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My guest for Episode #210 of the My Favorite Mistake podcast is Mike Kaeding, the CEO of Norhart. They design, build, and rent apartments. They are transforming the way this is done by incorporating technologies and techniques that have revolutionized other industries. This has resulted in improved quality and reduced cost of housing. Ultimately, they are committed to solving America’s housing shortage and affordability crisis. And in doing so they hope to improve the way we all live.
In this episode, Mike shares his favorite mistake story about not realizing that paying well to hire the best was well worth the investment. What opened his eyes to this as a new CEO and how did he adjust? We discuss that and the power of intentionally creating a culture that attracts and retains great employees who are aligned with Norhart's mission and goals.
Questions and Topics:
- How old is the company? You took over from your father…
- Tell us about some of the history and culture
- Your company — rare to design, build, AND rent?
- Is it a matter of speed, efficiency and quality?
- You’ve brought techniques from manufacturing? Tell us about that and who is helping you?
- Partnership with Toyota – TSSC
- You talk about building an attractive culture — Why is that? And how?
- The connection to employees and how it resonates with them?
- “Best in the world” is their goal…
- Life is so short — don’t waste it doing work you don’t enjoy, with people you don’t enjoy working with
- Norhart values
- Norhart Invest — interest-bearing accounts
- Podcast – “Becoming a Unicorn, ” launching soon
Scroll down to find:
- Video clips from the episode
- How to subscribe
- Full transcript
Find Mike and Norhart on social media:
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Automated Transcript (Likely Contains Mistakes)
Mark Graban (0s):
KaEpisode 210, Mike Kaeding, CEO of Nortart.
Mike Kaeding (4s):
And so changing my mindset to I can't afford it, to, I can't afford not to have the bust, was sort of the biggest transformation for me in my journey.
Mark Graban (18s):
I'm Mark Graban. This is my favorite mistake. In this podcast, you'll hear business leaders and other really interesting people talking about their favorite mistakes because we all make mistakes. But what matters is learning from our mistakes instead of repeating them over and over again. So this is the place for honest reflection and conversation, personal growth and professional success. Visit our website at myfavoritemistakepodcast.com. To learn more about Mike and his company, look for links in the show notes, or you can go to markgraban.com/mistake210. As always, thanks for listening. Hi everybody.
Mark Graban (58s):
Welcome back to My Favorite Mistake. I'm Mark Raven. Our guest today is Mike Kaeding. He's the CEO of Norhart. They are a company that designs, builds and rents apartments. They're transforming the way this is done by incorporating technologies and techniques that have revolutionized other industries. So we'll have a chance to delve into that a little bit today. And this has resulted in better quality and reduced cost of housing, which sounds great. They're committed to solving America's housing shortage and affordability crisis, and, and they hope to improve the way we all live. So I want to talk more about, you know, the values and the, and the culture that you talk about athar. But first off, Mike, welcome to the podcast. How are you
Mike Kaeding (1m 37s):
Doing? Great. Thank you so much for having me.
Mark Graban (1m 40s):
Well, I, I know learning from mistakes is, you know, an important part of the culture and, and the environment there. And we'll, we'll talk more about that. But, you know, as we always do, you know, Mike, thinking about your work and your career, looking back, what would you say is your favorite mistake?
Mike Kaeding (1m 59s):
You know, my favorite one is probably not realizing the importance of people early on in the company. You know, I think the number one lesson that I ever learned is to hire the very best. So many people think that the best people are too expensive. And of course, when you look at them on a cost per person basis, they're quite expensive. But instead, what people forget to realize is that the best people outperform the average by two to five to 10 times as much. And so when you look at it from a perspective of what they're producing, they're actually less expensive.
Mike Kaeding (2m 39s):
And so, changing my mindset to I can't afford it, to, I can't afford not to have the best, was sort of the biggest transformation for me in, in my journey.
Mark Graban (2m 49s):
So I, and, and, and I love that you, you point that out. I mean, it seems like that's a model that companies, just thinking of a couple Costco in and out, like they famously I can think of Bucky's convenience stores in Texas and a few other states, like they are, are famous for paying a, it seemed like above average rates and salaries, but they get so many benefits from that.
Mike Kaeding (3m 15s):
Oh, absolutely. You know, early on, I, I didn't understand the importance of that. And I would, I would push people like to see how low we can afford people, or we would bring on a lot of temp labor thinking that's gonna help me reduce costs. But all it does is create headaches and problems and lack of momentum and turnover. Right. And we turned that on as heads. So we're offering unlimited pay time off to construction workers, hourly workers, which is something that I haven't heard of people doing, but even just paying top of market. And it's amazing the transformation that happens. I think the most surprising thing is that the best people start unlocking doors that you didn't know could be unlocked.
Mike Kaeding (3m 59s):
And you start being able to step back and say, all right, these guys are so much better than me. Let them run.
Mark Graban (4m 6s):
So how did you discover this, this mistake? Or like what, was there an epiphany? Was there a coach? Like, I'm curious, like, cause a lot of people might just, you know, waltz through their entire career with that mindset. What, what opened your eyes to this?
Mike Kaeding (4m 25s):
One of the buildings we were doing, actually the one I'm in today, we were building this building and we opened the first half and the second half was just full of junk. It was just, just a nightmare. And the basement, we have an underground parking garage, and it was just full of stuff. And we had the mayor of our city coming to live with us. We had to drive through this like, canning of stuff. It's like, dude, I thought we got past this. Like, I thought we got past all these issues and we had a, a better system. Like we reverted back a little bit. And I went and started spending some time with the team, started realizing that this isn't, something isn't quite right here. And about that time I read probably one of the most influential books in my life, which is No Rules, rules by Reed Hastings.
Mike Kaeding (5m 10s):
And in that they talk about the importance of the best people and that, and then the people around me who were good kind of pointing these things out and saying, Mike, you're being an idiot. Like, you're, you are the one causing all of this pain. It's not them, it's not anyone else. It's you. And you have to change your mindset. I'm like, oh, huh. So it took me a little bit of time to kind of come around and we, and we were really trying to hire someone great at that time and, and realizing, dude, we do actually have to pay top market. And so that was sort of the epiphany. And then we, we changed it. We looked at our entire staff, we let most of them go and we rehired and kind of started from scratch and it changed everything for us.
Mike Kaeding (5m 53s):
Wow. And that's the point we started doubling in size every year.
Mark Graban (5m 55s):
So how, how many employees did you have at that point when you kind of did that? Reset, if you will?
Mike Kaeding (6m 1s):
Like 30 to 40.
Mark Graban (6m 3s):
Okay. And, and, and you've been growing to how many employees today? Brought
Mike Kaeding (6m 9s):
Mark Graban (6m 10s):
Okay. Wow. So Reed Hastings, for, for people who don't know, among, I guess he's most known for being the founder of Netflix, right? Yeah. Is is, is that the type of kind of like, I don't know, like tough love, want message that's, that's better delivered through a book than it might be if, let's say somebody in the local, you're in Minneapolis, St. Paul, right? Let's say somebody, you know, in the business community, you know, would, would, would try to say something like that to you in person? Like, I'm curious, like, just to think through, like, you read it and you're like, oh wait, oof. Like did it sting or did, did because it was Reed Hastings? Like, did it land I wonder because of who he is?
Mark Graban (6m 50s):
Mike Kaeding (6m 50s):
Know, I think it probably would've been better delivered by a coach or someone there. I just, we had some people speak up, but I think for me it was most con concisely put in that book, which helped me understand it. I, I don't know, for me, I've always recognized how little I truly know. And sometimes that's an asset cuz we start questioning things that are going on. But I, you know, I stand on the shoulders a giant, so the more people I can get around me, calling me an idiot, calling me out, pushing me to be better, I actually really enjoy that. Yes, it stings, it hurts. I've had moments where I've really question my own abilities because of the people around me telling me I'm poor at something.
Mike Kaeding (7m 37s):
But that has only helped make me better. And, and I don't know that that's what I've really enjoyed.
Mark Graban (7m 43s):
Yeah. Well, and, and it seems like not every leader is open to that kind of feedback, whether it's delivered bluntly or politely. Like, you know, there's, there's, I I I like how you distinguish, you know, being the difference between being stuck in the way we've always done it versus challenging things or, or distinguishing between what we know and what we can go test out. Right. So back to your point of like this idea of, you know, top grading or hanging, you know, top, top wages, hiring the best. Like, did, was that an idea that, that you thought you had to go test? Or what helped you feel comfortable moving forward with that idea?
Mike Kaeding (8m 25s):
You know, sometimes in my life I should probably be doing a little bit more testing than we do. And I think that kinda goes back to that ignorance and not knowing what we don't know. In fact, looking back a little bit, I think some of the good decisions we've made were were, I don't know if I would've made 'em again now that I'm older, simply because I knew the pain that we went through and going through that process. So we just, I think just one day I just said, all right, enough is enough. We are kind of switching my mindset. I'm just gonna accept this is fact and we're gonna try it out. Yeah. And we did and it changed everything for us. Yeah.
Mark Graban (9m 1s):
Yeah. How, how quickly did you see the impact of that, that change in philosophy and approach?
Mike Kaeding (9m 11s):
I mean, it, it took us six months to get through the whole staff and then maybe another three to six months to get new people kind of up and ramped up. But before that point, we were growing at about 16% per year, which is still pretty good to like doubling in size every year. And you can see the impact there of the quality of team.
Mark Graban (9m 31s):
And, and were there any lessons learned? I mean, yeah, I, I I would've, I think if I were there side by side with you, I would've agreed with you on the hypothesis or this idea. But, you know, no, no idea's ever perfect. Like were there, were there adjustments that were made along the way?
Mike Kaeding (9m 49s):
Yeah, I think the dark side of hiring the best people is that you're here to fire the average. And we often talk within our company that there's a spectrum of staff. You've got the gray people. Most companies know they want great, you got the bad ones. Most companies know they don't want the bad. The difference with us is that most companies will accept the average. We don't want the average, we want only the very best, the ones that are gonna change the world, and that causes angst. And those who are in the average or they're unsure of where they stand. And so one of the things we stole from Netflix is the keeper test. The idea there is if a particular employee were to quit, how hard would they fight the manager fight to, to keep them?
Mike Kaeding (10m 35s):
If the answer isn't fully enthusiastic, I want to keep this guy, then the, then we shouldn't keep them around. And so I think the lesson that we've learned in trying to implement this better is to provide better feedback, better insight into those staff members that are a little bit more on the edge. I think what's worse than knowing you're not making the cut is just not knowing which way it's gonna go. And that creates a bad kind of environment that we've gotta be mindful of.
Mark Graban (11m 6s):
Because I, I imagine even if someone is, you know, someone, this is like the language of HR and evaluation, sometimes, you know, meeting expectations, like they're okay. They're not a quote unquote rockstar, they're not causing any problems. But I mean, you, you've made an investment in a person, and we're gonna come back and talk more about some of your values at No Heart. Like I imagine like, if if someone's really aligned to the values and they're living those values, it's easier to say, okay, well we're gonna invest in skills or other competencies that they need to become a top performer. Is that fair to say?
Mike Kaeding (11m 40s):
Oh, absolutely. Yeah. Our, our values in it aren't even tied to skill much at all. You know, one of the things we'd look at is not, are you best in the world today? There's only a handful of people like that. We're looking at, are you on the journey to become best in the world? Yeah. If I was to work directly with you, are you pushing me in some meaningful way? Are you better or at least trying to be better than me in some way? If I feel that energy and push and, and comradery than, great, you're the right person. If it's just a, yeah, I'll do what you want me to do, I'm here to punch a clock. It's just not a good fit for
Mark Graban (12m 18s):
Us. Yeah. Yeah. So, so Mike, I'm, I'm curious if you can give us a little bit more of the history of, of nor or I, I, I know you took over from your father and that it was sudden and unexpected. So I, I'm sorry to bring that up, but I was wondering if you could tell us a little bit of the context there of, you know, becoming CEO and, and looking at, you know, whatever history or culture was there versus where you were looking and taking the lo looking to take the company where you are taking it.
Mike Kaeding (12m 51s):
Yeah, so this was originally a family business. And I can remember as a kid, pips Creek kid, very young. We would be taking family outings to the local hardware store about a half an hour away. We'd each fill up two carts full of stuff and bring it to my dad's little trailer. As we headed down the highway and back to our buildings, we'd be building like eight or 10 units a year. And then I went off to college and I wanted nothing to do with the family business. And my dad really wanted me to join. But looking back, I think the really, the reason I didn't want to join is because I didn't want people to think it was given to me.
Mike Kaeding (13m 33s):
So I really wrestled with my own ego on that point quite a bit. And then eventually I came to a conclusion, all right, I'm, I'm gonna jump in. We're gonna be part of this. Because deep down I knew I wanted to make some kind of meaningful, positive impact on the world. And if I'm gonna have that kind of impact, why not use this platform that my parents already started to grow that into something much larger? So my dad and I worked together for a few years and it was really, it was really a good time actually. And then one day he was no longer here. He, he passed away.
Mike Kaeding (14m 13s):
He was relatively young and it was totally sudden and shocking. Mm
Mark Graban (14m 18s):
Mike Kaeding (14m 20s):
Yeah. And I'm
Mark Graban (14m 21s):
Mike Kaeding (14m 22s):
Yeah. So we really, a a rough point in our life, but if I'm looking back at it in some ways, there was magic in it. And I think the magic is this, I didn't know much because I didn't know much. I didn't know the way things were supposed to be done. Right. And we could start questioning everything, and there's nobody to tell us, no, maybe not a great thing, but that's the reality of it. And so we pushed back, we changed, we tried new things and this allowed for some crazy new innovation. But at the same time, there was a tremendous amount of pain because at that time, my first project, after my dad passed away, the city didn't believe I could do it.
Mike Kaeding (15m 9s):
And in all honesty, they were to a degree. Correct. In fact, they shut us down twice in that project. And the second time they brought me in and said, Mike, you need to hire a professional manager. Oh, right. And just deflated. And then we brought someone in and in the course of three days, which is the worst way to hire someone that was not a good fit, but we had 'em around. And then behind the scenes we're working like crazy to try to get everything figured out and fixed up. And I can remember toward the end of the project, we had this water main, thousands of feet long buried, 15 feet in the ground. And the pressure test wasn't holding, meaning there was just a pinhole leak somewhere in this pipe.
Mike Kaeding (15m 53s):
So I'm out there in my fancy nice clothes in the mud trying to find this leak with their excavators. Day in, day out, we found the leak about a week or two before opening. And then about a week before opening the, with some of the city officials came out, looked at the building and said, there's, there's no way we're not opening this building. You could send everyone home. They're not, they're not moving in here. And I remember the last day before we were supposed to open, we had half a dozen inspectors for about a half a day come through and look at the building. At the very end of that, the head building official brought me down in the basement and said, Mike, all the projects we've done in the city, this is the nicest we've had.
Mike Kaeding (16m 38s):
Ah, finally. Right. Good. Finally some confirmation that we can do what we thought we could do. But, you know, that's the dark side of not having that experience.
Mark Graban (16m 50s):
But it sounds like you've got a great team and you've built a team that you can rely on for those details.
Mike Kaeding (16m 56s):
Oh yeah, for sure. And, and that is the magic of hiring great people, is now that we have that whole infrastructure, a lot of those things that used to be major pain points are no longer pain points.
Mark Graban (17m 8s):
Yeah. Again, our, our guest is Mike Catering, he's the CEO of Norhart. Talk about the company a little bit before we, we delve into the, the, the culture and some of the values. How, how rare is it for a company to design, build, and rent? Like, I guess my guess would've been you have developers, builders, and then it's sold to somebody who, who owns and rents and maintains. Am I, am I wrong in that? Or is is your company, how, how, how unique is that what you do?
Mike Kaeding (17m 39s):
It's quite unique. Yeah. The world of construction, typically the owner is a different company than the general contractor who's different than the developers and the subs and the, and the supply chain and the manufacturers. Imagine for a moment if a construction would bid toward to build cars, they would've a different company install on the windshield, a different company install on the door, and a different company install on the wheel. And then the wheel company, well, they would call us up and say, Hey, I'm so sorry, like at this other project we're delayed. We won't be out there for a couple of weeks. Your whole line would be shut down. And then when they did come out, they would be irate cuz they could only work on one car at a time.
Mike Kaeding (18m 24s):
See, the world of manufacturing looks at us and says, we're crazy, but this is normal in construction. And so bringing all the work in house was sort of one of the first steps we did to solving the construction costs.
Mark Graban (18m 39s):
I mean, it sounds like it would be a matter not just of cost, I mean maybe, you know, it's vertical integration, you're taking out some layers of margin, but it also sounds like it would be a matter of, of speed and, and quality and, and coordination from doing it this way.
Mike Kaeding (18m 53s):
Oh, absolutely. Quality alone, we have, we'd hire drywallers out and I would come do inspections periodically and certain walls had to have two layers of drywall. But the thing is, that first layer, once it's covered up, never gets seen. So what do the drywallers do? They put it up like a kindergartner had installed the, the drywall, it was mismatched, kind of sporadic drywall everywhere. And I walked in and they'd be, oh, I'm so, I'm so sorry, we'll get this fixed. But think about how often they were doing that. Right? If you have your own team, they're not incentivized to do that and they take a lot more pride in their work. But because everything is in house now, we can also think about efficiency.
Mike Kaeding (19m 37s):
And so if you look at manufacturing over the past 60 years, they've improved labor, top productivity by 760%. Agriculture is improved by 1500% during that same time period. Construction has done nothing or 10%, but basically nothing. Right. Yeah. And so if we can just take the lessons learned from these other industries, we can have some radical improvements. For example, the assembly line, right. A radical, a radically improved manufacturing. But how in the world could you take that concept into construction? I mean, you can't take a building and drive it down a line, can you? Well, no, but what you can do is you can move the person through the building.
Mike Kaeding (20m 24s):
And so right now, every five hours our teams shift through the building. And if you look at the very end of our line, you see a brand new apartment unit being produced every five hours and just that one technique takes a 15 month project down to nine months. Wow. But that wouldn't even have been possible unless we've brought things in house. Yeah.
Mark Graban (20m 49s):
So you, you mentioned manufacturing and you know, tho, tho those are my roots. Originally I started in the audio industry working with assembly lines. You know, your website talks about bringing techniques from manufacturing. So it's a company near and dear to me. Tell, tell us about at least one of those companies that's been helping you and and how they do that.
Mike Kaeding (21m 10s):
Yeah, so the inventors of sort of these efficiencies and something called Lean is, is Toyota. Right? They did, they, they radically improved the space. So why not for looking to find the world's best? Why not tap into the best people in the world what they do? So we co connected with Toyota and they were excited about this because they wanna see improvements to the overall economy go beyond just manufacturing. And so it's just a great partnership. They're out here for a week every month right now. And it has just been phenomenal. The lessons learned from them is just fantastic.
Mike Kaeding (21m 50s):
We actually met up with some of their executives just last week. And the lesson I learned from them this last week is you really want to think about culture as we're talking about here. You can bring people in and improve something about your business and then they leave and that thing goes back to the way it's been. And so how, how do you change the way that everyone thinks about this so that it becomes embedded in everything that you do? And that's, that's what we're working on currently with Toyota.
Mark Graban (22m 20s):
Yeah. Yeah. And Toyota and their TSSC group, yes, as they call it, they work with suppliers of theirs, manufacturers. They've done a lot of pro bono work for nonprofits, like with food banks and soup kitchens and helping them improve. Not coming in to be the idea people, but to come in and, and coach and teach methodology. They've done a lot of work in, in healthcare and, you know, I could see, I mean I can't speak on their behalf, but I could see the appeal where, you know, Nortart talks about, and there's this phrase that's on your website, obsession to improve our customer's lives. Like that, that's kind of a high-minded purpose or, or, or, or mission where I, I, I could see, you know, Toyota talks about doing the same things around mobility and improving people's lives.
Mark Graban (23m 8s):
Yeah. I wonder if that was part of the connection of like how they decide to work with a company like Nortart.
Mike Kaeding (23m 14s):
Oh, absolutely. There's a several month process that we go through and kind of evaluating each other to see if we're a good fit and a key piece of that's the culture, right? If you don't have the right culture in place, Toyota might be open to working with you, but, but they're not gonna have any bit of effectiveness unless you've got the right people and the right willingness to change and improve. And so, yeah, it's been a great partnership. In fact, we're in talks about becoming one of their like prime sites that they kinda show off for the rest of the world and maybe we can share this knowledge and experience we've gained the construction world with other companies.
Mark Graban (23m 54s):
So I'll put links on the show notes for the audience about some of the videos and some of the work that TSSC and Toyota have shared. Maybe I'll look forward to there being a video about Norhart someday that we can love it, watch and learn from and share. So, you know, you, you, you talk in videos and on the website about the importance of culture creating an attractive culture. And I know how important that can be, you know, to people in manufacturing. So I wouldn't be surprised that that matters to people doing construction. But can, can you kind of talk about like that connection of, of somebody who's, you know, a drywaller or a painter or whatever their, their field is like, they may have always thought of like the tasks and the job.
Mark Graban (24m 38s):
I'm curious like if you have stories about how like that connection to purpose and, and mission connects with people in jobs like that.
Mike Kaeding (24m 48s):
Yeah. You know, the, the heart of is understanding what your purpose and mission are. And if you get that right, it takes some time. But if you get that right, that connection starts happening. You know, for us, our purpose is to create a better way to live. But I think the impact that we can have is solving America's housing affordability. And once people start to get that, they realize that we're more than just here to make some money or just to get some work done or build a nice new building. We're all about solving that problem for humanity. And that gives people an extra energy and oomph to get what they're getting done.
Mike Kaeding (25m 28s):
You know, another, another piece of our culture is our mission, which is to build and manage awesome apartments. And we stay laser focused on that because we want to be literally be best in the world at doing that. That's the goal. That's not just some statement. That is actually the goal that's really a lot of fun cuz you go on site and talk with people and you hear people refer, re responding that back regularly. Like, we wanna be best in the world at what we wanna do because that's what it takes to solve this kind of problem. You know, another thing I often hear the world of construction, typically it's kind of rough and tumble. People can be yelling and screaming and kind of mean and nasty.
Mike Kaeding (26m 8s):
It's doesn't bring out the best in people always. And so oftentimes at orientation, people hear our orientation. I, I'm at every orientation and at the end I just get their feedback. And a lot of times someone in the room will say, Mike, this sounds great, but this is too good to be true. I have lived in construction for decades and people say this sort of thing, but it never actually happens. Then what I say is, in two months, you and me will be connected back up again for follow up orientation. This is your chance to tell me everything that's going wrong and right in the organization. And two months later, without fail, every single time I come back and say, Mike, I thought you were full of it, and then I walked on site.
Mike Kaeding (26m 57s):
Right. That, that's the powerful moments when, you know, finally if something is working the way you hope it will.
Mark Graban (27m 3s):
Yeah. Wow. That's great. There's, there was one line or something you said calling it a line that that's, that's not the right, it wasn't just a line. I can tell it's something you believe. So calling it a line isn't that, that was a mistake on my part, but I, I don't want to say it on your behalf, but I'll try to tee you up. Like what you said reminded me of something I've heard from Eric Ries, the author of the book The Lean Startup. Are you familiar with his work? Oh, yeah,
Mike Kaeding (27m 29s):
Mark Graban (27m 30s):
You know, so Eric talks about in the context of entrepreneurship or building software or building a company, basically saying like, I'm paraphrasing that it's disrespectful to waste people's time building a product or services that nobody really wants that without, without we, we, it's not just the wasted money or the wasted effort, but to me it connects back to Toyota and saying we should respect people's time and, and the time they're giving to us. So does that point you close enough to what, what I remember from your video to kind of tee up about life being short?
Mike Kaeding (28m 5s):
Oh yes. Yeah. You know, my dad died at a relatively young age and it really reminded me how short life really is, right? We only live about 5,000 weeks here on Earth, and I often ask myself the question, H how do I want to spend the minutes I have here on Earth? Right? And it's literally minutes. I, I'm not exaggerating with that. That is my life is down to the minutes. And the reason that is, is I want to make some kind of meaningful, positive impact in the world.
Mike Kaeding (28m 46s):
That's a big part of who I am. If, if I'm gonna do that, if our company is gonna do that, if we're gonna change this world in a positive way, that means that we need to spend our time the best we possibly can.
Mark Graban (28m 59s):
Yeah. Yeah. That was really, really powerful. How, how that was stated. And, you know, you, you, you said two parts that I took a note on here. Don't, don't waste your life doing work you don't enjoy and, and don't waste your life working with people you don't enjoy working with. Yeah. So somebody may have one or both of those dimensions, ideally. I, I, I'm, I'm with you. Ideally, you you have both.
Mike Kaeding (29m 25s):
Well, one of the things we talk about is if we wanna be best in the world, do you think you have any shot at doing that? Unless you love what you do, there's no way. No way at all. And what's one of the things we talk about at orientation? And, but it's, it's so much deeper than that because life is short. Don't waste your life doing something you don't wanna be doing. And just like you said, don't waste it. Doing it with people you don't wanna be with. You know, people often join an organization because the reputation of the company or because of maybe the recruiters calling you a bunch or the pay or benefits. But people leave for a much different reason.
Mike Kaeding (30m 6s):
They leave because of their experience with their manager and their coworkers. And so when we think about culture and think about the teams, we put a lot of time into making sure we have the right people. Because if you get that right, it is just magical. And I've seen what amazing teams look like, and I am tenacious and driven and I will fight to the end of the greet. We get to the point where every team is at that kind of level. Yeah.
Mark Graban (30m 36s):
And, and it seems like building upon that belief and, and, and hiring people who are aligned with or can embrace the values really, really helps. And, and, and two, I'm on the call out in particular, I'm gonna just read we'll short excerpt from the website and ask you to provide some commentary or elaborate on it, Mike. So one that stood out to me improve every day. Mm. We question the status quo. We believe work shouldn't be complicated. We relentlessly simplify and automate our processes. Tell tell us more about why that's so important to you and Nortart.
Mike Kaeding (31m 12s):
Oh my gosh, there's so much I could go into here. So for, to solve housing affordability, we gotta solve the construction industry. And people often think, well dude, it must be just some magical bullet. Maybe it's 3D printed homes or full volumetric construction. No, I tell reporters all the time that, no, that's just, that's one piece of the puzzle and that's a good important piece. I know it gets headlines, but in order to solve this industry, we need to solve 10,000 little problems. Now if you think I as the CEO or my leadership team or the managers can solve all those problems, you are wrong.
Mike Kaeding (31m 53s):
I often tell my team when they come, especially at orientation, if you thought we hired you just to swing a hammer, it's wrong. I hired you to invent the next way that this work is done. And so we challenge everyone to every day come in and look what is a small two second tweak that you can make your day. How can you fix what bugs you so that your work becomes easier tomorrow? And in fact, we, we even go a step further and all of our trades, all of our teams every single week produce a video. And this video is showing off something in their team that they improved that week to make some kind of meaningful improvement within their team.
Mike Kaeding (32m 38s):
And it's just a lot of fun. There's celebration, there's excitement, it's when you get the great people in the, in the place, it's just phenomenal. But, but yeah, improving something every day is such an important aspect to what we do.
Mark Graban (32m 51s):
Yeah. And, and making it safe for people to speak up. Psychological safety cha questioning the status quo is something that gets people in trouble or punished in a lot of environments. And to build on what you were saying, you are not gonna come anywhere close to being the best company in the world if it's a culture where people cannot challenge the status quo.
Mike Kaeding (33m 11s):
Oh my gosh, yes. I feel like you've seen my orientation. This is great. Yeah, no part of, well, even psychological safety. That's what I end with. Cause Google did this study comparing the very best versus the worst. Have, have you shared that study with your listeners?
Mark Graban (33m 28s):
We haven't talked about it directly. Okay. I I do point to it and mention it in, in my book, you know, from Amy Edmondson's work with Google, but Yeah, but, but you know, no, please go ahead. Yeah, yeah.
Mike Kaeding (33m 37s):
So the, the study I'm referring to, they did this difference compared the very best teams in Google for the, the good ones. And again, the teams in Google are all really good. But what was that difference? There was a number of factors, but the number one most important factor that they found with psychological safety and psychological safety is how comfortable you feel at sharing your honest belief of what's going on. And I tell our team, like, imagine if a genius were to battle it out against any one of us, were a problem with a problem. Now the genius is gonna win. But if you take that same genius and have 'em battle it out against a team of people, a high functioning, competent team, the team win.
Mike Kaeding (34m 20s):
Well, what's the trick? The trick is that we're tapping into the brain power of every single person in that room. You know, we're so hard wired to want to feel accepted, to feel like people like us. And so that causes us to take suboptimal choices. Like not asking questions to avoid feeling ignorant or to not question the status quo. So it won't come off as negative, but if only two people in a group of 10 are providing all the feedback and thoughts and idea why do we have the other eight? We need everyone involved so that we can get the very best ideas.
Mike Kaeding (35m 2s):
And then I ask the, the group and I say, Hey, who do you think I'd rather hear from? Do you think I'd rather hear from the 20 year veteran in our company or the brand new employee and say it's the brand new employee. And the reason that is, is because you haven't dranken the Kool-Aid yet, right? You've seen things from a different perspective. You have different ideas and concepts and ways that you can push back and teach us and train us something more. So please speak up. And then I end with a story. You know, one of our, we do these annual meetings every single year with all of our teams separately. It's a full day event. In the end they go do something fun.
Mike Kaeding (35m 42s):
But during the meeting, I remember one of the teams I met with, I was talking about psychological safety. And there was one guy who was quiet in that room the entire time, in the very end you spoke up and said, Mike, you know this thing on psychological safety. You see it, you know, I am afraid to share my thoughts. I'm afraid to speak up now look around this room. And everyone's so much more experienced than me. They're so much smarter than I am. I have ideas. But then I think, well, I'm sure they've already thought of that idea. And what's so powerful is what happened next.
Mike Kaeding (36m 24s):
Everyone in the room went around one by one and shared with this employee and said, dude, we love you. We chose you to be on this team and we want to hear your ideas. And so at orientation, I look at everyone, I say, dude, love you. Chose you to be here by extension. I want to hear your ideas.
Mark Graban (36m 49s):
Yeah, yeah. And, and, and you have to set that tone, not just, I'm gonna provide some commentary here. I mean, I love what you're saying, like you as the CEO and others in, in Norhart who share that culture, it demonstrates, like when you talking about hiring the best, like I don't, I I would propose, and I'm, I'm guessing you agree, it's a dangerous way to ask a question, but Okay, I'm gonna say it anyway. It's not even a question. I'm gonna make a statement. It's not a matter of hiring people who are uniquely brave and courageous who will speak up no matter what. Like, it's, it's, it's, it's a matter of creating the conditions where, where people who unfortunately have been taught by previous employers, don't make waves.
Mark Graban (37m 30s):
Keep your mouth shut. Don't be a troublemaker. You, you, you have to draw that back out of people Yeah. And demonstrate that it's actually safe, right?
Mike Kaeding (37m 39s):
Yeah. Yeah. We have a, an international team as well. About 15% of our staff are across the globe. And we have a couple of people in, oh, I'm blanking on the country now, but it's in the, in an Asian country. And they, I dunno if it's their country or just the companies they've been with, but it was very much the culture where they would tell you to speak up and then they would bash you down when you did. And it really made it clear like, you don't speak up with this group. And we hired them on. They were always very polite, always Absolutely. We're on this, we're good. And I, I knew, I I just from experience, no one is ever that happy with everything.
Mike Kaeding (38m 19s):
Like, if you don't tell me something is wrong, then I know you're not telling me the truth. And so I pressed them and pressed them. Eventually we started realizing that like, we need to go through some kind of exercise, something so that they can know that I'm actually serious. And so what we did, she took a half day meeting and the entire port, the thing of the event was me defending outlandish things like, we're gonna build an apartment building that's only for birds to live in. Or I've got this new ingenious idea, we're gonna offer all of our rents for free. Talk about housing affordability, really, really good. And their job was to debate me and call me wrong.
Mike Kaeding (39m 2s):
But what was powerful about that is since we used an idea that was ludicrous, it gave them enough room to start speaking up against me. And then that gave him some more confidence to have more authentic conversations with me later on.
Mark Graban (39m 17s):
Wow. I love that practicing by pushing back on a ludicrous idea.
Mike Kaeding (39m 24s):
Yeah. That's what it took for them. Yeah.
Mark Graban (39m 28s):
I'm sorry, go ahead. It took that, yeah, that's what
Mike Kaeding (39m 29s):
It took for them because there was such at a point of fear.
Mark Graban (39m 32s):
Yeah. Yeah. And I think, you know, meeting people where they are is important. You know, another value here, and I'm gonna bring it into, I think one of the other values that you've demonstrated, if it wasn't even part of the list. So the one that's on the list says, be a genuine human. We are kind, supportive, and humble. We share credit, admit our mistakes and learn from them, right? So that's music to my ears, all of it. But that part especially, we are open, honest, and vulnerable. And you know, I i it seems to connect then into transparency. And this is the the last thing, you know, I wanted to ask you about here, Mike, the practice of sharing your employees survey results online.
Mark Graban (40m 12s):
Yeah. Like in a lot of organizations, they would not share this with everybody internally. But I could go and read your 65 page thing you posted, and I, I, I didn't read all of it, but I did a search for the word mistakes. And here, here are the two comments I wanna read to you and get your comments and reaction on. So one from a painting and drywall employee said, we're allowed to make mistakes because we are human, we learn from them and grow and with more practice and we get better. We are all working towards one goal. And then the second comment, which I think was somebody in a business function said, we own our mistakes and we make continuous improvements. Like that's, that's, that's awesome to hear,
Mike Kaeding (40m 51s):
Dude. You're the first podcast host that's found this. I'm so happy for that. That's fantastic. You know, for us, we do these surveys and it's a nation, it's put on by a nationwide company, so it's independent of us. And you're right, most companies don't offer those survey results all publicly or even to their own teams. In fact, in these survey results, there's a certain section that only the CEO gets nobody else on the team, none of the, the managers, nothing. It only goes directly to me. Do you have a guess of what that is?
Mark Graban (41m 30s):
Mike Kaeding (41m 31s):
My score, how I did?
Mark Graban (41m 32s):
Oh, oh, right. Well
Mike Kaeding (41m 33s):
Guess what? The first thing we show when we meet with the company, yeah. I show them my results and they're not perfect. I'm average or so amongst the, the kinds of companies that take these surveys. And so I think it's so important to be transparent completely with where we're at in this stuff. Because I often say I don't want to be fake good. There are a lot of companies and countries that fake good, right? They, they pretend to be something they're not. I'd much rather it be imperfect, but honest. And the reason is because then I can work to improve.
Mark Graban (42m 12s):
Mike Kaeding (42m 13s):
And if I, yeah, I'm honest about it. Hi, I'm Mike and I have problems. Now we can talk about those problems, work through them and make them better. And so, yeah, this last survey result, we decided to take it up a notch and said, why not just offer these results to the world? Like one of the hesitations we see in employees jumping between companies is the fear that the grass really isn't greener on the other side of the fence. And if all of us companies were to be very honest and share those results, the employee, it's better for the employee cause they know what they're getting into. But it's also better for the company because it forces us to be better, right?
Mike Kaeding (42m 53s):
Transparency inspires better results, and I think there's a powerful element that many companies miss. Yeah.
Mark Graban (43m 1s):
Wow. That's really powerful. And I'm, I'm glad that you're not just doing that, but sharing that with others. I really appreciate that, Mike. So before we wrap up, and I, and I hate to wrap it up, I think I'm, hopefully we'll be able to do a, a longer discussion about Lean and Toyota and yeah. Another podcast that I host called Lean Blog Interviews. There's some, I feel like we're scratching the surface here, but we've been joined again by Mike Kaeding, CEO of Norhart. Tell, I know you wanted to mention two things that you're launching soon, two new initiatives, please. You know, tell us a little bit about that.
Mike Kaeding (43m 38s):
Yeah, two big initiatives. The first is Norhart Invest. It's an opportunity to allow investors to become the bank and to earn the interest plus the bank's profits. And so we're offering interest bearing accounts that are quite strong in the market right now. And if you're willing to lo lock it up for a little period of time, then you can get higher rates, or it's a little lower if you keep it flexible. So that's sort of the first big thing. And the second is a new podcast called Becoming a Unicorn. It's about the journey of small companies growing to billion dollar enterprises. But the twist is that we wanna look at what that journey looks like authentically the good, the bad, and the ugly.
Mike Kaeding (44m 25s):
And so we are not far from launching that, but you can visit our website to see more information on both.
Mark Graban (44m 33s):
I'm excited. I'll, I will definitely check out that podcast. And final question here, I mean, did, did anybody push back on either of these ideas as being spectacularly or you, you, you had pretty strong agreement around at least tweaking the concept to, to, to something that you think is gonna succeed?
Mike Kaeding (44m 54s):
Oh my gosh, yeah. So the podcast, part of the reason it's not launched yet is because version one was one thing, then version two was like, okay, that's not very good. Let's do, we went to version two, recorded a bunch of episodes, and we listened back. I'm like, okay, this is not as good as we think it can be. And so now we're on version three and it's actually turning out quite nicely. And that wouldn't have happened if we hadn't got all that feedback as we were going along. Even even to how to invest. That has evolved a lot over the last nine to 12 months, just based upon feedback. And so we meet with a lot of investors right now, and now we're to the point that we get a lot of positive feedback. But it wasn't that way originally.
Mike Kaeding (45m 34s):
Right. We had to tweak and learn as we grow.
Mark Graban (45m 37s):
That's great. That's great. So Mike, really, really appreciate you, you know, being here to share, you know, not just your own story on growing as a leader, but talking about what you're doing at Nortart. It sounds like there's a lot of great things going on. So I will put lots of links on the show notes to the website and, and videos and to the employee survey. And, you know, I hope people will go check that out. And I, I know we're gonna be hearing more from you at some point, Mike here and other, other podcasts and other venues. So really, really appreciate you being here today.
Mike Kaeding (46m 12s):
Absolutely. Thank you so much for having this, this is a lot of fun.
Mark Graban (46m 16s):
Oh, it has been fun. Oh, I was gonna say yes, I'm sure you're, you're, you're working toward being the best podcast in the world, so
Mike Kaeding (46m 24s):
Someday, yeah. We'll, maybe we'll have some collaborations
Mark Graban (46m 29s):
And I'm gonna learn from what you're doing and improving. So Mike, thanks. Thanks again. Thank
Mike Kaeding (46m 34s):
Mark Graban (46m 35s):
Well, again, thanks to Mike Kaeding for being a great guest today. To learn more about him and his company, look for links in the show notes or go to markgraban.com/mistake210. As always, I want to thank you for listening. I hope this podcast inspires you to reflect on your own mistakes, how you can learn from them or turn them into a positive. I've had listeners tell me they started being more open and honest about mistakes in their work, and they're trying to create a workplace culture where it's safe to speak up about problems, because that leads to more improvement and better business results. If you have feedback or a story to share, you can email me firstname.lastname@example.org. And again, our website is myfavoritemistakepodcast.com.