Two words come up repeatedly among builders who work in their family companies: honesty and integrity. "We wanted to have honesty and integrity, because if we didn't have those two qualities, we wouldn't be where we are today," says Jirair Hovnanian of J.S. Hovnanian and Sons, which has operated for nearly 40 years.
It represents a common sentiment for the builders on the following pages, who are the second or third generation to run the companies. To them, their work is far more than a paycheck; it is a link with their fathers and grandfathers, whose words they still remember. "Son, you'd rather get into a bad deal with a good person than a good deal with a bad person," Benton Taylor, founder of Taylor-Morley Homes, would tell his son Bill, now chairman of the Chesterfield, Mo., builder. "He's been proven right every time," Bill says.
They hope one day to forge the same history with their own children. "My 8-year-old son, Bradley, always wants to walk around in the mud with me and see the half-built houses," says Mark Morley, Taylor-Morley's president and CEO, who also followed his father into home building. "I'm trying to open the doors for him that were opened for me."
David Drees remembers the moment when he realized The Drees Co. had joined the big time. Paging through a newspaper a few years ago, he saw his family's business listed as a top local company. "My God, we're the largest private local company," David, now president and CEO, recalls thinking. "Wow--I guess we're not small anymore."
Definitely not. The Drees Co., based in Fort Mitchell, Ky., has grown to be one of the largest home builders in the country, public or private. This fiscal year, it expects to close 3,182 homes for $960 million in revenue--numbers that founder Theodore Drees, David's grandfather, could not have imagined. "He didn't understand me building 300 homes a year," Ralph Drees, company chairman and David's father, says with a chuckle. "He thought I was nuts."
Theodore, a German immigrant, built his first house with his brother in 1928, just before the 1929 stock market crash and the Great Depression made operating a home building company an unthinkably impossible endeavor. He took odd jobs, working in a dairy or replacing chimneys, and revived the company in the late 1930s, building Cape Cods that sold for $5,500 to $6,500.
After a stint in the Army, Ralph joined the company in 1958. "It was pretty natural for me," he says. He entered an industry vastly different from the one he knows today. "Back in the days when I got started, we had our own craftsmen who worked on the job. We did everything but mechanicals and plastering. That's changed totally. No builder--including us--operates that way."
As the industry evolved, so did The Drees Co. "The size, scale, and scope of the company has changed tremendously," says David, who oversees operations in eight cities. As the company changed, so did its leadership, as each generation concentrated on a different aspect of the business. "My grandpa was a craftsman. He was involved in every little detail," says David, who joined the company in the mid-1980s and became president a decade later. "My father is the typical entrepreneur. He wanted to grow the company. I'm probably more of a manager. My skills are more suited to organizing and leading a company."
But only a home building company. "I never thought about doing anything else," David says. "It's the only business I know, but I always liked it. I still like it. I like being able to create and build something you can feel, touch, and smell."
At The Green Co., survival has never been the issue, despite all the pessimistic statistics about family-owned companies' longevity. "I never look at it as a question of survival, but how can we be at the top of the market," says Dan Green, vice president and principal of the Newton Centre, Mass.-based company.
That attitude has served the builder well during the past 50 years. The offshoot of a family real estate business dating back to 1903, The Green Co. began building homes in 1953. Like many builders established after World War II, it catered to the beneficiaries of the GI Bill, constructing modest homes at modest prices. Today, chairman Alan Green and his sons Dan and Tony concentrate on this decade's hot market: upscale empty-nesters looking for lifestyle. (Tony is managing director of The Pinehills, which is a separate, but affiliated land development company responsible for the award-winning community of the same name.)
These buyers benefit from the Greens' unique priorities: compelling views, individual privacy, and development that follows the natural contours of the land. "Site planning is where the battle is won or lost," says Alan, who won approval to build the curvy narrow road he desired at one community after a majority of town officials admitted their favorite local road was a twisting, turning street just like the one he had proposed.
That road went into The Pinehills, an initially controversial development that's won numerous awards. But the 3,000-home project would never have gotten built without the Greens' reputation for innovation. "The town was tired of what the standard subdivision was doing to their town," says Tony. "They wanted something different."
That willingness to try something new is a Green Co. hallmark, Tony and Dan say, and one of the reasons they wanted to return to their father's company after starting their careers in other places. "When I worked elsewhere, there was so much hierarchy and so much effort going into making sure you weren't blamed for anything going wrong. It was so different from what I had experienced at The Green Co.," says Dan, who initially worked at an investment bank. "Seeing how things are done elsewhere is an enlightening experience and an important one." Tony, who worked at The Green Co. before joining The Pinehills, agrees. "There's something different about The Green Co. There's a camaraderie and a willingness to explore any idea. That's unusual in any business, small or large."
As anyone in a family business knows, such ventures can get complicated--fast. That's why Fred Napolitano Sr. established a few rules when his sons and daughter joined Napolitano Homes, the company he formed in 1977 with oldest son Vince: "Nine to five, everyone has a job to do. After 5 p.m., you are all brothers and sisters, and nobody's better than anyone else. If you have a dispute of any sort, don't bring it home."
The rules worked. Twenty-six years later, Napolitano Homes is one of the largest builders in the Hampton Roads, Va., area, and family ties are intact. "We've never had a cross word about anything," Fred Sr. says.
The younger Napolitanos, who are equal partners in the company, agree. "I think one of the reasons we have avoided a lot of the pitfalls of a family business in the past 26 years is that we, from the get-go, set it up so each of us has our areas of responsibility," says Fred Jr., 45, who handles purchasing and accounting. John, 42, manages construction and warranty issues. Vince, 49, does land acquisition, product development, and financing. "We all have our realms of responsibility, but we all confer with each other," says Vince, the company president. (Their sister, Terri, who worked in the company previously, is now a minority owner.) They also talk regularly with their father, who sits on the Napolitano Homes board.
Father and sons also share a strong commitment to the building industry. All have served as president of their local HBA, with Fred Sr. and Vince also serving as state leaders. Vince is currently an NAHB national vice president, and his father also served as the NAHB's national president in 1982. "One of the reasons we've done well is because of my and my sons' involvement in the industry," says Fred Sr., who adds that such gatherings have proven invaluable for learning what it takes to build a business.
Such knowledge is crucial, as shifts in the industry happen more and more quickly. "This business is changing so dramatically, with the big builders taking over," says Vince. "It's impossible to run your business the same way you did 10 years ago. You've got to change to compete. We're never satisfied. We're always looking to improve."
The company that would become Taylor-Morley Homes began in 1952 with a handshake and a grocery bag full of cash. "My father was close to a customer who'd inherited some money," says Bill Taylor, chairman of Taylor-Morley Inc. and son of founder Benton Taylor, a grocer who'd always dreamed of building homes. "He found a property. It was $50,000, and this customer went to the bank and came back with the money in a grocery bag ... . My father paid him back in less than three years. It was all done on a handshake."
Incredible, yes, but the anecdote illustrates one of Benton's legacies to the Chesterfield, Mo., company: a knack for creating trusting, lasting relationships. More than 25 years after he shook hands with that first investor, Benton joined with friend Harry Morley to form Taylor-Morley Homes. Thousands of homes later, the partnership between the two families still exists; Bill Taylor is chairman of the board, while Harry's son Mark Morley serves as president and CEO of the $150 million company.
Like many others, Taylor-Morley has far surpassed its early days. It started by building $15,000 homes in the greater St. Louis area, but its homes today have an average sales price nearly 20 times that, and the company predicts 400 closings this year. More than growth, though, the company values its internal strides, such as the decision to empower employees to create a quality experience for its customers. "The biggest milestone is when we adopted TQM (total quality management) as a management philosophy, because it allowed our employees to make us America's Best Builder," Mark Morley says. (The Green and Drees companies have also won this award.)
The philosophy also encouraged the company to diversify. "If we're training and motivating people, and yet we've put in a glass ceiling and we don't have anywhere for people to grow, that's a demotivator," says Mark, who is starting an urban division. Taylor-Morley also operates its own land development and carpentry companies.
And training matters at Taylor-Morley. "After my father passed away, we started thinking a lot about succession," recalls Bill. "We put a lot of emphasis on building leadership, on building that bench, and positioning people to move up ... . I think we've realized we can only grow along with the personalized growth of our team."
J. S. Hovnanian and Sons serves Jersey families for 40 years.
Family values influenced J.S. Hovnanian and Sons' most well-known community in the best possible way. "One of the reasons we did Birchfield [a development offering a variety of housing types for different generations] relates back to our culture. Being a family person and having grown up in a large family, I wanted people to be able to put their entire family in one community," says Jirair Hovnanian, president of the New Jersey-based company, which built Birchfield--the first planned unit development in New Jersey--in the 1970s.
Today, the company also connects generations in its operations as Jirair works with his two sons, Peter and Stephen. Peter oversees planning and development; Stephen manages sales, marketing, and operations. Their company will celebrate its 40th anniversary in 2004. (Jirair, an Armenian immigrant, started in home building in the 1950s with his three brothers, who separated financially in the 1960s. His brother Kevork established public builder Hovnanian Enterprises.)
Four decades has brought many changes to J.S. Hovnanian and Sons. Targeting the parents of the baby boom in the 1960s, the builder offered 1,800-square-foot homes for $12,990. "We also did a 2,700-square-foot house that was $23,000," Jirair remembers. "That was really luxury back then." Now the company concentrates on active adults, although it builds across the buyer spectrum, offering homes from the $200s to $1 million. This year, the builder expects 300 closings for $75 million in revenue, a long way from the eight closings of its initial year in business.
Those numbers are the responsibility of Peter and Stephen now; Jirair, 76, has turned much of daily operations over to his sons. Still, the founder hardly seems to be slowing down. "I never seem to be tired," he says. "I'm always one of the last ones to leave the office."
In addition to managing J.S. Hovnanian, Peter and Stephen have embraced their father's tradition of industry involvement. All three have served as president of their state builder association, addressing growth, affordability, and other housing issues in New Jersey. "They've been following in my footsteps all along," Jirair says proudly.
And his sons are happy to have done so. "We were fortunate that Dad was willing to give us an opportunity to learn about the business," says Peter, who ran his own home building company before joining his father in business. "Dad was a great teacher."