How Home Builders Win by Investing in People: Lean Manufacturing and Team-Based Management

In a competitive housing market, the difference between a good home building company and a great one often comes down to one factor: people. While builders invest heavily in equipment, materials, and technology, the most valuable asset on any job site or factory floor is the workforce. Companies that prioritize employee development, team-based problem solving, and continuous improvement consistently outperform their peers, even during market downturns. This article explores how home builders can capitalize on their people to drive quality, efficiency, and long-term growth.

One standout example is Fairmont Homes, an NHQ Silver Award winner that transformed its operations by focusing on employee involvement, training, and lean manufacturing. At a time when the manufactured housing market was declining sharply, Fairmont reduced cycle time by 20%, lowered repetitive defects by nearly 75%, and increased market share by 5.57%. These results did not come from new machinery or acquisitions. They came from unlocking the potential of the company’s workforce. For builders looking to build a great workplace that drives results, the principles that worked for Fairmont offer a proven roadmap.

Building a Team-Based Management Structure

Shifting from a traditional top-down hierarchy to a team-based structure is one of the most effective ways to tap into the collective intelligence of a workforce. Fairmont’s executive team recognized that the company had lost its competitive edge and that the greatest untapped resource was the intellectual potential of its employees. The solution was to reorganize the company around two types of teams.

Standing Teams vs. Project Teams

Standing teams exist on an ongoing basis and handle continuous improvement across departments. Project teams form for specific tasks and dissolve once the objective is complete. Both types share a critical feature: they are cross-functional. A team addressing a plumbing issue on the factory floor might include production line workers, an accounts payable representative, an administrator, and even a supplier. This diversity of perspective ensures that solutions address root causes rather than symptoms. It also builds buy-in across departments because everyone who touches the process has a seat at the table when changes are proposed.

Cross-Functional Collaboration in Practice

Each team must establish clear goals, report on processes regularly, and modify action plans as needed. All of this is tracked on a formalized computer system that ensures accountability and transparency. The key is that every team member has a voice, regardless of their position in the company. A line operator who works with a process every day often has the most valuable insight into how to improve it. When that insight is combined with the perspective of a supplier who understands material constraints and an administrator who knows cost implications, the resulting solution is far stronger than what any single department could produce alone.

For home builders interested in implementing similar collaborative models, understanding how to build better superintendents and field leaders through character-based development is an important first step in creating a culture that values input from every level.

Employee Training as a Strategic Investment

Training is often treated as an expense rather than an investment, but companies that take education seriously see measurable returns. Fairmont committed to providing training at every level of the organization, from line operators to senior leadership. The investment paid off in reduced scrap, lower material costs, and improved inventory turns.

Training by Role and Responsibility

Fairmont structured its training programs to match the responsibilities of each role within the organization:

• Line operators receive training in customer focus, group dynamics, meeting management (including agendas, minutes, and roles), the improvement process, and problem-solving tools.
• First-line supervisors receive additional training in team development, management styles, train-the-trainer techniques, and the role of the facilitator.
• Upper management focuses on strategic alignment, maintaining the balance between empowerment and accountability, and ensuring that team-based structures do not lead to bureaucratic gridlock.

The Risk of Skipping Training

Fairmont’s CEO Jim Shea observed that some companies attempt to shift to team-based management without providing adequate training in how to lead in that environment or how to work as a team member. The result, he noted, was “more people making bad decisions faster.” Training is not optional: it is the foundation that makes decentralized decision making work. Without it, the very structure intended to improve performance can create gridlock and confusion. This is why Fairmont made training the second pillar of its three-pronged strategy, alongside employee involvement and lean manufacturing.

Builders serious about workforce development should also explore strategies for developing the next generation of industry leaders to ensure their training investments create lasting leadership pipelines.

Lean Manufacturing and the 5S System

Lean manufacturing principles, particularly the 5S system, were central to Fairmont’s operational improvements. The 5S methodology (Sort, Set in Order, Shine, Standardize, and Sustain) provides a framework for evaluating, streamlining, and standardizing work processes across both the factory floor and the corporate office. The task of reordering each work process could never have been completed without involving representatives of all affected employees, who in turn needed training in using the 5S system and working in a team environment.

Applying 5S in Home Building

While 5S originated in manufacturing, the principles translate directly to residential construction. Here is how each step applies:

1. Sort — Separate necessary tools and materials from unnecessary ones. Remove clutter from job sites and workspaces to reduce distractions and safety hazards.
2. Set in Order — Organize what remains so that everything has a designated place. Reduce time spent searching for tools or materials and eliminate wasted motion.
3. Shine — Clean work areas regularly. A clean site is safer, more professional, and more productive for every trade working on it.
4. Standardize — Create consistent procedures for how work is done. Reduce variability in quality and cycle time across different crews and job sites.
5. Sustain — Maintain the discipline to keep the system running. Use regular audits, team accountability, and visible metrics to prevent backsliding.

Measurable Results from Lean Methods

Fairmont’s commitment to lean manufacturing and the 5S system produced concrete, measurable improvements across multiple areas of the business. The table below summarizes the results achieved through these initiatives:

These results demonstrate that lean manufacturing is not just about cutting costs. It is about creating a system where quality improves, waste decreases, and the company becomes more competitive in any market condition. For Fairmont, these gains were achieved during a period when the manufactured housing market was shrinking by more than 100,000 units nationally, making the improvements even more remarkable.

Creating a Culture of Continuous Improvement

Sustaining the gains from team-based management, training, and lean manufacturing requires a deliberate culture shift. Fairmont used several tools to reinforce continuous improvement as a daily practice rather than a one-time initiative that fades after the initial enthusiasm wears off.

Recognition and Incentives

Fairmont introduced a simple but effective recognition system. Employees receive Fairmont coins, redeemable at the lunch truck, whenever a supervisor spots them making a continuous improvement action. This provides instant gratification and reinforces the behavior the company wants to encourage. Small, frequent rewards are more effective than large, infrequent ones at shaping day-to-day habits. Over seven years, this approach shifted employee attitudes from skepticism to genuine ownership of the improvement process.

Setting Ambitious but Achievable Goals

Fairmont’s leadership set clear targets for the organization to work toward. These goals included:

• A 3-5% annual reduction in employee turnover
• A 90% safety rating across all facilities
• A 15% reduction in administrative costs
• 40 hours of training per person per year
• A 15% reduction in workers’ compensation costs

By making these targets visible and tracking progress formally, the company created alignment between individual effort and organizational outcomes. Employees at every level understood what they were working toward and how their contributions mattered in the bigger picture.

Empowerment with Accountability

One of the most difficult balances to strike in a team-based organization is between empowerment and accountability. Shea warned that it is easy to end up with bureaucratic gridlock if the system has too many checks and balances. The solution is to provide clear training on how to make decisions within the team structure and then trust employees to execute. Upper management’s role is to provide the training and maintain the balance so the structure empowers rather than hinders.

For builders looking to find and keep top talent, creating a culture where employees feel respected, heard, and empowered is just as important as competitive compensation. When workers see that their ideas matter and their contributions are recognized, they invest more deeply in the company’s success and are far less likely to leave for a competitor offering a slightly higher wage.

Similarly, companies that master employee retention and morale during tough economic times are better positioned to retain institutional knowledge and maintain quality standards when the market rebounds, giving them a significant competitive advantage over companies that had to rebuild their workforce from scratch.

Conclusion

The story of Fairmont Homes demonstrates that capitalizing on people is not soft management theory. It is a hard-nosed business strategy that delivers measurable results. By building a team-based management structure, investing in training at every level, applying lean manufacturing principles like the 5S system, and creating a culture of continuous improvement, home builders can unlock potential that no piece of equipment or software can provide.

In an industry where market conditions fluctuate and competition is fierce, the companies that invest in their people are the ones that thrive. The tools and methods are well established. The question is whether builders are ready to make the commitment to use them and sustain them over the long haul.