A disbelief in conventional wisdom inspires a company culture of discipline and passion.
A confession. I have toiled my entire professional career on the "dark side" of the balance sheet. For almost 30 years, I've done my share of sales meetings, but have never reeled in one penny of commissionable revenue. To this day, I appear to be, irredeemably, an expense, a manager of cost centers.
Naturally, feeling as if I've been a repeat offender in some type of business court of law, I harbor a rather queasy feeling about people in finance. You might know the feeling. It's vaguely reminiscent of the way I felt about "the fuzz" as a teenager–sometimes it was for good reason, and sometimes it was all up in my head.
Finance people think differently, and their way of thinking about numbers, their logic, and the extension of meaning they draw from those numbers, honestly, makes my head spin. So, as a chronic unremitting cost, I find myself trying to do whatever I can, short of staying within my budget, to avoid finance people like the plague.
If only I'd met Chad Dreier earlier in life, I might have been spared that "you're busted" feeling whenever I've had to go over my budget with the head of finance. Dreier, in his 14th year as chairman, president, and CEO of The Ryland Group, is a one-time auditor. Arguably, Ryland's financial discipline and land position analytics rival any public home builder out there, and most analysts would agree. He also happens to be a one-time baseball catcher, which is why I'd like to have known him earlier in my career.
At Loyola (now Loyola Marymount), where he studied finance, Dreier also was a star behind the plate, the field general. Catchers not only tell the other eight players where to stand and what to do; they know how to dumb things down.
So, Ryland's hard and fast rule of 30 percent internal rate of return on every land buy makes sense to me because he can make a finance simpleton understand. He even helped me grasp how and why Ryland focuses on returns rather than volume.
In the late 1960s, around the same time James P. Ryan and his kids were pulling up the weeds outside three "Home of Comparison" models in the Wilde Lake neighborhood of Columbia, Md., the very first Ryland houses, Dreier was studying marketing under the Jesuit aegis of Loyola.
"The guy teaching the class on loss leaders gave the classic example of selling your arrowhead at a loss so customers would come in the store and buy everything else. I thought that was so stupid. I never understood the principle of loss leaders. I've always said I want to make money on every house we build. Where I think some of our colleagues say, 'let's have lower margins on the first house,and on the fifth house we'll make more money,' I philosophically don't understand that, even today."
Clearly, what Dreier doesn't trust is conventional wisdom. Nor did he buy one (albeit important) man's opinion that he was a really good home building company finance guy, but that's as high as he should set his sights. The Ryland story, now 40 years long, connects its three principal CEO protagonists in uncanny ways. Each of them has acted decisively on what they didn't trust–land risk–and who they did trust–hand-picked, highly passionate lieutenants, not all of them sellers, who have made Ryland the publicly traded enterprise with the heart of a private company.