Bigger Can Be Better (If You Are Working Smarter)

Bigger Isn’t Necessarily Better: Lessons from the Harvard Builders Study
Frederick Abernathy, Kermit Baker, Kent Colton, and David Weil
Lanham, Md., Lexington Books, 2011, 138 pp., $60 (hardback), $24.99 (paperback or e-Book).

As we tiptoe slowly, ever so slowly, onto the solid ground of economic recovery, inexorably our focus hones in on the better times to come. But as we’re crossing the threshold to prosperity, we have an opportunity to move forward armed with insights from some solid research and analysis of the home building market. Unlike most of the (seemingly interminable) analyses of the recent economic downturn, this particular investigation doesn’t dwell on what went south within financial institutions to perpetrate the bad times, but rather examines practices within the home building industry during the good times and the resultant lessons learned that we can take into the next recovery.

Bigger Isn’t Necessarily Better: Lessons Learned from the Harvard Home Builder Study analyzes the eponymous study of the practices of big (more than 50,000 houses/year) home builders that came into being through consolidation and acquisition of smaller companies. At its onset, Harvard Home Builder Study researchers hoped that by analyzing the workings of these large home builders that were enjoying greater and greater shares of the booming market, they could pinpoint how the large builders took advantage of economies of scale, as did the automotive and computer industries. The benefits to the large home builders, through an economic virtuous cycle, eventually would benefit smaller home builders and the industry at large.

The study began in 2005 during one of the greatest expansions ever seen in the single-family housing market, and, as the book states, set out to examine how bigger was better, not if. As the analysis phase of the study continued into 2009, the housing market turned down and then plummeted, dropping off 80 percent of new housing starts from its 2006 peak of 1.7 million. As we all so painfully know, it is still struggling to recover.

In hindsight, the bust has served to highlight the importance of the Harvard study for gleaning what the building industry in general and large home builders in particular can learn and apply moving forward. The study surveyed in-depth 41 home builders (with 88 division levels reporting in), accounting for more than 60 percent of the homes sold by larger builders during 2004. Broad areas of concentration within the study are: organizational and financial performance, supply side management, information and communication technology, and labor and subcontracting.

Multidisciplinary approach

The book Bigger Isn’t Necessarily Better was developed by a multidisciplinary team of distinguished authors:
Frederick Abernathy is a professor of mechanical engineering at Harvard’s School of Engineering and Applied Sciences
Kermit Baker is well known to this audience as the AIA’s Chief Economist and as senior research fellow at Harvard’s Joint Center for Housing Studies
Kent Colton is president of the Colton Housing Group, a housing research and consulting company, and a senior fellow at Harvard’s Joint Center for Housing Studies
David Weil is a professor of economics and distinguished faculty scholar at the Boston University School of Management.

You can feel the touch of four different hands in the presentation of the material through nuances of style and emphasis. This is a good thing for this work, as the four different kinds of expertise are unified into one theory: it adds texture and personality to the narrative. The authors also offer a generous spread of graphic materials to help the reader grasp the large amount of data presented in the book.

The team approach also creates an in-depth profile of how large home builders, considered as an industry, operate, which is in itself a fascinating facet of the book. For architects, it is almost like an anthropological study of a specialized part of the building industry; in some ways very similar, but in others very different from architecture, construction, or engineering.

Lessons learned and gaining advantages through scale

The authors determined that although the large builders were able to leverage their size to access capital and land, they did not take advantage of economies of scale to achieve operational efficiencies, improve performance, or further expand their markets, leading to the conclusion that “big isn’t necessarily better.” In the last chapter, the authors define four major areas in which the large home building industry, moving forward, can take advantage of:
• Improved subcontractor coordination and workforce quality
• Increased standardization and preassembly of components
• The leveraged power of information technology
• Streamlined supply chain management and logistics.

Although the book outlines benefits to the home building industry, in particular through economies of scale, it is just one step removed from the next sphere of the construction industry and maybe a step-and-a-half from the building industry at large. A, E, and A/E firms continue to grow in scale. Likewise, information technology ties to practice advancements such as building information modeling and whole building commissioning, just two examples of how the industry is coming together and where sharing information and lessons learned can revoke the need to apportion blame and help the industry grow into the next boom.

As the book cover illustrates, the authors hit the nail on the head with their analysis. The study and its presentation flow nicely and avoid the propensity of this type of tome to sink into the gravity of its material. The authors deliver on the promise in their book’s title: through a lucid, well-ordered presentation of graphics and prose, they discern, explain, and share the lessons learned from the workings of the large home builders during of the last housing boom. Now it’s our turn—to study and apply these lessons so that we can do our share within the building industry to contribute to softer landings for all during future market downturns.

Stephanie Stubbs, Assoc. AIA, LEED-AP, PMP, is program director for the National Institute of Building Sciences, Washington, D.C.

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