A new book from researchers at Harvard University shows that American home builders were immensely profitable during the housing boom, but did little to improve the efficiency of their operations.Bigger Isn’t Necessarily Better: Lessons from the Harvard Home Builder Study,just released by Lexington Books, examines the performance and operation of the US home building sector based on a detailed survey of large home builders during the housing boom of the 2000s.
“Home builder consolidation was one of the most powerful forces this industry has seen over the past several decades,” said Frederick Abernathy, a professor of mechanical engineering at Harvard University and one of the book’s authors. “Yet it’s almost impossible to see its influence in the basic operations of these large companies.”
Though numerous studies have focused on the financial side of the housing sector prior to the Great Recession,Bigger Isn’t Necessarily Betterexamines the building side of the industry and what did, and, more importantly, what did not, happen during the period of unprecedented growth from 1999 to 2004.
“Large homebuilders were very effective at attracting capital for expansion, assembling favorable land positions, and developing a consistent corporate brand,” noted Kent Colton, a Senior Fellow at Harvard’s Joint Center for Housing Studies. “However, since much of the growth over this period was through acquisitions, there was little opportunity to fully integrate them into practices and procedures of the parent company.”
The home building industry still has gains it can realize from improving basic on-site building operations. “In a weaker and more competitive housing market, companies with more efficient operations will be the ones that thrive,” stated Kermit Baker, a researcher at the Joint Center.
Examining the experience of companies in other industries, from autos to computers to retail,Bigger Isn’t Necessarily Betterprovides insight into how American home builders might better cope with operational challenges going forward. “Many other industries have faced these same challenges,” said David Weil of the Boston University School of Management. “Home building is an unusually decentralized industry, and for that reason typically has not been a leader in implementing new innovations. Still, there has never been a more important time to introduce new practices into this industry.”
The book is available onAmazon.comand throughLexington Books.