A supplement to the Colorado Springs Business Journal
A Collaboration of Colorado Springs Leadership Organizations
June 20, 2008 Published by Colorado Publishing Company • To Subscribe to The Colorado Springs Business Journal visit www.csbj.com
Leadership gone bad: How to destroy an organization Before we leap into this abyss, let’s get a couple of things straight. Numero uno, the request I received from the Leadership Quarterly Editorial Board to write an article about this topic is a first, at least in my line of work. As a leadership consultant, I have never been asked by any client how to achieve the dubious objective of destroying an organization in one year or less because 1) nobody wants to discuss this topic, and 2) many leaders and managers can handle this task quite well on their own without any help from me. There’s something else we should be clear about up front. As a student, practitioner, professor and consultant on leadership, I have discovered something interesting about the way leadership works. It seems that there are only a limited number of ways to get leadership right. This doesn’t mean that there is a lockstep method to leadership, but it does mean there are a few underlying principles that surface again and again in the literature. Unfortunately, this is not the case for getting it wrong. Any time you think you’ve seen all the possible ways to destroy an organization with impossibly bad leadership, just stick around awhile and somebody will discover a brand new and creative form of “leadership in the
tank.” To paraphrase motivationpropose we look at three of the al theorist Fred Herzberg, man more subtle, yet classic, ways that has only managed a few ways to will either destroy an organizaget things right, but he is able to tion outright or at least knock find an infinite number of ways organizational morale down for to mess things up. the count. In no particular order How, then, shall we proceed if of importance, here they are. the number of ways to damage Withhold information. In an organization through poor my research on high perforleadership seems to approach mance work teams, the No. 1 Robert infinity? factor differentiating high perCertainly leaders could make Ginne t t formance leadership from poor any of the classic mistakes of leadership was whether teams choosing the wrong product line, market, at all levels could, or could not, get easy strategy or tactics. Likewise, they could and immediate access to information to fail to define and/or communicate a clear help them choose and align their work
As a leadership consultant, I have never been asked by any client how to achieve the dubious objective of destroying an organization in one year or less vision, mission and purpose. But these possibilities are so absurd, that they’re not really worth an article (not that we haven’t witnessed all of these mistakes being made in the “real” business world). Rather, I
strategies. So, if you want to destroy an organization, make sure you keep information from your subordinates. After all, knowledge is power and this will insure your power, won’t it? But why stop there?
Why not create an organizational culture where everybody at all levels of your organization follows this strategy and you can put a stranglehold on information (and productivity) in no time at all. Brilliant! Reward X while announcing support for Y and Z, (with apologies to Steven Kerr’s classic article, “On the folly of rewarding A while hoping for B.”) This is a superb strategy for destroying an organization because it is so subtle. For all intents and purposes you, as the leadergone-bad, are going to look brilliant, kind and benevolent because you can stand up in front of your organization and make glorious speeches about all the wonderful objectives you hope to achieve. But if you, or more likely, your HR advisor is psychologically challenged, you should simultaneously produce a compensation system that rewards completely contrary behavior. One such HR specialist we know of announced a plan to promote egalitarianism (a lofty goal) while devising a compensation system that created bonuses for those performing below the mean but provided no bonus opportunities for those performing above the mean. Think about that for a minute: the better See Bad on page 10
What is the Center for Creative Leadership and why does it exist? If you drive along 8th Street in Colorado Springs, you probably have noticed a big red stone and glass building on the hill overlooking a beautiful open space. That building houses the Center for Creative Leadership’s Colorado Springs campus. If you’ve wondered what business is conducted there, you are not alone. Many local residents know little about this global treasure right in their back yard.
Who are we? The Center for Creative Leadership is a nonprofit global provider of executive education, developing better leaders through an exclusive focus on leadership training and research. The Center was founded during 1970 in Greensboro, N.C., where it is headquartered. CCL also has locations in San Diego, Brussels, Belgium and Singapore. Our clients come from both profit and
nonprofit organizations in 120 countries on six continents. We work annually with some 20,000 leaders who are primarily mid- to senior-level executives, top-tier or C-suite leaders (CEOs, CFO, COO’s), human resource practitioners and consultants in the leadership development field. CCL’s world-class researchers Joan and faculty are dedicated to develG u r oping solutions for clients’ leadership challenges. The goal is to achieve greater individual, team and organizational effectiveness.
What’s in our name? Why are we called the Center for “Creative” Leadership? We believe that creative leadership is the capacity to think and act beyond the boundaries that limit our effectiveness. CCL’s founder H. Smith Richardson was
passionate about developing leaders to create sustainable organizations. He believed that creative leadership was a necessary ingredient. Richardson’s family developed Vicks Vapor Rub and parlayed it into a hugely successful product. He is largely responsible for building the Vick Chemical Co., which eventually v is was sold to Procter & Gamble. Freed from his operational responsibilities, Richardson created the foundation that bears his name to provide CCL’s initial financial backing.
four training rooms, conference rooms, action learning laboratories and a fitness center. In addition to training, this facility conducts extensive research on assessment tools, teams and issues regarding senior executives — the focus of several of its programs. In particular, the local campus offers a series of programs for community leaders including the Colorado Springs Leadership Institute, the Community Leadership Program and the New Leaders Program.
History of Springs campus
Jody Taylor, CCL’s first director in Colorado Springs, wanted the building to represent leadership. She also wanted people to leave the campus with CCL’s image of leadership imprinted in their mind.
The Colorado Springs campus opened during 1983 in a Victorian house downtown and ran programs out of hotels. A grant from the El Pomar Foundation led to what is now a 66-acre campus that houses
Visions for the building
See CENTER on page 10
INSIDE: Holland & Hart’s Business Leader Roundtable with developers and builders
2 COLORADO SPRINGS LEADERSHIP
A supplement to the Colorado Springs Business Journal • June 2008
Leadership image: Is your’s an asset or a liability? Your effectiveness as a leader is tied to your image. Your ability to project a leadership presence in the eyes of employees, customers and others is closely related to your ability to do your job well. Your image, then, can be either an asset or a liability as you engage in the tasks and roles of leadership. A study of 150 senior executives who attended the Center for Creative Leadership’s “Leadership at the Peak” shows that the image leaders convey has a significant correlation to perceptions of their leadership skill. In this study, led by Philip Willburn, an organizational development and knowledge management consultant at SAIC, leaders who conveyed a strong vision were rated higher on several important leadership skills than those who conveyed a weaker vision. The leaders who conveyed their vision in a strong and positive way also were seen as stronger in areas such as the ability to lead change, being dynamic, having competence in strategic planning, being farsighted, inspiring commitment, being original and having a strong executive image,
What is image? Leadership image is created by many things: personality, behavior, body language and speaking style, as well as formal status and physical appearance. Simply stated, your image is the concept that others form about you as a result of the impressions you make on them.
Your image may be the conduit through which people initially know you; it can have a great impact on how they get to know you as a person and as a leader. Whether someone is getting to know you through a first meeting, over time or even through the media, your image is being broadcast and your reputation is being formed.
Next, remind yourself that genuine change is rarely dramatic. For leaders, a significant change is likely to be viewed with suspicion as a false or manipulative behavior. Truthfully, you are not likely to make genuine and sustainable change without commitment to the small, daily changes that support the external Corey change. Griswell With that in mind, consider the Building an image gap between the image others have of you and the image you think you should Developing your leadership image be projecting. Decide what you could work doesn’t need to be an incredibly complion right away. Many people choose to focus cated process. Often, gaining the awareon one or two areas where they see that a ness of your current image and its limits
Simply stated, your image is the concept that others form about you as a result of the impressions you make on them. goes a long way. If you realize you talk too fast when delivering bad news and are often viewed as nervous, for example, then you can make a conscious effort to take a breath, slow down and remain calm. Before you make any changes to your image, take time to understand how others see you and why. Seek input from colleagues, your boss and direct reports. Ask your friends, children and significant other. Each of these points of view will give you insight into how your words and behavior are viewed by the people around you.
small improvement could have the greatest benefit. Consider whether any of the following techniques will help you: ■■ Tell stories. Leaders who readily give interesting examples through their stories are engaging and more interesting. They respond to and influence the organizational culture when they tell stories about what happened, how a problem was solved or someone who did something notable. ■■ Master your message. Clarity of thought and message is key. Think about
what you want to say. Every question and every conversation is an opportunity to share key ideas, vision and values. Strike a balance between too much detail and not enough; be sure you can talk about vision and concepts and show your grasp of the tactical. ■■ Use vocal variety. People listen better to a pleasant and appropriate speech pattern. Pay attention to your intonation, speed, diction, pacing and volume. Do you regularly say “ummmm” or overuse a word? Do you forget to breathe and rush through what you have to say? ■■ Focus on “we.” Leaders who use inclusive language (“we” and “us”) inspire and draw on shared effort and interests. ■■ Smile. You’ll appear friendly if you tap into your personal warmth; one of the best ways to convey warmth is to smile. Often leaders don’t relax or crack a smile unless they are talking about something personal: their child’s school event, coaching a sports team, a recent vacation. Leaders with a friendly image know they are more effective, engaging, and interesting when they take the same tone when they talk about the business. ■■ Consider visual impact. People see you before they hear you, and nonverbal communication is powerful. Change your haircut or update your wardrobe. If you feel good about your appearance, you’ll project an image of greater confidence. Corey Griswell is a research associate with The Center for Creative Leadership. She can be reached at 633-3891.
WHERE TO GO IS YOUR BUSINESS – HOW TO GET YOU THERE IS OURS.
FINANCIAL MANAGEMENT TOOLS. We know you have a vision of how to grow your company. We understand, because we have one too – to get you where you’re going quickly and cost-effectively. That’s why we have innovative business products and a banking staff trained to serve you promptly. Stop in or visit us at bankofcolorado.com. Distinctively different. Distinctively Colorado. COLORADO SPRINGS 4328 Edison Avenue, 719.574.8060 • 421 North Tejon Street, 719.227.0100 • 11580 Black Forest Road, Suite 55, 719.494.0500
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COLORADO SPRINGS LEADERSHIP 3
June 2008 • A supplement to the Colorado Springs Business Journal
The legal ramifications of nonprofit board service Our community is blessed with many people who volunteer their time to serve as directors of nonprofit organizations. Serving in leadership positions with nonprofits is a valuable service. However, legal ramifications are involved with this service. This article highlights legal implications of serving, with a focus on standards of conduct and duties associated with doing so. The Colorado Revised Nonprofit Corporation Act (the “Nonprofit Act”) states that all corporate powers of a nonprofit corporation are exercised by or under the authority of the board of directors. The business and affairs of the corporation are managed under the direction of the board. Directors, as well as officers and members of committees established by the bylaws or the board, must discharge their duties: ■■ In good faith. ■■ With the care an ordinarily prudent person in a like position would exercise under similar circumstances. ■■ In a manner the person reasonably believes to be in the best interest of the corporation. What is known as the business judgment rule creates a presumption that directors act in good faith. Good faith requires honesty of intention, openness and fair dealing. Due care involves being diligent and attentive, having an active interest and reasonable familiarity with the affairs of the corporation. Directors are expected to come to board meetings prepared to inquire about material matters. Ordinary prudence means exercising sound and practical judgment, employing common sense and reaching informed conclusions. However, directors are not guarantors of the success or correctness of each decision. Directors are viewed as generalists and their actions will be evaluated by the facts known to them at the time a decision is made. However, directors with special expertise are expected to use such knowledge in exercising their duties. The business judgment rule also creates a presumption that directors have acted in the best interests of the corporation. A director’s conduct must at all times further the organization’s goals and not personal goals or the goals of others. This is an area of close scrutiny and conflicts of interests should always be handled with care. These standards of conduct include a duty of loyalty. Directors owe a fiduciary duty to the corporation, which means they stand in a special relationship of trust and confidence toward the corporation. Directors are entitled to rely on information or reports (including financial statements and other financial data) if prepared by (a) officers or employees of the corporation whom the director reasonably believes to be reliable and competent in the matters presented; (b) legal counsel, a public accountant or another person as to matters the director reasonably believes is within such person’s professional or expert competence; and (c) a committee of the board of which the director is not a member if the director reasonably believes the committee merits confidence. Directors are not acting in good faith if
they have knowledge concerning does not relieve the board or the matter in question that makes any director from responsibilthis reliance unwarranted. ity imposed by law. Under the Nonprofit Act, a Confidentiality obligations are board may designate from among an important element of these its voting members an executive standards of conduct. When committee and/or one or more provided with information a other committees of the board, director should always keep in each of which, to the extent promind (a) the nature of the inforTom mation provided; (b) whether it vided in the resolution establishing such committee, may exercise J a mes is proprietary to the corporation the authority of, or delegated by, (internal vs. publicly available); and (c) their fiduciary duty and duty of the board (with certain exceptions enumerated in the Nonprofit Act). The delcare to the corporation in discussing and egation of authority to any committee dealing with this information.
Finally, regarding limitation of liability, the Nonprofit Act provides that directors are not personally liable for the acts, debts, liabilities or obligations of the corporation. This provision of the law, as well as volunteer immunity statutes and Good Samaritan laws in effect in Colorado, are designed to protect volunteers who serve nonprofit organizations and to encourage people to serve. Thank you for volunteering your time to serve on nonprofit boards — by doing so you are exercising leadership! Tom James is a local attorney. He can be reached at 633-6211.
Choices are blooming in Colorado
HMO, PPO, POS Everyone likes to have choices. That’s why we’re introducing MultiChoice,SM a point-of-service (POS) plan that includes HMO, PPO, and out-of-network options. MultiChoice provides a full range of choices. Your employees get unlimited access to both Kaiser Permanente and nonKaiser Permanente primary care and specialty physicians and facilities. Plus, copayments, out-of-pocket maximums, and deductibles are equal for the HMO and PPO tiers. Kaiser Permanente is better than ever—offering an expanded HMO suite, PPO, POS and more. Add our preventive programs, proactive care, and alternative therapies—and you have a whole bouquet of options to offer employees. For more information, contact your broker, call a Kaiser Permanente representative at (719) 867-2100 (Colorado Springs), or (303) 338-3700 (Denver/Boulder), or log on to employers.kp.org today.
Celebrating 10 years of commitment to the Colorado Springs area.
4 COLORADO SPRINGS LEADERSHIP
A supplement to the Colorado Springs Business Journal • June 2008
Holland & Hart Roundtable
May 15, 2008
COLORADO SPRINGS BUSINESS LEADERS ROUNDTABLE DISCUSSION TRANSCRIPT OF PROCEEDINGS May 15, 2008, Taken at the Law Firm of Holland & Hart LLP, 90 S. Cascade Ave, Suite 1000, Colorado Springs, CO 80903, at 7:49 a.m., before Mary S. Parker, Registered Professional Reporter and Notary Public within Colorado.
KENT KARBER, ESQ. Holland & Hart LLP
“The feds just need to leave it alone. Just let it hit its natural bottom and we can pull anything out they’re going to do.” Scott Smith, La Plata Investments LLC
The Ingels Co.
RANDY DEMING Campbell Homes
PAM KELLER Keller Homes
Banning Lewis Ranch
La Plata Investments LLC
MATT DUNSTON Walden Preserve
LINDSAY CASE The Case Co.
The state of residential real estate in El Paso County Editor’s note: This conversation was held 5/15/08. Events & circumstances may have changed by the time this publishes.
What does the future hold for residential real estate in Colorado Springs? Seven veterans of the industry shared their perspective during the Business Leaders Roundtable on May 15, 2008. The meeting was held at the law offices of Holland & Hart and Kent Karber of Holland & Hart was the moderator. MR. KARBER: This is a question with some political overtones. Do you see any fundamental change in your industry as a result of the upcoming presidential election? And the follow-up question to that is: Any perceived differences as a result of a particular candidate winning? MR. CASE: Oh, that’s a 36,000-foot question. I don’t particularly see that close of a correlation. The main driving forces in the liquidity of the environment or the mortgage industry and all that is, you know, having to be absorbed by the Federal Reserve and I’m not quite sure how Fannie Mae and Freddie Mac are relating to that in terms of helping the countrywide foreclosures, but as far as I understand — I’m not in the residential field as much to know that the interest rates have been — they’ve been able to somehow keep the interest rates at an acceptable level for continued growth, but I just don’t see the presidential campaign topics as quite that relevant, I mean, but I’m in a little different end of the supply chain. MR. INGELS: I think the thing that the election is going to influence, hopefully, is consumer confidence. I think there’s enough uncertainty surrounding the election that I think there are probably people that are holding back that think there could be potentially issues. I’m kind of like Lindsay. I think sometimes we put too much stock in what the — how much effect the president actually has, but I do think there are a lot of people on the fence right now
that — and that could be part of the reason. I don’t know. MR. CASSIANI: Well, it seems like both parties have their own bills or plans that they’re trying to get accepted. You’ve got Senator Dodd who is trying to get a plan right now that the Republicans are fighting, but John McCain has his own plan also, so I think, no matter which president gets in, there’s going to be a plan put in place. How good the plan’s going to be, who knows? It all comes down to the FHA backing the — whatever the base is you have to write the loans down to. Well, that happened. Will there be tax implications of the people who have loans written down or will there be a forgiveness situation where we’re going to have to pay some taxes on the loans that are — or the write-down that’s happened, and it’s come down to the Freddie Mac and Fannie Mae raising around six billion apiece now to try and get capital into their organizations to back these loans, so there will be a plan, and I don’t think it matters which candidate wins the election in November. There will be a plan. The question is: How good will the plan be, and will it really go after and help the people who really should be helped? And there’s people out there who are speculators who are just going to flip it and just play the game and mortgage bankers who didn’t play by the rules. Not all of them, but some of them did, and I don’t think everybody should be helped. I think the people who really deserve to be helped who really played the game the right way are the people who should be helped out. MR. KARBER: Well, that’s a good segue to the next question, and that is, in the current — if the Congress is considering a rescue package for the housing and lending industries, do you see that, any aspects of that package, directly affecting the economy here in the Springs as it pertains to your business? MR. CASSIANI: Well, what you want to try
and do is minimize the number of foreclosures that are going to be out there. Unfortunately, all over the country there’s foreclosures happening, and we happen to be, you know, in that mix, but not the same extent as many, many other places in the United States, but you don’t want a neighborhood of resales that are populated by foreclosures that are just going to affect that neighborhood itself, and so I’m more worried about the neighborhood impact of four or five homes on a street or in a neighborhood that are in foreclosure and other people trying to sell their homes and being impacted by that, but if we can minimize the number of foreclosures, figure out a plan to save people, have them save their homes, the people who really want to save their homes and really are not the speculators and not the investors, I think that would be good for the economy and help us get out of this down cycle even sooner than everyone thinks we might be able to get out of it. MR. KARBER: Anybody else want to comment on the packages that Congress is looking at now? I’m sure we’ve all read about them. Any other comments on that? Randy? MR. DEMING: One of the things that is coming at us is Freddie Mac has announced in the beginning of August a maximum of four units owned by any one individual with their guarantees. That includes their primary residence, so when we look at the investor side, part of the thing that I think is going to help on the foreclosure thing is investors coming in and picking out the houses to ride the wave out, and with Freddie making that move, Fannie is probably going to follow in the same vein, and that is going to severely restrict the ability of the investors to come in and help on the foreclosure side of things. The other thing locally — the State of Colorado lists foreclosures by filings, not by actual foreclosures, and I haven’t seen any statistics on how many filings versus actual foreclosures transpire, and I think that’s an important — MR. CASE: You mean actual sales.
June 2008 • A supplement to the Colorado Springs Business Journal
COLORADO SPRINGS LEADERSHIP 5
Holland & Hart Roundtable
“ ... they’ve been able to somehow keep the interest rates at an acceptable level for continued growth, but I just don’t see the presidential campaign topics as quite that relevant.“ Lindsay Case, The Case Co. MR. DEMING: Actual sales, yeah. MR. CASE: Right. MR. INGELS: The last number I heard, because we just had this conversation with Rich Laden not very long ago, was that about 40 percent never make it to the finish line. They get resolved prior. MR. DEMING: One way or another? MR. INGELS: Right, and obviously that percentage may skew under the current conditions, but — MR. DEMING: Good number. MR. INGELS: Yeah. MR. CASE: I think something really important, whenever press reports on these types of numbers, is what is it in relation to the population as a whole? One of the things that I always brought to Dave Bamburger’s attention, oh, upwards of ten years ago was “Dave, what are the permits per thousand of population? You know, don’t just give us these roller coaster numbers, but what are they in relation to the population growth?” Because, you know, maybe, if we have a thousand foreclosures now, it’s different than if we had a thousand closures in 1988, and the relative impact is much more minor, and I think those are very important ways to approach the understanding of what’s happening in the horizon of those types of foreclosures. MR. KARBER: Great. Any other items that could be done? Any other programs at the national level that you think would positively affect our local housing and building industry? MR: SMITH: The feds just need to leave it alone. Just let it hit its natural bottom and we can pull out anything they’re going to do. Really, any economic stimulus or anything like that may actually postpone a real true recovery. MR. INGELS: The reality. MR: SMITH: Because the recovery is going to happen. There is just demographically household formation that’s taking place and that’s what’s going to pull us out, when we have real homeowners buying homes, as opposed to speculators, and what’s gotten us into trouble is we’ve gotten false demand that was created by speculation, and that created an oversupply, and now we’re just in kind of like we hit the end of the swing, and now we’ve got to swing back. Leave it alone. MR. CASSIANI: I agree with Scott, a great point. The other thing we did in the last two or three years is pull every apartment renter in the country out of apartments into home ownership
because of the low way to get into the loans and, you know, “There’s available money. You can get in with 0 down. 120 percent or 150 percent of the loan value you can get,” so the word was “Why rent when we can get into a house for the same price?” So for the last two or three years you pulled out everybody you could out of the apartments. The apartment market in this town and across the country, you know, but mainly in this town, went down dramatically in terms of its occupancy. Places were running 80 to 85 percent and then there were — of 75 percent economic occupancy. We need to get through that cycle. We lost a lot of buyers who would be buying in this today and tomorrow and the next year who were taken out of the market the last three years. MR. CASE: Accelerated, they were accelerated. MR. CASSIANI: Accelerated. MR. INGELS: Dave Bamburger’s reports for probably four quarters said we are borrowing buyers from the future. MR. CASSIANI: And that’s exactly what happened, and now the apartment market is starting to come back because less and less people can qualify, and so naturally I agree with Scott 100 percent. You leave it alone. Right now the pendulum is swung too far the other way. You’ve got all these restrictions now on what you can do with mortgages and all the lenders are increasing. If you don’t have a 700-plus credit score, your interest rate is up another point, so you’re just getting hurt because — the pendulum is going to come back. It’s going to come back and we’re going to see the market come back, but you’re right. The feds are almost at a point where they’ve put their hands in it too much. I think they’re right where they should be. MR. CASE: Keep job creation strong. MR. CASSIANI: That’s the whole point. MR. CASE: That’s the key, job creation. MR. KARBER: Well, great. We’re going to switch gears just a little bit, and this next couple of topics may be more geared to our panelists who are actually building homes, but everyone is welcome to weigh in on this. Pam, if you wouldn’t mind, I’ll direct this to you: Has your industry been affected by the international economy in terms of your supplies? For instance, we hear that China’s and India’s
May 15, 2008 demands for oil are driving up the price per barrel. Are there component parts in the building industry that prices are going up or there’s increased scarcity, which usually tie in together as a result of international demand? MS. KELLER: I think, in the local housing, single-family housing industry, everything, almost every product we put in the house, is trucked in, so absolutely the costs have gone up, and the suppliers that we are dealing with held the costs as long as they could due to the market conditions, but we’re seeing price increases now, and I anticipate that that will continue and they’re just trying to get to that place where they can be at a break-even, I’m sure, but, absolutely, the oil costs have impacted housing greatly, and I’m sure every single thing, commercial as well, is impacted by it. MR. DUNSTON: I would say, in addition to that — certainly I would share that sentiment — certain fungible, raw natural resources I have seen spike pretty considerably. Anything in cement, Portland Cement, has gone up a bunch, and steel has, I think — I don’t track it exactly, but I think it’s like doubled in the last maybe two to two and a half years in price, and that literally has changed the method by which certain builders design and build, like they might use more wood beams instead of steel beams, for instance, just because of the price of steel, and it really does change the dynamics in certain aspects. I mean, it’s all just sort of part of a bigger economy and it just raises the aggregate cost and it also raises your competition’s cost, so not too big a deal, but there’s a few types of — there’s a certain type of construction, I think, that’s affected more by it, probably, certainly, commercial, but residential, where there’s — some houses are more steel intensive and some are more concrete intensive, but just backing up just a little bit — I don’t know if these comments are all that relevant to the discussion, but, you know, we’re looking at foreclosures and mortgages on sort of the macro scale, but I would say, in El Paso County, in terms of the election, the more military people are better likely to come back, I think that would be a boost for the local economy or just any other type of — I would say just DOD-type stuff in general, and the only other concern I have — and I’m sure that somebody in this room would know if it’s likely to be a problem better than I would, but raising of capital gains, long-term capital gains tax, would be, to me, a huge problem because I’ve just seen so many taxable events and so many business stimulating-type events that have been brought
about by low, long-term capital gains. If someone owns land, they don’t really need to sell it, but “Hey, taxes are so low I think I’m going to do it,” and the other would be any change in the law with respect to 1031s, tax-free changes exchanges. MR. KARBER: Well, thanks. I’m going to follow up again on kind of a — Oh, I’m sorry, John. MR. CASSIANI: I’m sorry. Just on the development side, this economy is good news and bad news. In terms of the asphalt, every time you go to pave a street, the asphalt prices have gone through the roof. MR. DUNSTON: Right. MR. CASSIANI: PVC pipe, anything oil-related, you know, oil-related products, have gone up tremendously, so that’s bad in terms of trying to keep costs down. The good news is every contractor out there right now is so hungry that they’re coming in and actually bidding below their unit-rate cost that they had even a year ago, so, at the end of the equation, we’re almost pretty much where we were a year or two ago, overall costs, trying to keep our lot prices where they were, but, boy, the spikes in the oil-related products have just been unbelievable. MR. DUNSTON: And it is an interesting dynamic because I think what it boils down to is that, because things are so slow, people are willing — and I think this is kind of what John is saying — people are willing to work for less. Therefore, that somewhat offsets the cost of increased raw materials — MR. CASSIANI: Right. MR. DUNSTON: — whether it’s petroleumbased, steel-, or concrete-based. MR. CASSIANI: Right. MR. DUNSTON: And I saw that just yesterday. I met with and asked someone from Schmidt Construction. I think they were giving us a little better deal just because things are kind of slow, even though asphalt is more expensive. I probably shouldn’t mention the name. MR: SMITH: I think, with labor, that’s true, to some extent, but one thing that’s happening this time around that didn’t happen last time is commodity prices have stayed real stiff, and, you know, the last time around, when the housing market closed, then you’d see commodity prices drop because the demand goes down, but we’re seeing steel prices and, I mean, everything’s at least stable. You’re not even seeing a reduction in
“... in El Paso County, in terms of the election, the more military people are better likely to come back, I think that would be a boost for the local economy ...” Matt Dunston, Walden Preserve
6 COLORADO SPRINGS LEADERSHIP
A supplement to the Colorado Springs Business Journal • June 2008
Holland & Hart Roundtable lumber or gypsum. MR. DEMING: I can’t point to any component going into our homes that have decreased in cost. MR. DUNSTON: Not even lumber right now? MS. KELLER: No, lumber actually has gone up. MR. DEMING: Absolutely nothing. MR: SMITH: So that’s going to be real interesting to the industry because resales are going to have a distinct advantage for quite some time. MR. DEMING: You’re right. MS. KELLER: I don’t think that’s going to happen, Scott. I think what’s going to happen is the resales are going to benchmark against us, and the people that don’t have to sell aren’t selling. If we go back to look at homes that we’ve built in your neighborhood, White Creek, there are hardly any homes on the market, so those that have to move because of job transfer — some of them are moving because of family size. I think you pointed that out. People have to move because they need a bigger place to live, but if they don’t, they’re not, and if they are, they’re benchmarking against Cordera. MR. CASE: Well, they’re in sub- markets of the city. MS. KELLER: Right, and that goes to your comment. MR. CASE: And your area is in such primo demand whereas, in the southeast, Scott’s comment may make a little more sense. MS. KELLER: Well, I think that goes to your comment too, though, about studying the statistics. All we ever see in the paper are national statistics. If you get down to really looking at the numbers in particular neighborhoods and communities — I don’t care if you’re talking foreclosures, number of houses on the market — in fact, the number of houses on the market in Colorado Springs is less now than it was a year ago.
MR: SMITH: There’s fewer permits too. MS. KELLER: There are, absolutely, yeah. MR. DUNSTON: That’s what she’s saying, yeah. MS. KELLER: But part of that fewer permits is there are less people pulling permits, not that are even here doing it or playing in the game, so when you look at your numbers game and the statistics, you really have to factor that in and it’s not easy to do. MR. KARBER: We’ve talked a little bit about commodity prices either going up or at least holding their own in what is a soft economy. Could you comment on whether or not your labor costs have gone up as a result, perhaps, of increased border security and less immigrant labor being available in the market. Has that been a noticeable event? MS. KELLER: Have you seen that? MR. DEMING: I haven’t. MR. INGELS: For one thing on that, I don’t think we have the same type of immigrant labor issues to the same degree as they do, say, on the West Coast or in Arizona or Texas. I think a lot, at least the guys that I’m familiar with that have, you know, immigrant labor, most of them have gone through the process to have them here legally. MS. KELLER: They’re legal. MR. INGELS: And so I don’t think we have nearly the issues, you know — in California, for instance, most of the contractors — they don’t even have the same guys every day. They go their designated places and you drive there at 6:30 in the morning and say, “I need five guys,” and they jump in the truck and away they go, but I don’t see that happening here. MR: SMITH: I think it’s a hidden problem because, you know, with the permit level being down like it is and the fact that you’ve taken that group of people out of the work force, I mean, that’s just kind of gone in concert with each other. What happens when we have the next uptake? I mean, labor prices will probably go through
“... I don’t think we have the same type of immigrant labor issues to the same degree as they do, say, on the West Coast or in Arizona or Texas.” Bobby Ingels, Ingles Co.
MR. CASE: Resale. MS. KELLER: Exactly. MR. CASE: Yeah. MS. KELLER: But we don’t — you have to get down and look at those real numbers and say, “How much choice is there for the consumer?” And when you look at the number of permits, there are less builders in town today pulling permits than there were a year ago, no question. MR: SMITH: There’s fewer permits too. Have you noticed that? MR. CASSIANI: Quite a bit. MS. KELLER: I’m sorry?
the ceiling. MR. INGELS: We may actually see that issue bevel up here if the demand exceeds the supply. MR: SMITH: Cool. MR. INGELS: But the contractors that I’m familiar with that use a lot of those kind of guys — most of them work through regular companies that bring those guys here, take them through the process to get them work permits, and then hire them out that way, and they have the same — it’s like planning for any kind of a resource. They book however many guys they think they’re going to need for the season. They book
May 15, 2008
“... we hear that China’s and India’s demands for oil are driving up the price per barrel. Are there component parts in the building industry that prices are going up or there’s increased scarcity, which usually tie in together as a result of international demand?” Kent Karber, Holland & Hart those guys well in advance, and many times, landscapers in particular, they’ll have the same crew year after year after year after year. They have the same guys come back to them, and they have to be, you know, they have to be out of the country — I think it’s for 30 days. MR: SMITH: The feds have clamped down on that this year, though. They have not been issuing the permits, even the guys that have been coming back and forth a lot. MR. INGELS: Well, I know, like, with Robinson and Dan Cohen’s bunch — they pretty much have the same — Dan’s not getting all of his back? The Robinsons — their crew looks pretty much like it looked last year to me. MR. DUNSTON: What I’ve observed just anecdotally along this line is that, because of the lesser demand, the crews have scaled back and, when I have a big project suddenly come up, I’m unable to get the same type of — same size crew that I could a year ago because a lot of guys have gone back to Mexico and are less — therefore, they’re less able to take care of what they do. Another really interesting thing too along those lines is that, because some of the crews are so efficient and hard-working, their demand almost seems to transcend the ups and downs in the economy. They can do other types of work, whether it’s landscaping, find existing projects, remodel-type projects to do. There just seems to be a pretty strong demand for good, hard workers, but because the construction side has slowed down, a lot of guys have gone back to Mexico so when anything scalable comes up they’re less able to do it and it’s kind of frustrating. MR. CASE: I have just a final, maybe, summary on the commodity topic: I’ve joined an organization in London named the Chatham House and they have usually monthly meetings about different issues globally and, in February, I went to one where the OPEC minister spoke and the different ministers of Kutar and Egypt and Iran and all the hydrocarbon producers in the world, and what I’m hearing from those sources is that, over the next 30 years, there’s an 11,000,000-barrela-day shortage in capacity that they don’t even
have on the books to supply, so in the long term, there’s going to be — continue to need to be an enormous capitalization on a global level in the hydrocarbon industry, but they also said things like “Well, the real true supply and demand of the barrel value now is only $60 and a lot of this additional value is hype,” and so, with those things, we might have some reprieve if there’s some stabilization on international politics that bring it down, but there’s no question that the energy requirements of China and India and other Asian parts of the world is just enormous. MR. KARBER: Well, that’s a good segue into the next question: Colorado Springs is obviously a very automobile-oriented community. How do you see $3.50-per-gallon gas prices affecting development further and further away from where people work? Who would like to take that? MR. DUNSTON: Well, where most of our stuff is is further and further away, so I wouldn’t want to say that people have been less likely to buy in northern El Paso County because of the distance from work. I think we have some advantages because we’re near Denver and Colorado Springs, and oftentimes that served us well. You see interesting things. I mean, I bought a Prius recently, which is pretty rare for anyone that knows me, and very unexpected, and yesterday I met with an excavator who, you know, is usually driving around in a big pickup truck when he’s not running his big front-end loader, and he pulls up in a small, 32-mile-per- gallon Volkswagen, so I think probably commentary I could come to this group with would be just observations and things that I see, just feet-on-the-ground-type experience, and one of his biggest complaints, of course, was the cost of diesel to run his frontend loader. MR. CASSIANI: Yeah, you’ve seen nationally the jump in mass-transit riders, 20 percent here, 30 percent here. In Colorado Springs, we don’t have that option. I mean, the only mass transit we have is the bus system, and it’s not great, and it needs to get better. If we’re going to become a big-time city here, we need to get better mass transportation. Until we do that — and it’s going to be a while, I think, until we do that — you know, put a plug in for some of the master-plan developments. Our hope at Banning Lewis Ranch is that
June 2008 • A supplement to the Colorado Springs Business Journal
COLORADO SPRINGS LEADERSHIP 7
Holland & Hart Roundtable
“I think the problem we’ve got is the fact that, as long as fuel prices continue to rise and they don’t stabilize, that that’s going to prevent people from pulling the trigger to buy a house because they don’t know. ” Scott Smith, La Plata Investments LLC
someday we can have people living there and working there and playing there so the commute times are minimized, but until we do that, people are going to drop. We’re in the west. They’re going to get in their car and they’re going to go where they need to go. Maybe this will, you know, get carpooling a little better, maybe, hopefully, we’ll see it pick up the mass transit a little better, but right now I don’t think you’re going to see that big of a change in lifestyle because of the gas. You have to get to work, and until we come up with better solutions, I don’t think you’re going to see that much of a change. MR: SMITH: I think the problem we’ve got is the fact that, as long as fuel prices continue to rise and they don’t stabilize, that that’s going to prevent people from pulling the trigger to buy a house because they don’t know. I believe, once it stabilizes and people get used to the energy costs, I think it will be — you know, you’ll adjust and get vehicles that will, you know, get better mileage and some things like that as your car gets older and that kind of stuff and you will get used to it, but I think, as long as the prices continue to be volatile, I think that just keeps people on the fence. MR. CASSIANI: Scott, you’re right. The uncertainty is what’s causing people not to buy right now. You don’t know if you’re going to have a job tomorrow or how much you’re going to have to pay for gas or how much you’re going to have to pay for this or that. It’s too many variables and they can’t find a solution based on the variables still out there. MR: SMITH: One more reason to stay on the sidelines. MR. KARBER: Well, on a related topic, are you seeing any consumer preference for green construction? And this really goes to residential, commercial, all across the board. I know there’s a lot of discussion about green certification or being LEED certified. Are you seeing anything from the consumer side? We see a lot in the industry that this is being promoted, that this is a good thing, but are you having buyers come in and say, “Where are we on the LEED, L-E-E-D, scale?” Pam? MS. KELLER: No. That was no. MR. CASE: Is the choice available, though, to them? MS. KELLER: Yes. MR. CASE: Is the distinction of choice made available to them? MS. KELLER: I think the distinction of — we’re an Energy Star builder and I think, if we
spend another dollar, it will not add to the value the customer is looking for. We are already at that level. We’ve monitored ourselves to that level. We’ve used the building sciences in our industry to really find the things that are of value to people that bring back the return. If we go the next level, the science isn’t there, in my opinion, to justify the cost and the buyer is not willing to pay for it. If you can prove to them that it is, they are. Are they walking in the door saying, “I’ll buy a smaller house so that I can have a LEED house?” Absolute not. MR. DEMING: We went through the experience in Cordera. There was a requirement that we all are green builders, and the builders got together and said, “Let’s shift the focus from building green to Energy Star because, when you’re Energy Star, you can quantify the savings. We’re a hundred percent tested. Our buyers receive a certification at the closing table that will tell them exactly how many dollars they’re going to save on an annual basis buying an Energy Star home at the level we’re testing out at, versus a home built to break the building code, so I agree a hundred percent with Pam. We haven’t had anybody come in and say, “We’re going to buy because you build green” or “We’re going to buy because of Energy Star,” but we have, over the years, evolved as an industry to a point that — in fact, we had a meeting at HVA last week about the progress we’ve made, as builders, building a home today, as opposed to 20 years ago. We’ve elevated our industry internally without mandates and that’s one of the concerns we have on a state level with Ritter sitting in the governor’s chair coming down with mandates to our industry. We don’t need them. We’ve already done it. MR. INGELS: I think a point of clarification too on the certifications: LEED right now does not have — I don’t think they have a residential certification. They’re racing toward that, but, like Randy said, our whole focus has been to try to educate our legislatures and that that “Here’s what we’ve done without mandates,” and, to try to mandate things if you don’t fully understand what is already being done, chances are you’re going to mandate something that’s not going to be — the paybacks are stretched out way longer than the cost and you’re just going to drive people out of the market. You’re going to just keep lopping the bottom, raising the bar. MR: SMITH: I learned something really cool at ULI last week. They had a presentation by a guy that is a consultant for green and he broke the green buyers into three categories. I had never heard it addressed like this, but it’s pretty cool. You have forest greens, money greens,
May 15, 2008 and healthy greens, and the forest greens are mostly like the younger generation that do things from an altruistic standpoint and they just do it because it’s the right thing to do, but they are not at the level in their lifetime or in their life span to afford housing yet, so they’re still renters, but we’ve got an upcoming generation that is going to be very green-oriented. Then you’ve got the money greens that like to buy green as long as there’s an offsetting actual cost offset, so that’s going to be things like energy savings or, you know, maybe using some more passive solar and things like that, and they’re going to be very interested in those types of things, and as long as there’s a direct payoff for it — it’s not just, you know, for the good of it — and then you’ve got the healthy greens that are really focused on particularly the indoor environment, so making sure there’s no toxins in the carpet and those types of things, and I think we’ve been more focused more on the money greens and are probably starting to get more focused on the healthy greens, but I think, down the road, the forest greens is the generation we’re going to have to be paying attention to. That was the first time I’d ever heard anything like that. I thought it was an interesting way to break it out. MR. CASE: I think one of the things that maybe hasn’t been focused on this question is where a lot of green concepts are coming now is in full master-plan design and where you need to start thinking of city codes that relate to riparian areas and, I mean, the whole EPA and wetlands mitigation and the whole range of project design when you’re putting a road near an area that might have sensitivity. There’s a whole green component to how communities are designed today and I think BLR has got a really exceptional leadership in that area, partly because they’re new and they can bring that type of thinking on, but I don’t know. We don’t have too many other brand-new, fresh projects just out of the chute, but I think — John, I don’t know if you’ve got comments on that concept. MR. KARBER: And I just want to use this
opportunity to broaden — and exactly what you’re doing — say what other trends besides the green and the energy-saving trends do you see in your industry, so this is a great introduction to that, so please go ahead. MR. CASSIANI: Well, you know, Lindsay’s right. There are so many things that we’re trying to at Banning Lewis Ranch to take advantage of wetlands and that kind of mitigation and channels into their natural flows and things like that, but I think some of the things that the City Stonewater Group is coming out with right now, in looking at the Jimmie Cam Creek Drainage Basin study, they’re almost trying to oppose too many things. They’re trying to put their ideas on, like, lowimpact development, which is really, I think, more costly, or full-spectrum detention, which hasn’t been proven to us that it will be a cost sayings, you know, a lot more retention ponds, versus fewer larger ponds. These are new, great ideas that I think their time will come, but there’s no proven terms as to the what the cost implication is going to be to the developer, and right now, as you might imagine, cost — it’s always very sensitive, but in today’s world you have to watch every penny when you develop. I think, besides green — and we’re looking at trying to build all of our new schools and all of our new rec centers with a LEED certification or some type of green component with it because we think that’s the right way to go, but I think the real key in Colorado, especially in Colorado, and as in most western states, is going to be water in terms of the best and most efficient use of water. Someday we’re all going to be restricted, you know, with the amount of water that’s going to be available. I mean, thank goodness we’ve got a new system called Southern Delivery that will be bringing another 78 million gallons of water a day to Colorado Springs, and it should take us, for the next 40, 50, 60 years, whatever it’s going to take to supply the town, but we’re still water- restricted. This is an arid community in terms of the
“... we’re an Energy Star builder and I think, if we spend another dollar, it will not add to the value the customer is looking for. We are already at that level.” Pam Keller, Keller Homes
8 COLORADO SPRINGS LEADERSHIP
A supplement to the Colorado Springs Business Journal • June 2008
Holland & Hart Roundtable amount of moisture we get and we rely on the best water available, which is snow melt, the best drinking water you can get. We need to keep touting that as our benefit in Colorado Springs. There’s a lot of people going to recycle wastewater right now for their drinking water supply, you know. We may have to get there in 50 or a hundred years, but hopefully not until that time frame, so I think green has its importance in component. I think housing right now can’t justify the additional cost that green requires, but I think looking at water and looking at trying to build insensitive natures in terms of all the issues we just talked about, wetlands and how do you do your ponds, your retention ponds, your drainage, things of that nature, have to be taken into consideration when you do a master-plan development. MS. KELLER: I think one of your comments is right, though, John. It’s about the science. If it’s a proven thing, I think we’re doing it, which goes to what you’re saying, is we’re able to prove and justify that it makes sense, and we know that, not only is it the right thing to do, but for a number of reasons, and that it’s going to be the right thing to do for a long time to come. I think there’s a lot of fuzzy science out there that is being pushed onto us or is being suggested that maybe we don’t know if it’s proven or not. MR. CASSIANI: It hasn’t been, like this fullspectrum detention and low-impact development, these are great buzz words in the industry right now, and we’ve got some people in this city who are really pushing it hard. MR. KARBER: Could you explain those terms. MR. CASSIANI: Low-impact development is — and I’m not sure I’ve got all the great terminology. Someone else may want to help here, but low-impact development is how you develop in terms of setbacks from channel areas, the amount of flow that goes into channels, and the amount of water leaving a site, and there’s some philosophy in low-impact development that, you know, you minimize the amount of flow that goes
retention ponds, versus a larger retention pond,” which is the theory today. You go into an area and you say, “Okay, I’m going to have all my drainage go into this area or retain water and that’s the way we’re going to handle flows to avoid flooding downstream in the channels.” Full-spectrum — you might have to build 12 ponds instead of one or two, and I think the costs, the out-fall structures, things like that, are going to create more of a development requirement in terms of cost than going the other way, but I’ve asked the City, you know, “Show me the numbers. We’ll look at it, but you’ve got to prove to me that we’re not going to be doubling,” or even, in this market, even a hundred thousand dollars more. It just won’t be justifiable unless there’s a great reason why. MR. INGELS: And it’s not just the flood control. It’s sustainable development. It really — I think water quality has probably even gotten right up there on the same plain with flood control. MR. CASE: Absolutely. MR. INGELS: And the full-spectrum detention — the water quality component is really the thing they’re driving here, but I know there’s a study that’s just being started in Pueblo about sustainable development, and they’re already, like John said, they’re coming up with a lot of great ideas. I discussed it with a guy there in the last week and I told him, you know, “A lot of these things have already been discussed.” When Colorado Springs was going to their second level of the clean water — their Clean Water Act Permit, he was talking about pervious pavement and all kinds of things that are, you know, talked about, but they don’t work here. Those things have already been investigated and, if they worked, they would be used. MS. KELLER: Um-hum. MR. INGELS: And so you get these guys that don’t have a lot of practical knowledge, or obviously this guy hasn’t done his homework, but we’re going to pay to have him study all this stuff
“We haven’t had anybody come in and say, ‘We’re going to buy because you build green’ or ‘We’re going to buy because of Energy Star,’ but we have, over the years, evolved as an industry ” Randy Deming, Campbell Homes
into your drainage systems, your natural stormwater drainage systems. Full-spectrum detention basically says, “We’re not going to just handle the larger rainfalls and flood flows. We’re going to handle everything from a small rainstorm to a large rainstorm and handle it through a multiple set of many, many
and he’s going to go back and try and reinvent the wheel here. MR. CASE: And the science is localized. That’s the issue — MR. INGELS: Oh, absolutely. MR. CASE: — on this because what may work here in Colorado, or even down in southern
May 15, 2008
“... there are some major problems coming down the road with drying up of the aquifers and not doing recharging and augmentation not happening, so there’s a lot of issues that are going to restrict the growth outside of the city limits in the future at some point.” John Cassiani, Banning Lewis Ranch Management Co. Colorado, may not work on the western slope or in Kansas, where there’s a whole different hydrology of the whole environment, so science is very hard to apply in different subenvironmental hydro areas. But I think what we’re talking about leads very seriously to a topic that’s very crucial for subdivisions that are not on central water systems with surface-water rights, and that is anything in the county, where a lot of people have wells going into the Denver aquifers and those various aquifers, relative to the science, there’s a real war right now between a variety of homeowners that have had wells, well levels, drop, along with the state engineer, trying to understand what’s really happening in the aquifers and the non, you know, nonurban, you know, Colorado Springs central water supply. And I can say this, that probably, in the mid ‘90s, Romer was concerned about these things. I do know that Russ George, in the Natural Resource Division, was very astute under Owens’ administration, but we have an extraordinarily very serious problem coming — and it could be a 50-year problem. It could be a 20-year problem — with a lot of people on wells. And it doesn’t affect us immediately, but, boy, if you get a couple of homeowners in an area where you’re building that have a well dry up and they’ve got to go redrill — I’m hearing of stories where people are having to redrill or just take their existing well deeper. And those are going to be issues in terms of the future supply of land, and that’s why water, integrated water plans, where there are surfacewater rights blended with groundwater and recharge, that’s the real buzz. If anyone follows the Cherokee water issue, you know, the state engineer is saying, “Recharge, you’ve got to recharge,” but that’s all in aquifers that are what are considered alluvial recharge of the Black Squirrel. The deep aquifers are completely not rechargeable. They’re like oil wells that you’re mining the oil and, when it dries, it’s gone and you’ve got to drill another well, and it may not even be able to be drilled next to you, so that is a very serious issue that will hit a lot of people in, you know, maybe not in our short-term lifetimes.
But it’s kind of hard, when you get into these conversations, how far out do you want to think as to when it relates to water supply and that type of thing. MR. CASSIANI: Well, just one more comment on that: That’s why it’s so critical to have, you know, a good water supply to the city. The City’s got great water rights. MR. CASE: Yep. MR. CASSIANI: It just has to get the water to the town, and that’s why right now, if you’re in the city limits — like Banning Lewis Ranch is in the city limits and many of the developments here are in the city limits — you have the surface-water rights and you have the surface-water supply coming from Colorado Springs’ utilities, but, you know, Lindsay is exactly right. When you’re outside of the city limits — you’re in the county or other communities outside of the city limits where you’re being supplied by city water — there are some major problems coming down the road with drying up of the aquifers and not doing recharging and augmentation not happening, so there’s a lot of issues that are going to restrict the growth outside of the city limits in the future at some point. MR. CASE: For nonright, nonsurface- water rights development. MR. CASSIANI: Right, nonsurface- water rights development. MR. KARBER: Can we go off the record. (Discussion off the record. MR. KARBER: Let’s go back on the record. MR. CASSIANI: I think the media has an opportunity here to help us get out of this problem sooner than later. I think Colorado Springs is almost one of the best-positioned cities in the country right now to come out of this downturn because of the fact that our prices never did go up that much, the fact that we’ve got job growth going on. We have the population growth. We have the Fort Carson impact that’s coming. And I think the media has a tendency to put — talk about the negative stories nationally and to have consumer confidence be eroded because of the national stuff going on. I think, if the local media really took a lead role to say, “This is one of the best cities out there in terms of its coming
COLORADO SPRINGS LEADERSHIP 9
June 2008 • A supplement to the Colorado Springs Business Journal
Holland & Hart Roundtable out of the downturn. It should be one of the first cities in the country showing positive results,” I think it could help get consumer confidence up in this town and I think it could help start the homebuying process become faster than anywhere else and we could be the leader in the country in terms of getting out of this thing. And I think we’re trying to get that — I know you’ve talked to Rich Laden. We’ve talked to the Gazette. We’ve talked to the Business Journal. We’ve talked to the TV stations, but negative news seems to take the headlines versus what really could be happening in this town and what should be happening in this town. MS. KELLER: Well, I think that with that, though, our supply isn’t going up and it’s shrinking and the ability for a buyer to have choice — how long do you market time when you’re buying a house? And the choice that the consumer has is going down because the inventory is being absorbed and no more inventory is being put on the ground as far as land, that I’m aware of, and not in any major capacity, so I think we’re going to see consumers be disappointed. We’ve got fantastic interest rates right now. We know that they’re there now, but we don’t know what will happen with the next election or if that will be changed, so I have concern that people are saying, “I’m sitting on the fence” and you can maybe not make as much money on the home that you have to sell, but you might make more money or have a better transaction on the home you’re buying, and you get the known. You have more selection. You have a great interest rate. Six months from now that might
not be the case. We don’t know that. I think, too, the consumer continues to hear, which you and I have talked about, the Federal Reserve make comments about “We’re going to lower the interest rate. We’re going to lower the interest rate.” But the mortgage rates are not going down and I’m not sure the consumer understands that, that those two are not related to each other. MR. INGELS: I think that’s a real common misconception. When they read in the paper that the Fed is going to lower the interest rate, they think it’s automatically going to lower the mortgage rates. MS. KELLER: Right. MR: SMITH: And you hear those mortgage brokers, you know, add “The Feds are going to lower the rates again.” That’s all you hear from the mortgage brokers. MR. INGELS: So for no refinance, no closing costs. MS. KELLER: But the common consumer doesn’t understand that. MR. INGELS: Absolutely. MS. KELLER: And so that keeps them on the fence, thinking “Tomorrow’s going to be even lower, and can I shop or can I look?” I have customers that I’m building houses for that say, “I’m waiting and I’m not locking my loan,” and I’m like “Lock your loan. It would be a good idea. Get that rate. Get that guarantee.” MR. CASE: What are the rates right now? MS. KELLER: Right at six, or even five and three-quarters, so really phenomenal interest rates.
May 15, 2008 MR. CASE: Good rates. MS. KELLER: Jumbos, as you stated, are a point to a point and an eighth higher. MR. CASE: So that’s tightening up a little. MS. KELLER: A little. MR: SMITH: It was 175 basis points. MS. KELLER: A little bit, yeah, it is tightening up a little bit, and that goes to John’s comment too. The pendulum went way over here, and it’s going to come back to center, to some reality. We’re just taking the candy back because people were so used to “I can get a house with no money down,” which goes to the investor issue. We didn’t have that anywhere near in Colorado Springs like Las Vegas or Phoenix or Florida or many of the other markets that had a lot of investment speculation going on, but I think the pendulum is going to come back, but it is really — I’ve been doing this now for 29 years and only maybe three or four of them do I remember a buyer ever being able to get a loan at a hundred percent, so we’re going to get back to where a customer has to have some down payment, good interest, and that’s really normal. That isn’t abnormal. That’s normal. MR. CASSIANI: That’s how it should be. MS. KELLER: And that’s exactly right. If you’re investing in a mortgage, you want to know that that buyer has some investment in it as well, so that’s part of where the problem went, and as that continues to improve — and it will — and I agree 100 percent with you, Scott. Keep the Feds out of it or any government change and let the market forces work, and they
will work, and they will work well, and, John, you’re right. We’ll be one of the fortunate communities to come out sooner rather than later because we didn’t have that speculation. MR. CASSIANI: Right. MS. KELLER: And we won’t have to absorb anywhere near what some of the other communities in the United States have to absorb, so we do have some good news out there, and I’ve spent a few minutes with Rich myself. MR. CASSIANI: I bet you have. MR. KARBER: Okay, if that’s all, we’ll go off the record.
WHEREUPON, the within proceedings were concluded at the approximate hour of 8:42 a.m. on May 15, 2008. CERTIFICATION I, Mary S. Parker, Registered Professional Reporter, Registered Merit Reporter, and Certified Realtime Reporter, certify that the above proceedings were had; then reduced to typewritten form, by means of computer-aided transcription. I further certify that I am not related to any party herein or their counsel and have no interest in the result of this matter. IN WITNESS WHEREOF, I have hereunto set my hand and seal. Mary S. Parker Registered Professional Reporter Registered Merit Reporter Certified Realtime Reporter
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10 COLORADO SPRINGS LEADERSHIP
Don’t derail through e-mail Pete joined the company six Impressions are typically months before sending out a based on very small amounts of companywide e-mail congratinformation. ulating his team for being the In his book “Blink,” Malcolm best team in the organization. Gladwell popularized the notion At first glance this might seem of “thin slicing.” This is when we motivational. But there were a form opinions or make decisions few problems with it. based on very narrow “slices” of First, while Pete was based information. We make snap deciin Seattle, he was part of a Mary Lynn sions about people all the time, 5,000-person global organioften unconsciously. zation. Employees in Boston, P u lley Through e-mail, we send out Atlanta, London and Singapore thin slices of ourselves to many had never heard of Pete — until they repeople daily. ceived his e-mail. Pete’s case also raises an issue about the Second, no one ever sent an e-mail like cost of unnecessary e-mail. Everyone in his this to the entire organization. organization did not need to receive the The company prided itself in congratulatory note to his team. its work ethic and believed Practices have emerged that performance spoke for in many organizations itself. Tooting your own that promote wasteful horn was not part of the and unproductive use of company culture. e-mail, such as “Replying Third, many could arto All” as a default. A recent gue that Pete’s team was survey of one organization not the best in the orgashowed that of a sample of nization. His measure 78 employees, the total yearly was short-term revenue cost of dealing with unnecesresults. Other teams sary e-mail was $365,000. were performing just This is probably a conservaas well — if not bettive estimate of the amount ter. And other teams had a longer of time — and money — that track record of success. is wasted by companies as emIf Pete’s e-mail was your first and only ployees manage their daily inbox. interaction with him, what would be your Here are three questions to ask your self impression of Pete? before clicking “send”: For many in the organization it was not ■■ Would you want it to appear in the good. They wondered, “How did this arNew York Times? — Keep in mind that rogant braggart get into the company?” e-mail is the least confidential form of Pete’s reputation in Seattle grew worse communication. With the click of the butafter he sent a few critical e-mails to project ton, any e-mail can be forwarded to your managers who were working on several colleagues, your boss, your clients, your of his projects. Pete sarcastically accused mother or the press. them of not being customer-focused. ■■ Would you say it face-to-face? — We The project managers were highly retend to lose inhibitions when we’re writing garded and they had worked at the comfrom the privacy of our office or cubical pany much longer than Pete. They had because we have no social cues to rein in close relationships with many of Pete’s colour behavior, such as a guffaw, rolling eyes leagues, so they circulated Pete’s e-mails. or a verbal response. His colleagues shunned him. Pete left the ■■ Does it pass the morale test? — Sending company just after his first anniversary. sarcastic e-mails to his project managers Pete de-railed through e-mail. was not an effective way for Pete to build This case highlights two key issues team spirit. His project managers retaliabout e-mail. For Pete, it put him on the ated by forwarding his messages on to fast track to derailing his career with the their friends and colleagues, which further company. As we all know by our bulging damaged Pete’s reputation. inboxes, e-mail grows exponentially and Every e-mail you write does not have to with the click of a button we can reach be a perfectly crafted literary piece. Yet evthousands of people. ery e-mail you send will evoke a response in If Pete were giving a face-to-face presentathe recipient. Make it a positive response. tion to all 5,000 members of his company, it’s The message and tone that you convey likely that he would put quite a bit of thought is an important aspect of your commuinto what he would say, how he would say it nication. Creating a positive electronic and even how he would dress. presence enhances your own career and Few of us put this much thought into also helps to create a healthy and more composing our e-mail. productive work environment. Yet e-mail is now the most common form Mary Lynn Pulley is the co-author of “Get of communication in the workplace. It is Smart! How E-Mail Can Make or Break Your the predominant face that we show to the Career and Your Organization” and president work world. And it is the basis upon which of Linkages Workplace Consulting. She can many form their impression of us. be reached at firstname.lastname@example.org.
A supplement to the Colorado Springs Business Journal • June 2008
Continued from 1
you perform, the less chance you have for incentives in your paycheck! Low performers should never strive to achieve the mean (less their bonuses will cease) and high performers should deliberately mess things up in order to accelerate their drop to the bottom of the performance pile (so they can qualify for incentives). This absurd scheme may qualify for a Tony in the Broadway version of “Taking Organizational Morale Down Overnight!” Use your authority to whiplash everyone. This tool, too, can be extremely effective at creating organizational havoc at all levels, especially if your innate authority preference leans toward behaving like a dictatorial tyrant. Here’s how this one works. Tease everyone a little by occasionally asking others for their input. Maybe even ask for some
Center Continued from 1
So, creativity was reflected in the vision, and construction took place in two phases. If you have never been inside the building, here are some interesting points about its development: PHASE 1: First building (opened October 1992) ■■ The building was designed so you have to make choices and exercise your own intent, without predictability but with the feeling of being boundary-less. Spaces with surprising shapes were created. ■■ Before beginning the original blueprints, local architects Holger Christiansen and Leland Reece attended programs to better understand CCL. ■■ CCL received a $750,000 grant from El Pomar Foundation for the 66 acres of land. ■■ The Smith Richardson Foundation paid for the building costs. ■■ The property is zoned as “open space.” PHASE 2: Second building (opened September 1998) ■■ To achieve our mission of generating revenue for research, our participants required more space. This phase was financed from operating funds and the building was paid for within a year. ■■ Since we are a 501(c)(3) nonprofit educational facility, any additional revenue is funneled back into our leadership research. ■■ We also “give back” to our participants through scholarship opportunities and community leadership programs. Gateway from mountain to prairie full-service dining room, called the Gateway, is the core of the building. It functions as a multi-purpose room/
We’ve Got You Covered
employee participation. If you’re really feeling daring, you might even let them try a little taste of democracy or self-management. And then, just when they’re showing signs of creativity and engagement, fly into one of your tyrannical rages at the drop of a hat, jerk back all decision making into your realm and watch them shrink back into their little shells of dependency and submission. Splendid! So there you have it: three terrific, but by no means all of the ways, to take an organization’s moral and performance down in a very short amount of time. And oh, by the way, in case you started reading somewhere in the middle and missed the introductory comments — this article is satirical. Don’t try these stunts at home (or in your organization). Leave that to the professionals. Robert Ginnett Ph.D. is a partner with Impact Leadership Development Group LLC., and can be reached at 719-264-9920 or email@example.com. auditorium/stage area, book store and wireless café. ■■ Its design as a gathering place is our representation for the world — a crossroads about leadership where everyone can come and share. ■■ The Gateway also functions as a performing arts center. Our performing artist in residence conducts a leadership module called “Artistry of Leadership” at the piano. ■■ The Gateway has multiple levels and angles that reflect different perspectives and ways we can achieve our mission. We wanted the building to symbolize what we do and who we are — a place for inquiry. ■■ The symbol of our leadership programs, a Button-Button appears on the banister and outside the building. Multi-use conference room and artwork ■■ Multi-use rooms were created for efficiency. We learn to use spaces in different ways. ■■ Paintings and art work are on permanent display, and local artists can showcase their work for sale. CCL is highly committed to demonstrating leadership in a sustainable environment and has done extensive work on the building’s interior and exterior and in its business practices to promote energy conservation and social responsibility. For instance, it purchases carbon offsets for participants in our top executive program and uses green materials in new construction and renovation whenever possible. To learn more about CCL and its offerings, visit www.ccl.org and find a program that suits you or your business. Joan Gurvis is managing director of the Colorado Springs campus of The Center for Creative Leadership. She can be reached at 633-3891.
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COLORADO SPRINGS LEADERSHIP 11
June 2008 • A supplement to the Colorado Springs Business Journal
Scene from the mall: Children teaching diversity I was recently commandeered by my wife and collegiate daughter to go shopping in Denver. Stoically, I braved the first mall, Park Meadows, by wandering in the atrium corridors, dodging the relentless throng of gregarious shoppers. I had just found refuge in a book store when I was “cellulared” and told to stay put so that I could be safely escorted through the maze of upper, lower and indifferent levels to our vehicle and instructed to drive forthwith to the next target, Cherry Creek Mall. I was “parked “ by my family at the play area and carefully instructed on the where the best restrooms were. Sipping a large coffee. I opened my fictional novel about dark doings in Scotland. My concentration, however, was disturbed by a cacophony of children cascading through the play area. Resignedly, I abandoned my attempt to read and watched, instead, events unfold in the real world. Shoe-less Korean, Hispanic, Arab, Russian, Vietnamese, white, black and
brown children boisterously into the food area, an amazing explored the breakfast-themed phenomenon occurred. They play area. The Mexican kids had loudly requested refreshments the lock on the large cereal bowl from their parents in a mulwith a shredded wheat slide, gartitude of foreign languages ... nished with blueberries. Arabic, Spanish, Korean! Very The Korean kids took over obviously American inside and the waffle. The children played ethnic outside. seamlessly together, sharing the Then, the crisis.....A group of kids spaces, leading and following, were roughhousing when a young encouraging and supporting, statuesque Hispanic lady separated delighting in discovering inno- P a t el the combatants in accented English, vative ways to circumnavigate “Ju don't play like that”. the expansive playground. Although none of the kids were hers, Watchful parents, especially the mindshe engaged civically without the slighters of teetering toddlers, exchanged shy, est hesitation. parental smiles. A colorful world of joy. This was followed by an ad-hoc congress Intriguingly, the only language spoken of mothers. The actual Hispanic mother inside the play area was English and I was communicated to the other mothers privy to some elaborate introductions through her 10-year-old daughter. After amongst the kids. a few minutes of discussion, verification, “This is my sister, Juanita, and my apologies and admonitions ... a unanimous brother Roberto and this is Nate ... he's verdict. No harm no foul. just a friend (new).” The duly chastised kids ran happily When the kids scaled the low buttresses and collectively to join the Koreans in the
waffle area. Crisis resolved ... moms rule! As a neutral but intrigued observer I pondered on the events. Adults in our community often have difficulty working with various ethnic and diverse groups. When conflicts arise, they can become belligerent and self-righteous. In the adult world, conflicts are never satisfactorily resolved unless there is a clearly declared victor or aggrieved party. Adults seem determined, at times, to unravel and separate the threads of the intricate tapestry woven over two centuries and nearly two score years that we know and love as America. You know, even cognoscenti fumble, when asked to define important concepts proclaiming instead “ I know it when I see it!” So ask me, please, what diversity is ... I believe I have seen it. Jay Patel is the co-chairman of the Colorado Springs diversity forum. He can be reached at firstname.lastname@example.org.
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12 COLORADO SPRINGS LEADERSHIP
A supplement to the Colorado Springs Business Journal • June 2008
Watch for the next Colorado Springs Business Journal Leadership Quarterly Roundtable coming this Fall.
Leadership Quarterly Roundtable Holland & Hart would like to thank the following real estate leaders for their participation in the ﬁrst Colorado Springs Business Journal Leadership Quarterly Roundtable. John Cassiani, Banning Lewis Ranch Management Company Pam Keller, Keller Homes Randy Deming, Campbell Homes, LLC
Serving individuals, businesses, and communities in Colorado Springs for more than 60 years, Holland & Hart offers straightforward legal advice and representation for local, national, and international clients in the areas of business, litigation, and natural resources. We provide comprehensive representation for the real estate industry including: Corporate � Real Estate Zoning and Development � Wealth Transfer Intellectual Property � Natural Resources � Commercial Litigation Dispute Resolution � Labor & Employment � Construction Telecommunication � Tax � Estate and Philanthropic Planning E-commerce � Multi-media Technology � Entertainment Law
Lindsay Case, The Case Company Scott Smith, La Plata Investments, LLC Matt Dunston, Walden Preserve Bobby Ingels, Ingels Company
Contact: Kent Karber (719) 475-6422, email@example.com 90 South Cascade Avenue, Suite 1000, Colorado Springs, CO 80903 www.hollandhart.com/cosprings ASPEN BILLINGS BOISE BOULDER CARSON CITY CHEYENNE COLORADO SPRINGS DENVER DENVER TECH CENTER JACKSON HOLE LAS VEGAS RENO SALT LAKE CITY SANTA FE WASHINGTON D.C.