Bill Pulte sees in the PulteGroup, a company that he founded in the mid-1960s and carries his name, an enterprise that has drifted dramatically from whom and what he feels Pulte is, what it does best, and what made it—briefly—home building’s largest empire, at least by annual revenues.
Bill Pulte believes that the future for the organization—if it is to regain its place as one of the industry leaders—depends on a strategy that is true to itself, right down to its 1967 roots as a provider of entry-level homes for middle class Americans. He believes the name Pulte as a home builder should mean that, and that an early housing recovery that does not bring a huge push behind attainable-priced entry-level homes betrays the name and the spirit of the company he started.
He sees, in the person of Chief Executive Officer Richard Dugas and the current PulteGroup board of directors, a misguided strategy, a set of corporate assumptions that have disconnected profoundly from home-building enterprise fundamentals, and an executive-level brain trust depleted of skills and insight necessary to put the organization back on the rails.
So, Bill Pulte started gathering facts about what was going on at the company during the middle part of 2015. After, eight or more months of fact-finding, his mission since the middle part of March of this year has been to remove Richard Dugas from his position leading the company. The reason he gives for this goal is to restore direction, momentum, and leadership to the company that bears his name.
We spoke yesterday for about 20 minutes with Bill Pulte about his mission, the origin and nature of his misgivings about the company and its leadership, his course of action, and his intention to keep battling until he’s exhausted every avenue open to him.
Founder Bill Pulte’s recourse—legally and officially—is as the corporation’s largest shareholder. Yet, to him, and to his grandson Bill, the matter is deeply personal. It’s not about money—although Pulte’s failure to keep financial pace with D.R. Horton and Lennar during the past three years served as a red flag to Pulte. To the Pultes, it’s not about ego either, although their belief that their namesake company’s sub-par performance is deeply wounding, and something they mean to fix if they can.
Bill Pulte notes in the start of our conversation that when he retired in 2010, and left the company entirely in the hands of its leadership and board, he became “an outsider” in the corporate governance sense of the word.
Still, now, Bill Pulte believes it’s the right thing for shareholders, Pulte employees, and his own legacy to do as he has done in the past vis a vis company leadership. That is, to ask the ceo—quietly—for his resignation and work on a transition to a new leadership.
“I stayed clear of Richard in any way other than socially, but, if I wanted to sell stock in the company, I could not be an ‘insider.' I had to remain an ‘outsider,’” Pulte tells me, by way of explaining the context of his relationship with the company over the past five years.
Bill Pulte started feeling faintly ill-at-ease with the company’s direction and strategy as the recovery took shape, distinguishing which companies had best positioned themselves for the early part of the cycle from others. That faint feeling blossomed into full-fledged misgivings as Bill Pulte started to hear from and contact a network of friends and acquaintances who either still work at Pulte or have left there recently.
In his opinion, and drawing on 60-plus years of experience and perspective on running this organization, Richard Dugas’ original misstep was not replacing “a Bill Pulte” on his board of directors in 2010, when Bill retired. Strategic miscalculations and management disconnects cropped up as the absence of a home-building operations veteran played out.
“[Richard Dugas] started to lose respect of a lot of employees,” Bill Pulte says. “He’s not a home-building operator, and he doesn’t have a product background. He really needed to put that kind of advice on the board and he didn’t. A good number of people who left the company expressed that he was going in the wrong direction.”
The case any large investor can make for a growth vs. value strategy is that home building and residential investment motivations typically orbit around growth. While D.R. Horton was introducing and deploying nationwide its big hit Express Homes brand for the entry-level, and Lennar, too, brought a high-volume, lower-price range strategy to bear in the early-going, Pulte’s value creation disciplines focused on higher-margin product, land optimization disciplines, and operational process that placed per-home profitability higher on the priority list than pace.
Who would argue with a strategy that focuses on profit-margin operational excellence to the exclusion of volume growth?
Founder Bill Pulte would, and he believes that the best operators would agree with him. In their eyes, both margin and volume are achievable at one time, and are especially important hand-in-hand tactics during an early recovery.
“The way you can make money as the market recovers is also offering homes at lower prices and building a whole lot of them on existing land,” says Pulte. “The company’s pricing is way out of whack. They’re closing less homes.” Bill Pulte points, as an example, to three different Pulte communities in the Naples, Fla. Market—Pulte, Del Webb, and DiVosta—which offer, to his eye, essentially the same small number of plans across all three segments, all positioned for a move-up or second-time move-up level buyer.
Part of these disciplines and processes occurred as the result of greater corporate-headquarters control and oversight, a massive reduction of product and floor plan options that would streamline sourcing, costs, and operational processes.
“A lot of decisions that used to be made in the field, and should be, are now being controlled at the home office,” Pulte says. What’s more, Bill Pulte took note of other changes to the company policy and management that have struck at the fabric of a culture that made Bill himself, his openness and integrity, and his passion for the business an essential part of its strategic core.
“The bleeding is going on now, and the quicker we can stop the bleeding by removing Richard, the quicker we can address getting the company back on track,” Pulte says.
A little more than a month ago, Bill Pulte felt the moment had come. He believed that his position as founder of the company qualifies him to speak with authority on what is best for PulteGroup, even today. He expected that if he asked Richard Dugas to retire immediately, it would be enough.
“I wanted him to go out looking like a rose, and to keep his reputation,” says Bill. The expectation was that Dugas would announce an immediate plan to retire, and allow for a CEO search process that would be taking place now.
Dugas did not follow the script Bill Pulte wrote for him, so the battle has intensified.
Bill Pulte has legal rights as a leading shareholder, but they’re limited. Otherwise, he can agitate, and he can tell his story, hoping it will appeal to the “court of public opinion,” that includes current and former employees and the broader home builder universe.
“I gave him an opportunity to leave on a high note,” says Bill Pulte. “He forgot that I learned how to fight in this business.”