They're celebrating another of those 40th anniversaries of the 1960s this year, the 1967 Summer of Love. Back then, young people would lounge around, burn incense (and draft cards), and smoke marijuana, a good amount of it in a quasi-religious offering in the name of world peace. Legions of them would cling to that ritual for years thereafter, before they evolved from flower children into the most well-educated, highest-earning generation ever in the history of anywhere. Many of them are Toll Brothers' customers today; more aspire to be. Bob and Bruce Toll, who were already working in the family business during that era, did not share the interest of their contemporaries in buying pot. They wanted to buy lots. Home lots. At $1,500 a pop. Their father, Albert, did not approve.
In late 1966, the first time 25-year-old Bob approached his dad about taking down two residential lots that Al Toll's real estate development partnership was shepherding through approvals in Philadelphia's Chester County, Penn., environs, Toll senior said, flat out, "no."
Al Toll had made it the hard way in residential and commercial land development, and he'd taken considerable pains to prepare his elder son for more, for better. Al had two brothers, four-time U.S. congressman Herman, and Joe, who ran hotels in Atlantic City, N.J. Like Al, they had come to the United States in the early 1900s from Kiev, Ukraine. Unlike Al, they'd studied and practiced law, leaving Al somewhat wistfully wishing he'd done the same. Although he'd acquitted himself admirably and successfully as a real estate developer and builder–doing apartments and commercial projects–through the 1950s, Al wanted his son Bob to be an attorney. He and his wife Sylvia sent Bob to Cornell University to do his undergraduate work and to the University of Pennsylvania to study law. He was confident in his son's future, especially since Bob loved law school. Al Toll knew his oldest son was destined to become a lawyer.
Or so he thought. Although he loved studying law, Bob didn't love being a lawyer. No more than a few months into his first job at prominent Philly firm of Wolf, Block, Schorr, and Solis, Bob Toll decided the legal profession was not for him.
He'd been doing some entitlement work on the two lots his father's company was to develop, and he'd obtained approval for an access road. He'd also decided that he wanted to develop those lots.
That's when Al said no. So, Bob did what any respectable child of his generation would do in a clash with a parent. He went to the parent's partner, whom he enlisted in a campaign of persuasion. The partner agreed. At the time, his brother, Bruce, who'd finished his undergraduate work in accounting at the University of Miami, said he wanted in on the deal. With two sons, a lawyer and an accountant, no less, and a partner lobbying him, Al relented and came through with money, lot deals, connections and access to their first bank loans. Toll Brothers was thus born.
"We built two homes. Instead of selling them, we used them as samples for the ground down the street," says Bob Toll, who is now 66. This was news to their bankers. "We showed up with contracts at the bank, and they said, 'You know, you're only supposed to be building two houses,'" he explains. "And I said to them, 'Yes, but I have 20 contracts for homes people want to buy down the road.'"
The brothers would go on to develop and build about 20 homes in 1968, which doubled each year until the business took off in 1976. That first batch of homes in Chester County sold for $17,490 each, remembers Bruce Toll, who is now 63. "My father thought we were overcharging." Profits on those first homes ranged from $400 to $800 per unit–which meant the fledgling company was making an annual profit of about $12,000, according to Bob Toll.
Toll Today
That Toll traces its origins to the Summer of Love plays significantly in how it the company can today guide Wall Street with forecasts that consistently beat expectations. Even amid the worst housing economy in more than two decades, Toll deliveries in 2007 will total about 6,000 or so homes, at an average price of $670,000, for a home building revenue total in excess of $4 billion. Even if Toll is now one of America's best-known home building brands, it's still run the same as it was when the company was a Philadelphia-suburbs neighborhood builder.
Four decades of operation and peer-leading profitability over many of those years prove the validity and fortuitousness of two theories–and their steadfast execution. One is the theory of organizing around vertical rather than horizontal management. The other is a focus on those erstwhile Summer of Lovers, the baby boomers, as the home builder's principal market target for most of the four decades. Both inside and outside the industry, Toll has become known as a name that stands for astute real estate strategy, quality workmanship, and a shrewd business culture that remains as Bob Toll-centric as ever.
Some think that Toll would make for a jewel in a larger company's portfolio in a further-consolidated world of builders. It would be hard to imagine, though, with a 20-percent owner who is both CEO and chief steward of the Toll family mission.
Zvi Barzilay, who joined the company in 1980 after working, among other jobs, as a city planner in Philadelphia, is a director on Toll's board, as well as COO. "We are a unique brand name, which is unheard of in this industry, and we are deliberately and purposefully a teaching and learning organization. Each part of upper management has an obligation to impart knowledge, experience, and wisdom, and we have many, many communications channels for this to happen on a daily basis."
Today, Toll operates in 21 states, with more than 4,000 employees. Essential to the business's ability to grow fast–and at the same time continue to claim primacy among higher-end buyers by serving their "Me Generation" whims and dreams–has been Toll's management structure. Toll's story is, in part, a saga of smart hires. Whom Bob and Bruce have recruited over the years is testimony to their decision to bring on, as chief marketing officer Kira McCarron describes them, "the kids who would get in trouble in school for asking too many questions." Giving 500 project managers complete license and accountability, community-by-community, serves as an object lesson in how to organize around growth.
Learn more about markets featured in this article: Philadelphia, PA.
