Big Builder ’07 Innovator Spotlight: Gary Mayo

Big Builder ’07 Conference

From a strategic perspective, entering the Las Vegas market with the acquisition of Coleman Homes’ local division in 1997 positioned Toll Brothers to achieve high visibility and a piece of market share in what would eventually become an ultra-competitive production builder environment. By 2003, the company had already sold roughly $450 million worth of homes in the robust market and announced an expansion into Reno. Today, along with Florida, Toll’s Nevada operations are among the hardest hit. After closing 368 homes in 2006, expectations for this year are down roughly 50 percent, and 2008 may be even bleaker.

Gary Mayo Photo: Courtesy Toll Brothers As a tougher capital environment sets in, group president Gary Mayo has committed to do more with less. He’s convinced that through smart-sizing and realignment, he can create an effective team for today and preserve superstars for tomorrow. “We are in an interesting and different position than most of the publics,” Mayo says. “We will institute incentives to move product, but we won’t move it at any cost–which is unlike our competitors. Through corporate philosophy, I can’t price the product to be as competitive with the other guys, so I have to do it with less staff and less discretionary overhead.”

To get inline with operations, Mayo has downsized his staff with three rounds of layoffs since January. “We won’t cut back on the sticks and bricks, and the land cost is what it is, so the only area I can look at is doing it with fewer but better people.” Today, the staff, which peaked at 348, is exactly half that number.

But rather than to cut mid- or upper-level managers where hefty compensation makes more impact on the bottom line, Mayo has implemented contrarian thinking by maintaining people who have been with him for 10–12 years. To help ride out the storm, everyone has taken a step up and is juggling.

“The way we do it [keeping the top-level staff and pushing them down as far as responsibilities] costs the company a lot more in salaries than it would had we done it the other way, which most companies do,” Mayo says. “We could be saving millions more in salaries through the reductions that we have had if we had let the managers go instead of the worker bees.”

Impact

Admittedly, the initiative has people spread thin. But, structurally, while one or two disciplines have been deemphasized, the division hasn’t lost any departments. “Land acquisition is almost nonexistent, but we have shifted their focus into production housing to preserve them. … I have vice presidents all the way up to division managers who are out in the field again, now running one, two, or three communities as well as maintaining what their day job was before,” Mayo explains. “It breeds loyalty with these guys. They know that, as long as they are willing to take a step back, we’re willing to continue to hold onto them.”

Vitals

Gary Mayo runs the Nevada operations and joined Toll Brothers in 1997 as part of the Coleman Homes acquisition’s management team.

Outlook

“I do need to generate enough cash flow to pay the bills, but I don’t need to do it at a loss; so you’re going to see us with much less market share than we have had over the last 12 months ? and we are ready for that,” Mayo says. “When things pick up, I will just need to hire some construction mangers and I’ll be ready to go again.”

–Lisa Marquis Jackson