Believe it or not, the way most homebuilders know if they are “winning” is defined by how angry your labor and material suppliers.
As part of my series about the “How To Take Your Company From Good To Great”, I had the pleasure of interviewing Ken Pinto.
Ken Pinto is the author of “How Much Is the Milk?”, a practical roadmap for business leaders interested solving supply chain issues, and founder of KENZAI USA, an international supply chain solutions company. In his newly released book, Pinto shares secrets and sustainable solutions to some of the biggest building industry obstacles and opportunities. With more than 40 years of construction industry experience coursing through his veins, Pinto is an accomplished carpenter, mason, plumber, electrician, steel worker, heavy equipment operator, surveyor, project manager, and a 21-year veteran of the commercial construction industry. He worked for 19 years as Supply Chain VP at Shea Homes, Pulte Homes, Standard Pacific Homes, and Toll Brothers, and is a sought-after speaker on global supply chain management. Pinto contends that the supply chain is less about raw materials, manufacturing, ships, planes, trains, and trucks, and more about people and relationships, resolving to help businesses transform transactions into interactions. A former Navy Seabee, Pinto’s journey in the construction industry began at the tender age of 11, serving as a master carpenter’s apprentice. Fluent in Japanese, Pinto is also a contributing writer to various homebuilding industry publications and newsletters.
Can you tell us a bit about your backstory and what led you to the point you are today?
As a young teenager I was coached and mentored by a master carpenter, went on to help build five houses during my last two years of high school, and then spent 14 years as a Navy Seabee, doing construction for the Navy in many parts of the world. My early construction experiences, combined with the skills I picked up as a Seabee, gave me a unique perspective on how production homebuilding operations could be. Or rather, should be.
Straight out of the Navy, I found myself working for the biggest homebuilder in San Diego and was surprised that we had no idea how much we paid for a sheet of drywall, a sink, or anything else. We used turnkey, lump-sum subcontracts to get our houses built, and as long as we had three bids, we were comfortable with the result. I wasn’t.
I stepped away from construction operations and began my journey in supply chain management with the intent to fix existing challenges. I hoped to return to the operations side unhindered by building material delays. I underestimated the magnitude of the task.
After a few years with key breakthroughs and successes, I realized that unless the whole industry changed, my progress would remain limited. To help spur change, I felt compelled to tell the industry what I learned, with an eye on being a positive change agent. The format it took was my book, “How Much is The Milk?”.
Can you share a story (or two) about a hard time you faced when you first began your journey? Did you ever consider giving up? What drove you to continue?
Being a good carpenter marked my beginnings, but that wasn’t enough for me. I wanted to make a bigger impact. When I was often ahead of guys twice may age, they resented it. I had to work twice as hard to earn their respect and gain their trust by proving that together, we could do more, and do it better.
In retrospect, each of my positions seemed an uphill battle either due to my youth or because I was assigned the most difficult projects. To survive the path on which I’d put myself, I could never let up and pushed myself to quickly learn and consistently improve. I don’t recall ever considering giving up but was tempted to move to a job that wasn’t as hard. Temptation aside, I never gave up. My ideas usually worked, and I was able to prove, through word and action, that collaboration allowed us to achieve more than before. It was often hard, but the hard is what makes it fun.
Can you share a story about the funniest mistake you made when you were first starting? What lessons or takeaways did you learn from the experience?
When serving as a Navy Seabee, I remember thinking I was so smart — a great estimator and project manager. I often lamented having to do the planning and estimating for more projects than my peers yet being recognized for my skills also made me feel valuable. Doing the planning and estimating on more than just your own project was not typical. But I was good at it and everyone knew it. In a crunch, I was the guy to swoop in and get it done. I estimated every nail, 2x4, gallon of paint, and number of manhours required for each trade (carpenters, plumbers, equipment operators, etc.).
The bottom line is that everyone makes mistakes. What is important is to learn from them, never let the same mistake happen again, and teach others to avoid similar errors.
My biggest mistake happened when I was a Navy Seabee, about to deploy to Sasebo, Japan. I had completed the planning and estimating on several projects, procured the necessary materials and put them on a ship to arrive just before we did (or so I thought). Estimates for overseas projects must be spot on since you can’t just run down to Home Depot to pick up missing supplies or replace something should you make a mistake. If contingencies aren’t built in or orders exact, you are, for lack of a better term, screwed.
Upon arriving in Japan, a glaring error was discovered. There was no sweeping the mistake under the rug and worst of all, everyone caught it. Instead of using the letters “plt” on my requisition form, I used “sht,” and ended up with 46 sheets of plywood rather than 46 pallets of plywood. A very big ooops!
My crew had to procure plywood from stores in Japan, send them to testing labs to determine their structural properties, and have engineers redesign the shell of the building. The results were massive delays and incurred costs. I did that.
My peers laughed about it for months, but my managers did not. There may not be an estimator in existence that doesn’t make mistakes, but most don’t make mistakes this big.
What do you think makes you stand out? Can you share a story?
My parents never owned a home and therefore never knew the benefits and advantages tied with such an accomplishment. It is one of the primary reasons I wanted to open doors for more people to enjoy home ownership by lowering the cost (not quality) of home construction. It’s what continues to drive me to this day.
When I was a builder, I thought my subcontractors were ordering materials in advance. Instead, they were only giving 24–48 hours notice, completely squandering any opportunity for effective demand planning. This in turn caused distributors to over-inventory SKUs and quantities of SKUs for “just in case” demand, which mistakenly triggered manufacturers to make the wrong products at the wrong time. The “just in case” inventory and guesswork are what drive up the costs of building materials.
I learned these valuable lessons (and many others) the hard way, but rather than keep it all to myself, I believed that sharing information and collaboration will ultimately help us upend industry challenges. There are plenty of homebuilders who don’t (yet) realize how their practices can be vastly improved and costs lowered. I (literally) wrote a book to help today’s homebuilders to eliminate some of their greatest pain points, which is my way of leaving the industry better than I found it.
Which tips would you recommend to your colleagues in your industry to help them to thrive?
Believe it or not, the way most homebuilders know if they are “winning” is defined by how angry your labor and material suppliers. I once worked for someone who didn’t think an adequate job was being done unless subcontractors were sneering. In his mind, should subcontractors be happy, you’re letting them take advantage. This poor mindset guided me during my formative years, yet thankfully, I learned to do and be better.
Rather than using abrasive tactics, I learned that a collaborative culture is monumentally more sustainable. I modified the parameters of what defined my “team” and instead of excluding subcontractors and others, I pulled them in closer. What I learned is that people want to feel fulfilled in their jobs and the roles they serve. Once you transform faceless transactions into personal interactions, the culture shifts. People feel like they are members of a team, they are more fulfilled, and this type of culture makes attracting and retaining good and loyal employees and team member, much easier.
None of us are able to achieve success without some help along the way. Is there a particular person to whom you are grateful who helped get you to where you are? Can you share a story?
Although there were many individuals who contributed to my growth, if I had to choose just one, I would pick the man who gave me the foundation upon which all my current knowledge, skills, and experiences rest. That person’s name is Al Price. He steered me away from the wrong path as a teenager by keeping me focused on something constructive (pun intended). He was my first boss. I helped him put an addition on his house one summer and then worked on his job site after school, weekends, holidays, and summers during my first four years in construction and formative, foundational years that were vital to my personal and professional development. I owe him a lot.
How would you define a “good” company, and what does that look like? How would you define a “great” company, and what does that look like?
W. Edwards Deming said, “If economists understood collaboration, they wouldn’t teach competition.” We put too much faith in the bidding process when collaboration might bring better results. Good companies are good negotiators. Great companies are great collaborators.
Collaboration, inclusive of every employee inside the company and every supplier outside, where shared risk and shared reward are fair and balanced, not only predestines success but is resistant to profitability reversal when key people leave the company.
A culture that encourages the flow of ideas, expects the unfiltered facts, and fosters openness to challenge one another, all with the single goal of better business performance, embodies a rewarding and gratifying place to work. Great companies find it easier to attract and retain good employees, too.
Based on your experience and success, what are the five most important things one should know in order to lead a company from Good to Great? Please share a story or an example for each.
In my experience, leading a company from Good to Great can happen when you learn and put into practice some vital concepts that affect how you do business every day:
1. Listening lowers costs. I was in the habit of asking my suppliers “what are we doing that costs you money” and then patiently waited for a response. A door hardware manufacturer, picking up on what I was trying to do, offered to package doorknobs and locks for each house we built. The resulting “box of locks,” simplified the supply chain, reduced costs and increased the capacity for our material suppliers. By asking the right question, and more importantly, listening and digesting the answer, I learned much about possibilities.
2. Where there’s mystery, there’s money. If you don’t know what you’re paying for, you’re likely paying too much. This valuable lesson was learned after I asked my team to contact our subcontractors and convert lump-sum pricing into unit pricing, therefore detailing each product and associated quantities and individual pricing. I wanted to see the unit pricing of the building materials to determine if we were paying too much. Surprisingly, each subcontractor submitted new pricing proposals with the detail requested but with lowered prices. All of them lowered their prices. When I inquired about the reduction, each alluded to a gut feeling that we’d “caught them,” which compelled them to deliver fairer pricing.
3. Be a change agent for the entire industry; your voice is needed. To illustrate this point, allow me to share a story about a time when I was, in my opinion, at the top of my game. My company was reaping immense reward from my successful management of the supply chain, so much so that we were attracting the attention of the entire industry. We ultimately hit a plateau because realistically, there are limits to what can be achieved when an entire industry is set up (or comfortable) doing things the ‘old way.’
Remember that “box of locks?” At lunch with one of our subcontractors during which I awaited kudos for helping him reduce overhead costs, I was jolted into reality when he said, “you know all those overhead costs we deducted from my contract? I still have those costs because all other builders we work with still do business the old way.” I realized then that unless the whole industry improved, there would be a ceiling to how much progress could be made.
Bottom line: Don’t be afraid to get involved in industry groups that can help educate, inspire and raise the bar for the industry as a whole.
4. Stop, breathe, and listen (to everyone on your team). At a time when my company was selling houses faster than they could be built, and my undersized team swamped given the volume of work, a plumbing contractor came to my office concerned that we had made a decision that would prove costly. He came to help me but instead of stopping in the moment to listen about the additional inventory he needed to lease and the new distributor relationships he needed to forge, I held my hand in the air and said, “I don’t care. Just get it done.” Even now, the memory frustrates me because I did care, but felt I didn’t have time to stop, take a breath and acknowledge his lament. The reality is that his ideas could very well have steered me towards a better decision and outcome for all involved. When we get so busy that we stop listening to those best suited to help us, we lose. Keep these words in mind: stop, breathe and listen.
5. Put a structured training program in place. When I entered production homebuilding, our company also hired two professionals away from a competitive, Top 5 homebuilding company. Many assumed that their employment at a premier homebuilding company equated to highly trained performance. Nothing could be further from the truth.
Having worked for several Top 10 homebuilders, I can share that few homebuilding companies have robust training programs, yet the highest performing have made training a priority. It takes time away from daily duties and money to train people, which often leads to the temptation to just hire professionals away from competitive companies. Laziness, disinterest, and discomfort with professional development should not be reasons to avoid investment in employees. In fact, there is greater reward in making an investment as not only will your trained team members train in your individual performance and best practice methodologies, employees view training as a path towards upward mobility.
How would you advise a business leader who initially went through years of successive growth but has since reached a standstill? From your experience do you have any general advice about how to boost growth and “restart their engine”?
In the Plan-Do-Study-Act cycle of a typical continual improvement process, it is normal to plateau after a period of improvement. Plateaus indicate it is time for change. If you are unsure what to change, ask your employees, customers, and suppliers. They will not only have opinions, they will also gladly share them. My strongly held belief is that listening lowers costs. The hard part is changing what requires change. The best companies are those unafraid to innovate.
Generating new business, increasing your profits, or at least maintaining your financial stability can be challenging during good times, even more so during turbulent times. Can you share some of the strategies you use to keep forging ahead and not lose growth traction during a difficult economy?
In these instances, I fall back on my best practice of listening. If your business is having a hard time, it is likely many others are too. Find out what each needs to survive during difficult times and work together, not apart, for mutual benefit. In some cases, it may even seem counterproductive to use your company resources to help others, but in my experience, doing so has always returned larger dividends than could have been realized by not helping or collaborating.
In your experience, which aspect of running a company tends to be most underestimated? Can you explain or give an example?
As a long time “operations” professional, I tend to feel as if many businesses deemphasize operations, treating those departments as a necessary evil rather than the key to improved business performance. In most companies, the sales team gets all the glory and is viewed as the star player. I’ve also observed employees in roles situated at the bottom of organizational charts are capable of much more than what is expected from them. There is a saying that you cannot manage what you do not measure. Customer service, the frontline of your company, can improve only if you measure its success and use your customer service team to decide on what to change. Don’t underestimate what a good customer service team can do for your brand.
As you know, “conversion” means to convert a visit into a sale. In your experience, what are the best strategies a business should use to increase conversion rates?
Back in the 80’s, one of my friends owned a video rental store. His business had major competition from companies like Blockbuster, yet he was undeterred. To set his store apart, he trained his employees to remember the name of each and every customer. Greeting each one by name when they entered the store was of utmost importance. The employees helped one another by greeting those customers they more readily identified. My friend’s store was the highest grossing video store in the city by a very comfortable margin.
The best strategy for conversion is to discover unique ways to make your product or service attractive to consumers — even if stiff competition exists. Maintain focus on the customer. Exceed their expectations and use the premise of surprise and delight every chance you get. In doing so, you will not only earn loyal customers, but will extend the potential of your business as your customers champion your brand and product with their circle of friends, family, and colleagues.
Of course, the main way to increase conversion rates is to create a trusted and beloved brand. Can you share a few ways that a business can earn a reputation as a trusted and beloved brand?
Selling a house is a big deal as it is frequently the most expensive purchase made during a person’s life.
What I’ve learned is that news travels fast, but bad news travels faster.
Let me share an example: When I managed a newly developed subdivision, we sold a home to a family with a penchant for constant complaining. The male head of household complained literally every single day about something that would never have leveled up to customer service, but instead, seemingly secured a lot of free product and support. We recognized the game being played but responded to his needs in the hopes of silencing him which unfortunately did not work. He continued to harass the sales agent, various customer service representatives and even job site superintendents. After about a year of this dance, the complaints finally subsided and the unexpected happened. The man’s sister purchased a home from us in the very same subdivision. Soon after, his uncle purchased a home as did one of his friends. The man-who-never-stopped-complaining sold three houses for us for one simple reason: we never stopped providing professional support and service even when it pained us to do so. The moral of the story is that your brand integrity is vital to gaining (and keeping) customer trust. Once you’ve earned it, that loyalty sticks.
Great customer service and great customer experience are essential to business success. In your experience what are a few of the most important things a business leader should know in order to create a “Wow!” customer experience?
After traveling the globe, my personal opinion is that Japan has some of the best customer service compared to anywhere else in the world. Japanese businesses place knowledgeable, friendly people at every customer touchpoint to ensure customers feel they are the most important. When you approach an employee in a department store in Japan, for example, employees stop, stand at attention, and welcome you upon your arrival. He or she is knowledgeable about each product or quickly finds someone who is and stays nearby to serve you as needed. You never see employees chatting with coworkers, checking cell phones, or completing a task that does not involve serving you. Each and every time I visit, I experience the ‘wow’ factor as America is different. In fact, our culture has become more casual, which means that for those businesses interested in rising above the noise, it takes very little effort. The challenge lies in training employees to do something with which they are unfamiliar. For example, the power of an apology (for not having stock, not having the immediate answer) seems to have fallen by the wayside.
Should you experience moments of shortcoming in your customer’s eyes, train employees to say, “Sir (or ma’am), I am so sorry that this (name the error) happened. We will do everything we can to make it right.” Then, develop best practices for remediation and resolution. By promptly and adeptly handling mishaps or mistakes, you immediately increase a customer’s satisfaction and loyalty, leading to future sales, favorable reviews, and positive referrals. It’s an underutilized approach but makes a huge difference.
I’ve recommended, to gain a contextual image of five-star customer service, that people fly on Japan Airlines, eat at a restaurant in Japan or shop at a grocery store in Japan. The dichotomy between how business operates overseas versus here may inspire different approaches or unique methods to make customers say ‘wow!’
What are the most common mistakes you have seen CEOs and founders make when they start a business? What can be done to avoid those errors?
At one point in my career, the CEO of the company I worked for opted to share confidential business performance data (information typically shared with senior managers and BODs exclusively) with all company employees. The reason he did so was to emotionally engage every single team member in the performance and outcome of business operation. This was a risky move that made the board nervous, yet it had an entirely unexpected impact. By opening the kimono and sharing depth-filled information about the company, each employee virtually stepped into the role as “CEO,” learning and concerning themselves with key performance indicators and metrics that drove the company’s profitability. The days of “just do your job” have come to an end. Every employee should visualize themselves as a CEO and be trusted and encouraged to do more than what is listed in a job description, while reaping associated benefits. By creating a culture of collaboration and sharing the details of the business, employees will feel as if they have skin in the game and will complete their daily responsibilities with the same passion, creativity, and energy as those that lead it.
If you could start a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger.
A moment forever etched into my memory is when an interim CEO arrived on site and shared three audacious goals at a companywide meeting which included:
a) Become the most profitable home builder in the US.
b) Ensure our company’s placement at the top of customer service charts; and
c) Place in Fortune Magazine’s “100 Best Places to Work” ranking.
In the short time he had our company moving in exactly the direction outlined, yet he also said that he could not help us to become a best place to work; that it was up to us to arrive each morning with the individual intention of making the company a better place to work for someone other than ourselves.
Many of us took his advice to heart. For example, a woman brought in a bowl of yellow M&Ms and placed it on someone’s desk with a note that read, “You brighten my life every day…so I want to brighten yours.” Personal birthday decorations exploded around the office. People were buying each other lunch and bringing in morning coffees for coworkers. One team member who had a car wash service come to the office to detail his car, paid the service to wash the cars flanking his own, too. I don’t remember if we made the Fortune 100 list or not, but I can share that it was an amazing and highly positive culture within which to work.
The trigger for this was shared purpose. We all, individually, desired working for a company that not only valued our contributions as well as those of our co-workers. So much good comes when a shared goal is outlined and a collective hive mind attacks it collaboratively — just like a well-functioning beehive.
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This was very inspiring. Thank you so much for the time you spent with this!