ARLINGTON, TEXAS, SEPT. 21—The moment was one in a series over the past several months that called for a declarative assertion of stability over volatility, control over chaos, calm over incipient disarray—finally. Revolving door owners and executives—a painful months-long hemorrhage of company leadership that started a year ago this spring—were gone, but far from forgotten, leaving a convulsive wake of questions in the industry and jitters among 400-plus employees. So, as Choice Homes' regional vice presidents gathered at their Arlington headquarters on that Wednesday, senior-level organizers of the strategy session would have had to be wondering whether the heavens themselves somehow had it in for Choice. As 87 percent of the company's operations are based within the state, nary a manager present could ignore the urgently pressing phenomenon of then-Category 5 Hurricane Rita as she barreled toward the Texas coastline.
Weathering storms is hardly new for Choice. The just-under-a-half-billion-dollar company—at one time the largest builder in the Dallas/Ft. Worth market—has been battered by the winds of change for the past 18 months … struggling with a brain drain, plummeting market share, decreasing revenues, and rapidly disappearing expectations. “The bar has definitely been raised,” says newly anointed COO Dan Couture, acknowledging the quality and quantity of builders butting into their highly competitive markets. “And there is no doubt we didn't do as good a job as we should have in recent years. We were too conservative.”
But today, as new president and CEO Bob Ladd radically re-sets a course for the enterprise, the traditionally low-profile company has battled back from its own private brink, recruiting and digging deep from within its ranks to cobble a determined new go-to executive team, realigning business plans with a growth-oriented financial structure.
Questions remain. A third of the company's ownership is in financial limbo—subject to the disposition of a family trust—and less competitive product and land positions characterize an enterprise that drifted into an inertial state as its long-time owners and top managers sorted out their personal and professional differences and split with their take. Ladd's challenge has been to regroup and re-focus speedily, at the risk of having Choice disintegrate into a collection of once-admirable assets, a shell of its former self. The shift from auto-pilot to operational strategy may be critical, whether its owner operators intend to carry the company forward as a home builder brand or to extract value from the organization as the industry's behemoths target companies like Choice in a slow steam-roller of consolidation.
CENTRAL CASTING The first challenge was a management team to replace a suddenly depleted executive suite. Stabilization at the top came decisively, and from within. This past January, Ladd tapped controller Steve Garza to step up to the plate as the company's CFO. And, as evidence that perhaps the dust is finally settling on what employees admit has been “a transition time,” the company named Dan Couture as COO in late September, in effect filling out Choice's executive dance card.
Promoted directly from his position as regional vice president for Texas-based operations in Ft. Worth, Amarillo, and Lubbock, Couture has been with the company since its inception. His appointment “is a great move for Choice,” according to strategic consultant and residential market researcher Ted Wilson, president of Dallas-based Residential Strategies. “He knows all the intricacies of the company and he is certainly on board with the makeover that is going on.”
As Ladd, Couture, and Garza establish their bearings, the company is bidding its past goodbye. “We will have a lot of good things to report,” says Couture of Choice's rebirth. “Many of them are still being put into play as we speak.”
STUMBLING BLOCKS Choice's inadvertent metamorphosis began in April of 2004, as the company lost its co-founder husband-and-wife team of creative front man, COO Dale LeMaster, and his finance-focused wife Victoria.
The couple had been a powerful force at Choice since they teamed up with oil industry and construction investor Bill Bowerman to form the builder in 1987. Choice evolved quickly into a top 20 builder and a regional powerhouse. As 2003 drew to a close, the LeMasters found themselves looking for an exit strategy. After exploring the possibility of a public offering, the principals decided to stay private. The LeMasters divorced and sold their combined one-third ownership to Bob Ladd, a Masco executive. Most observers assumed Ladd's role would be as a passive investor, and most observers believe that's what Ladd assumed at the time as well.
Within 12 months after company directors opted to keep Choice private, longtime CEO Steve Wall resigned. Neither he nor Choice owners will comment on his reasons, but industry observers can take well-educated guesses as to why. Wall had been leader of a management team that felt that—as company owners became fixated on disposing their respective holdings over the past couple of years—“ownership was taking profits out of the business, basically starving the company and stifling growth,” opines Tony Avila, managing director of home building at JMP Securities. Another factor: Wall, who was widely credited with driving Choice's successful growth since he stepped up as CEO in 1999, was also known to have sought an equity stake in home building, a doubtful scenario at Choice.
Learn more about markets featured in this article: Dallas, TX.