Leadership

How Builders Approach The Hard Decisions Ahead Without Clarity

With business and budget re-forecasts in a market inflection come uncertainty and a series of ripple effects. Here's how leaders might look for a resolved way forward without the benefit of certainty.

Leadership

How Builders Approach The Hard Decisions Ahead Without Clarity

With business and budget re-forecasts in a market inflection come uncertainty and a series of ripple effects. Here's how leaders might look for a resolved way forward without the benefit of certainty.

July 8th, 2022
How Builders Approach The Hard Decisions Ahead Without Clarity
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For housing leaders, learning on the job is a constant, no matter how long they've been at it.

A neverending lesson seems to be that clarity, which seems to have gone MIA, is a trickster. When things go well, it's a beaming beacon whose light consists purely of prescience, vision, an uncanny sense of visibility into what's in that distant horizon or around that next corner. When conditions deteriorate off-schedule and spiral downward who-knows-how-far, clarity goes rogue. No one seems to know how or where to find it, and everybody wants it and pursues it like it's a goal.

Right now, we’re in this cauldron of uncertainty,” said Jonathan J. Miller, the president of Miller Samuel Real Estate Appraisers & Consultants. “Housing hates uncertainty. The biggest enemy of the housing market is uncertainty, and we have buckets full of uncertainty.” – New York Times

A year ago – or less – there were "buckets full" of clarity, crystallized by surging self-evident demand meeting chronic and slow-to-change supply.

Fundamentals, sentiment, and policy stars aligned. A brand new pandemic-powered narrative for Americans' desire and wherewithal to "re-place" how and where they'd spend their time in a next-normal work-life spectrum. The arc sloped boldly upward, a smoothed and fully-evidenced pathway whose momentum seemed assured and undeterred.

Then came two blasts of turbulence and stress disrupting the geometry of that arc:

  • one, in the form of a Fed policy document whose key take-away assertion would effectively shellack a pillar of the so-called clarity market-rate housing leaders built their planning models on for the past almost 3 years. Basically, it's that businesses underappreciated "demand" as a primary cause of price and pace imbalances and increases in the past two years, and, in turn, gave too much credit to years of underbuilding new supply as market drivers.
  • the other, dumbed-down, is another underappreciated X factor in why things are going kerflooey, inflation like there hasn't been in 40 years or more, and the whiplash it's creating for people and households who've never experienced it.

Now, for some reason, clarity's playing hide-and-seek. We feel we can see clearer what's at a greater distance, but everything in the near-term horizon is blurry.

Nevermind clarity about demand, for a moment. How about clarity about buyers, for which Fed policy analysts offer a lens something like this?

bt+1 = bt − btqtb(θt) − bt(1 − qtb(θt))wb + nbt+1

Everything clearer now?

Probably, no.

What is clear is that housing market dysfunction as we know it is multifactorial – stemming from mismatches, undersupply, surging demand, and imbalanced economic mobility and opportunity.

But as a business leadership issue, clarity as a navigational and confidence-inspiring tool is at least temporarily not accessible.

The thing about a koan is that you can't make it up any better than it occurs without help. When logic is inadequate as an explanation for something, a koan opens a window of insight. Clarity may be a trickster because it may only appear to be there when we're flourishing. What's more, it goes with the turf that we feel clarity is rare, and that our stock of it is a measure of others' lack of it, which explains how it is we see things more precisely, more insightfully, and more predictively, and others simply do not.

In business-life as a full-contact team sport, having clarity on our team – not the others' – is a source of bragging rights and a competitive advantage.

Likewise, it may only appear to have gone away when we struggle – when actually, what we believed to be clarity may have an illusion all along. Lack of clarity makes us feel just like everybody else, prone to doubts and vulnerable to greater risks and threats. But what we feel to be the vertiginous, disorienting, and baffling forces of uncertainty may simply be a different sum total of the exact same headwinds and tailwinds – only with reassigned subjective values.

The big questions for housing's leaders – lacking the clarity they thought they'd have for decision support as to investments, debt handling, allocation of resources, company cost initiatives, revenue and volume forecasts, and of course, profits – come down to two priority areas of focus for a buckle-your-seat-belts time period.

  • Capability – in the form of your human capital and their access to technology to become more productive
  • Customers – the center of the operational universe of value creation

If you believe that the loss of visibility and clarity hits all players equally, the idea might be to steel oneself for a near-term bruising that will take an even bigger toll on competitors. This means taking hard decisions sooner knowing that while they're painful now, the debilitating intensity of those same decisions – taken later – accelerates fast and wide.

A hibernating market – of opaque and obscured magnitude and duration – has emerged clearly in pockets and patches that may or may not ever gain absolute definition and coherence.

While other leaders thrash and clamor about their sudden loss of visibility that had supported growth, commitment, and investment moves over the past two-plus pandemic years, a door of opportunity opens. You can be the leader undeterred by the navigation system malfunction, the one who lights a candle instead, and listens, and learns how the work of improving an organization's culture is a job never done.

As the market moves into hibernation, take the hard decisions sooner than later, and take them not with full knowledge that they're exactly the right thing to do, but with the resolute certainty that your customers [buyers, shareholders, local partners, etc.] are the business' only true beacon, now and always.

Here's a quote from Clayton Christensen that helps add perspective when clarity – hostage to uncertainty – becomes too much of a goal in itself.

“Getting something wrong doesn’t mean you have failed. Instead, you have just learned what does not work. You now know to try something else.”

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ABOUT THE AUTHOR

John McManus

John McManus

President and Founder

John McManus, founder and president of The Builder’s Daily, is an award-winning editorial, programming, and digital content strategist. TBD's purpose is a community capable of constant improvement.

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John McManus, founder and president of The Builder’s Daily, is an award-winning editorial, programming, and digital content strategist. TBD's purpose is a community capable of constant improvement.

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