Hovnanian Enterprises prefers that the creation and selling of its homes be the sole province of its operating divisions. But as it grows, Hovnanian is taking new measures to enforce compliance with corporate policies and procedures that address how its operating units manage employees, work with subcontractors, buy from vendors, and calculate and report financial performance.

"When you're a larger company, your liability is greater," noted Lou Csabay, Hovnanian's vice president of human resources, which is why all new employees go through a three-hour workplace harassment orientation. Acquisitions must be in line with Hovnanian's policies in such areas as workers compensation, jobsite safety, and homeowner warranties.

Tim Mason, Hovnanian's vice president of risk management, noted that it's often easier for larger acquisitions to comply with their new parent's standards "because they already have the infrastructure in place in their operations." Smaller companies, though, aren't always so organized. "It's not uncommon to ask for [a human resources] procedures manual and get one page," said Csabay, whose department uses a 32-point checklist to align -- and typically improve upon -- an acquisition's human resources and benefits policies with its own.

Hovnanian integrates its acquisitions into the national contracts it has with about 20 vendors as quickly as possible, said Hovnanian's vice president of purchasing and communities setup, Mark Voetsch. The contracts have helped reduce the cost of homes built by the company's Texas acquisitions an average of $1,450 per unit. "I've seen the prices we pay for appliances, fireplace inserts, windows, and doors continue to come down," said Nick Pappas, president of the company's southern coastal California division, which will build 700 homes this year. "Because our costs are lower, we can be a more competitive bidder for land."

"We're at great pains to get out of the way and let them do their thing." -- Ara Hovnanian, president and CEO, Hovnanian Enerprises Hovnanian Enterprises is financially conservative and demands compliance to its accounting procedures throughout its organization. It wants operating units to be "speaking the same language" as the corporation, "when we look at numbers like gross margins," said Hovnanian's CFO Larry Sorsby. So the company provides its divisions with sophisticated software for planning, budgeting, reporting, and forecasting. Once the entire organization is linked to the same computer system, Sorsby anticipates that there will be greater uniformity in the way the divisions process invoices and write contracts. Voetsch expects the computer system to streamline Hovnanian's bidding for land and lead to greater interdivisional sharing of information about costs and savings.

Key decisions, like big land purchases and acquisitions, require corporate approval. And every month, Hovnanian Enterprises' corporate officials have a 15- to 20-minute phone conversation with each divisional and group president to discuss key operating measures to make sure the operating units are on track with corporate goals for sales, profit, and productivity.

But Hovnanian takes a "best practices" approach to its business and has been flexible enough to adopt how its divisions handle such areas as variance purchase orders and structuring land transactions. "We have a 'crawl, walk, run' philosophy," said Sorsby. "We'll test ideas to see if they work in one region, and if they're successful we'll roll them out."

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