The GHB Interview: CR Herro, VP of Innovation, Meritage Homes

Green building expert talks about the prolonged success of Meritage Homes and some prevalent homebuilding trends that are emerging

Green Home Builder:  In your eyes, what were some of Meritage’s highlights this year and what was it like to navigate a company through the pandemic?

CR Herro: I think the big challenge and opportunity was being responsive to the latest change. We’ve always been leaning into innovation and it was a year where innovation was necessary to constantly evolve to evolving CDC recommendations, changing consumer priorities around health. We really had to be nimble this year and stay true to our roots, but also, it brought things to the forefront that we thought were a couple of years out, that we ended up implementing this year, from significant expansions in our online content and ability to review and purchase homes online, to putting really significant advances in our indoor air quality progress.

GHB: What specific green homebuilding trends have you seen emerge from the pandemic and are there any that you see becoming permanent for years to come?

CR: All the facets that come into sustainability, from durability to energy efficiency to health — I think  all of those things end up being emphasized by buyers. No matter what we do, the greatest idea doesn’t matter unless we inspire buyers that it’s important and relevant to them. We end up having a platform where people didn’t feel safe and it gave us the opportunity to inspire people to talk and say there’s really significant things you can do in new home construction to keep your family safer, to make your home more adaptable to changing circumstances. But also just with technology to feel safe just going through the buying process with the ability to get the information and to design your home and go through the closing process all while social distancing.

It really did have us take things that we’ve been thinking about that we could evolve slowly with consumers to take some big steps forward. Consumers were very receptive to those challenges and opportunities.

No matter what we do, the greatest idea doesn’t matter unless we inspire buyers that it’s important and relevant to them.

GHB: Speaking of consumers, I know Meritage was recognized at the Avid Awards earlier this year for its customer service. What would you say is the key to providing great customer service?

CR: It’s two fold. One is in the process to set good expectations. We talk about with our buyers and ask what they’re looking for in a partner to build your home. That partnership is so important, especially to first-time homebuyers, that they’re aware of how much they influence and how much their participation is important in the homebuilding process. Then, making sure you’re focused on exceeding consumers’ expectations. Once you’ve set those expectations and you’ve educated them on the buying and building process, make sure you’re there for them, that you over-communicate, and you’re really clear within and with out of your control. The nice thing about being a green builder is that so much of what we do is a standard and every home we build ends up exceeding the performance that most people are used to. So they come into a home and it’s quieter than they’ve ever lived, the temperature is more even, the humidity is more controlled and they get a utility bill that’s half of what they’re smaller home used to be. There’s a lot of these really good opportunities to touch the consumer in a very affirming way.

Then the technology that we keep talking about, we recognized we needed to remind the consumers of how thoughtful the build was — the Wi-Fi enabled thermostat controls and security around doors and doorbells. All of the home control systems that have been automated make people feel safe and end up being more convenient, but also work to make the home function better. It usually exceeds people’s expectations. You hear people in marketing talk about surprise and delight; that you can deliver something that exceeds expectations. And doing that resets their understanding of what a good home is.

GHB: Meritage CEO Steve Hilton announced his upcoming retirement. Talk about what it was like working with him and how vital his leadership has been to the company over the years.

CR: It’s been incredibly important. He was the founder of the company; he’s been at the rudder this entire time. He is the person that created my job — there’s no other VP’s of Innovation in the homebuilding industry because he wanted his company and new home building to feel like a commodity. It’s just a floorplan and some pretty counters. He really wanted to subsequently evolve Meritage and pull the whole industry along with him in building really good homes. Make no mistake about it, it was a big, brave leap of faith on Steve’s part to implement the crazy ideas I had. Without Steve, it’s just a bunch of good ideas. He was really the heart and soul of taking the leadership position and dedicating the company to a brand promise from every price point across the country in the toughest market.

We started doing this in 2009 during the worst residential housing crisis. Steve was the reason I work for Meritage, and Steve’s the reason that Meritage is Meritage. He’s been a tremendous leader, both within the company and within the industry. Make no mistake about it, we’ve known about his impending retirement and the succession plan for a very long time. It was a very thoughtful process. Steve’s very young and very involved, and he’s just moving from CEO to chairman of the board. We anticipate he’s still going to keep his hand on the tiller. We’re definitely his company, and he’s part of us.

GHB: How would you describe the company culture at Meritage?

CR: It’s something we do very actively. Our COO and the new CEO of the company Phillippe Lorde has really taken culture on as part of his belief in management systems. We very actively pursue a culture that’s based on ethics and communication. We do that very purposely. We have a very clear culture that’s communicated throughout the company and we do something about it — it’s not just a bunch of words.

A lot of the things we had done several years ago to pivot — to have a very transparent buying process, to set very clear expectations and to streamline our business to create more value for our buyers — paid off tremendously this year in being ahead of the curve, being able to implement these strategies to create a buying process that needed to evolve. So our culture is very receptive to learning and growing and taking a responsibility for itself, which I think is key in any innovative company. You have to manage it and can’t just hope for the best.

GHB: What advice would you give to other builders who are considering adding green products to their line of work?

CR: There’s two big understandings for anybody that’s not in the space. First, it’s surprisingly easy. The U.S. government has been involved with really credible building science for a long time. The ENERGY STAR program and the Zero Energy Ready Homes program are recipe books so people can easily implement the standards and the scopes of work to build very credible, sustainable green homes. There are a tremendous amount of programs out there that offer free support and free education that’s online and available through these government resources that make it very easy for people, whether they’re building one home or 2,000 homes. It’s not something where you have to go hire somebody with a PhD in chemistry. They can literally be handed a textbook for free through these programs, follow it and be one of the better builders in their market place.

Second, there’s a misconception from the 80s that sustainable building was really expensive, and that the materials were expensive, the additional energy-efficient appliances were expensive, the lighting was expensive — all the components significantly added up and made it only for very expensive homes for very wealthy people. The truth is that every three years, the IECC publishes a new code for energy-efficiency. That code has become so aggressive, especially in states like California, that it is very cost efficient to understand how to get to those performance goals. There’s a performance path that says you can meet these energy-efficiency standards any way you can as long as you meet this threshold. We’ve been building with very tight construction with insulated attics and high-performance windows, and those economies of scale and the availability in the supply chain has made energy-efficient components of green construction very cost effective in meeting the requirements of these new codes.

So those are the two big ones and I think people saw them as hurdles: learning how to do it and affording to do it. Once you get into it, you realize quickly that you can build better and differentiate yourself in the marketplace without screwing up your P&L.

GHB: Is there any exciting news from Meritage that’s coming in 2021?

CR: We’re doing two things that I think are noteworthy. First, we continue to work with the Department of Energy on how buildings consume energy. There’s a growing understanding of the daily cycle and these peak energy demands of homes. All of us as consumers, there’s over $1 trillion in the inefficient use of energy because of the peak and valley. $1 trillion. We’ve been working quietly with the Department of Energy to adjust buildings so they have less peak energy demand. Basically it’s flattening and elongating the heating and cooling demand. It’s keeping the house from being so subjective to the oscillation of the weather outside. Then, being thoughtful on the big appliances and getting them to consume energy at different times of the day than the normal utility peak. Those sorts of things end up being tied to the time of use rate, which means people not only have a smarter home that lends to the sustainability of the country, but also then financial pays them back by consuming the cheaper energy instead of the more expensive energy. That’s been something I’ve been very proud of that we do quietly to make the world a better place and we continue to lead in that space.

The other big one is looking at alternative materials. There’s no doubt that there’s other ways to build other than conventional lumber and that the trades involve with conventional lumber are retiring and there’s not a lot of people coming in to replace them. So we’re really aggressively looking at construction systems that out perform the traditional, but also are easier to build. So all the alternatives out there, and as the housing industry has been busy and lumber has gotten very expensive, and labor has become more scarce, they are going to be very important to the success of our industry, and more importantly, there’s opportunities to improve the sustainability and functionality of homes by leveraging these new materials and these new system approaches.

Those are the two big ones that we’re taking a big stride forward on this year. Obviously, last year, the big story was that we were the first big builder to certify every home to the Indoor airPLUS program. This year, we’re the first builder to adopt filters that are catching virus-sized particles, so we moved everything all the way up to MERV-13. That’s on top of the whole indoor air quality we’ve already had. We’re really proud to be partnering with the Indoor airPLUS program that way because it’s such a good, credible and cost effective way to protect our occupants. We’re just in the middle of implementing all of that and looking forward to those other projects going on in 2021.