Jun 29 2007 10:06AM | Permalink | Email this | Comments (0) |
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When my wife was pregnant, I received a very good piece of advice. Paraphrased, it goes like this. There was very little or nothing I could do to make the birth of our son a better experience. It wasn’t something I could improve. What I did have in my power to do, though, was screw it up completely. Keep gas in the car, I was advised. Make sure the bags are packed; be certain the house is ready for the baby’s return, and be responsive to my wife.

For home builders with multiple divisions, this is the same role that I see the corporate office playing. Often, there is little they can do to make the local office better, but they sure can screw it up.

Why? Because all home building businesses are local businesses. Certainly large home builders can implement great and sophisticated systems in their local divisions. They can invest in technology, spreading the cost of more sophisticated technology across more divisions. But even with those improvements, the implementation will often screw up a really good functional system at the local level.

How many times have we seen a large builder – private or public – come in and buy a great local company? They implement some changes, people leave, and the division loses its advantage.

I’m not advocating the dissolution of large builders with multiple divisions. What I am pushing for is smarter and more focused management of divisions that allows them to compete in their markets with greater efficiency. Often that means making a decision not to cut cost. But when the primary reason for consolidating an enterprise is to bring more cost control to the overall group, it becomes very difficult to implement anything but a cost-cutting decision at the local level.