannot be cured as the “disease” is simply too advanced or widespread. The reality is that when recommending a course of action for these developments, often a hospice program is logical or, if the builder/developer is able to face reality, euthanasia for the community so that the builder/developer can stop wasting time, energy and assets and proceed to more promising endeavors.
In our business as in life, it pays to visit the doctor not only when you are in pain but also for regular wellness “check-ups”. If the new division president of the major homebuilding company referenced in my lead story for this blog had followed that advice, there would be no need for him to prepare those three envelopes. But that’s just my opinion.
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