By Roberta Maynard. The night the industry's first $1 billion deal was made, Bob Strudler, Stuart Miller, and others, negotiated until well after midnight. Two years of talks came to a close that evening, talks that languished then revived a half-dozen times whenever Lennar's CEO made another appeal to U.S. Home's execs to consider a merger. Now the deal was struck at last, but the real work -- the job of melding together the fifth and eighth largest building companies -- was just beginning.
When Strudler called his division presidents with the news, most were incredulous. D.C. division president Rory Dickens remembers saying: "You've got to be kidding. Why sell?" It quickly became clear that pulling off this integration presented a huge leadership challenge.
A month before the deal closed in May 2000, Strudler opted to go ahead with a scheduled division presidents' meeting. He invited Miller to come along and bring some key Lennar people.
"Stuart sat at the back of the room for two days and listened -- just listened," Strudler recalls. On the last night, Miller asked to speak to the group -- 120 die-hard U.S. Home people. "Everybody wanted to know how the thing was going to play out," Strudler says. They had heard of the group hugs and reciting of poems. But more separated the two than Lennar's playful use of Dr. Seuss rhymes and name badges: Unlike U.S. Home, Lennar was decidedly unheirarchical. The companies' marketing strategies fell at opposite ends of the spectrum. On top of that, the two would compete with one another right off the bat in their common markets in Florida, Texas, California, and Arizona.
"Was I a little skeptical?," says Strudler. "Sure."
When Miller asked the group to come forward and sit on the floor, a dubious crowd complied. Joining them, he began reading a book he created called "Where's the Wow?," which begins this way: "Excuse me, kind sir, but I'm looking for wow; and I know that I want it, and I want it right now ... . I need something special -- I have no doubt, that wow in a bottle will help me stand out ... ."
"And this," Strudler says, "was everybody's first exposure to this aspect of Lennar's culture." While U.S. Home emphasized teaching, learning, and sharing knowledge, Lennar was "more bent on trying to create a sense of excitement, a sense of caring about what we do," Strudler says. "Stuart uses culture as the medium for communication. That's all culture is: the language for communicating his sense of values."
At first, Strudler recalls, "Everybody was kind of questioning, 'Was he real or not?'." But by the meeting's end, the U.S. Home staff got the "wow" message. There was even a group hug. "Stuart's a wonderful Pied Piper. He captivated them."
In the weeks that followed, the two execs, now officially part of the same team, logged many hours riding on Strudler's bus to visit the divisions. "We'd drive for two days at a time because we both wanted to get the message out that this was going to work," says Strudler.
The time the two spent together as they rolled down the road solidified their personal partnership. "Over Krispy Kremes and Dairy Queen Blizzards, our relationship was created," says Strudler with a smile.
The biggest test came four months later in Phoenix at the first joint division presidents' meeting. Strudler could sense the uncertainty on the part of the U.S. Home people. "They were looking [to me] for leadership," he recalls. 'Was I committed? Did I believe in this? Was I going to stay?'"
The combined group watched a video that Miller had put together showing all the aspects of both businesses through associates' eyes. Called "I care," it was a personal, heartfelt message about working together as a team to create homes for people. After the video ended, the powerful images left the group quiet, moved by emotion.
That was the moment of truth. "We walked away from the meeting knowing this deal would work," Strudler says. "Everybody knew we were on the same page. Stuart and I weren't competing -- not for energy, not for time." Indeed, in the year following the merger not one division president on either side resigned.
As for Miller, he says he had no doubts about the combination. "I knew it would be successful from the beginning. For all the fun and silliness, and our Little Red Hen [poem], we do not mess around with due diligence." When the companies were still in the beginning stages of discussion, he says, Lennar staff visited each U.S. Home community, just one example of the company's studied approach to mergers, he says. "We work out the hard stuff first."
While U.S. Home brought to the deal a well-honed program of management and leadership training, Lennar brought consistency, imparting to the new divisions the standardized terminology and methods it uses to track performance. All divisions now report their financials on the same one-page form, creating a 60-page document that makes for easy and direct comparison. When it comes to performance standards, Strudler acknowledges that U.S. Home had to adjust to a higher bar and quickly "get fixated" on return-on-net assets. Known internally as RONA, this is the measurement that divisions compete on monthly, the one on which incentives are based.
Each exec still believes in his own program: Strudler favors his design studio approach (known in the company as DS), while Miller is equally committed to Everything's Included (shortened internally to EI). Within markets and communities, the two brands actively compete against each other. "Peer pressure is the best motivator there is," Strudler says. "Every month, they're competing. Do we encourage that? You bet your booties we do!"
A key contribution from Lennar was freer reign for the divisions, says Miller, noting that the company gives "a lot of autonomy to division presidents. They get very few edicts from corporate." Dickens, who started with U.S. Home 20 years ago, says that's been the most exciting part of the merger.
To Miller, the union represents a powerful coming together of strengths. "We have been doing the people side of this for many years, and U.S. Home had a much more clearly defined program of giving back to the community. When you put these two programs together, you really have an explosive combination."
Direct and frequent communication ties it all together, he says. "Bob and I talk two or three times a day ... . If you can breed communication within an organization where everybody's talking because they like talking to one another, and they happen to also make sure that they're coordinating their work, it's amazing what a fail-safe you have in place and what a fertile bed for communicating something really important. When we want to focus on return-on-net assets or costs, the platform is there -- because we all talk."
Consciously focused on making a serious job fun, they also laugh. Miller and Strudler together in one room generate a lot of laughter -- knee-slapping, eye-tearing laughter. They trade good-natured jibes with each other and with their associates. Strudler ribs Miller about having the attention span of a gnat. And Miller, red-faced from laughing, describes Strudler's tendency to get into every aspect of the operation: "He is the octobubbie," says Miller, setting off more peals of laughter with this fabricated word that clearly gets a fair amount of play at Lennar headquarters. "He's got his tentacles in everything all the time," he says, still chuckling. But no offense is taken; the mutual affection is clear.
Strudler, suddenly serious, sums it up. "I know of no company -- and I know them all -- that has an emotional aspect that binds as well as this one."
What counts most when setting out to unite 60 divisions and 7,000 associates under one umbrella? Manner of expression plays a huge role, both execs agree. "Words matter, gestures matter," Miller says. "One thing we rarely do is use the word 'acquire.' We talk about combinations. It's not us being them; it's both of us buying into each other. We have as much to prove to them as they have to prove to us."
"You set the standard from the very minute you do the deal," adds Strudler, noting that another word that's never used is "synergy," which he says people associate with job cutting. "There were plenty of synergies in this deal, but we never mention the word because we never wanted anybody to think it was going to be achieved with their job."
Indeed, as they negotiated this deal, Miller and Strudler had no trouble agreeing on one thing: putting people first. "U.S. Home could have been sold to any number of companies," Strudler says. "It was not so much price as where we could maximize our people. The last thing I was going to do was sell out long-term employees."
There were tough decisions. Sorting out two benefit programs, two bonus programs, two languages, and two computer systems. "Stuart and I worked hard and through the night at things like 401(k)s and days off to make sure no one was losing what they had. We did an objective assessment of everyone, and we literally found a home for everybody."
With Strudler more than two years into the three-year commitment he agreed to, the question of how long he'll stay comes up. "I have just literally months until I have the upper hand," he jokes, prompting Miller to add: "There's nothing that ties him here. He doesn't need the money. He just loves what he does."
Looking at the company's financials -- such as return-on-net capital of 20 percent last year, up from 14 percent in 2000 -- it's easy to forget that there were doubters. But it's hard to deny that the partnership has worked.
"It starts with keeping emotions and egos in check," Strudler concludes. "It really works because Stuart and I wanted it to work."
Published in BIG BUILDER Magazine, July 2002