Tomnitz, Don 1948–

views updated

Don Tomnitz
1948–

Chief executive officer, president, and vice chairman, D. R. Horton

Nationality: American.

Born: 1948, in St. Louis, Missouri.

Education: Westminster College, BA, 1970; Western Illinois University, MBA, 1975.

Family: Married Sharon (maiden name unknown); children: two.

Career: U.S. Army Signal Corps, 1971–1974, second lieutenant and captain; Western Illinois University, 1975–1976, professor of business; RepublicBank of Dallas, 1976–1981, vice president; Crow Development Company, 1981–1983, vice president and partner in the Land Acquisition and Development and Custom Home divisions; D. R. Horton, 1983–1994, vice president of various divisions; 1994–1996, vice president of Western Region; 1996–1998, president of Homebuilding Division; 1998–2000, executive vice president; November 1998–, chief executive officer, vice chairman; 2000–, president.

Awards: Winner of the Alumni Achievement Award, Westminster College, 2004.

Address: D. R. Horton, 1901 Ascension Boulevard, Suite 100, Arlington, Texas 76006; http://www.drhorton.com.

■ Home construction executive Donald J. "Don" Tomnitz was the CEO, president, and vice chairman of the home construction company D. R. Horton. With over $8.7 billion in revenues in 2003, Tomnitz led the company that had been building houses since founder and chairman Donald Horton built his first house in 1978 with a $33,000 loan. Tomnitz began working with D. R. Horton in 1983 and rose rapidly within its ranks, helping to take it public in 1992.

D. R. HORTON

D. R. Horton was a national leader among U.S. homebuilders. The company constructed and sold single-family homes in metropolitan areas throughout the United States: the Mid-Atlantic, the Midwest, the Southeast, the Southwest, and the West. It also sold upper-end, luxury, and active-senior housing, which can cost up to $900,000 per unit, but 80 percent of its sales in the early 21st century came from entry-level and first-move-up single-family houses (that is, homes priced under $250,000). The company closed on over 40,000 homes annually in the early 2000s. Houses ranged in size from 1,000 to 5,000 square feet, with an average selling price of $232,000.

In the early 2000s D. R. Horton operated through 53 divisions that built together in 44 markets within 20 states. The company built and sold homes under the D. R. Horton, Cambridge, Continental, Dietz-Crane, Emerald, Melody, Milburn, Schuler, Stafford, Torrey, Trimark, and Western Pacific names. It also provided mortgage financing and title services to homebuyers. Its competitors included Beazer Homes USA, Centex Corporation, KB Home, Lennar Corporation, M.I. Schottenstein Homes Inc., Pulte Corporation, Ryland Group Inc., and Standard Pacific Corporation.

FROM AIR FORCE TO LAND DEVELOPMENT

Tomnitz grew up traveling around the world with his father, an air force officer. Later, while living with his aunt and uncle in Missouri, Tomnitz decided he wanted to become a physician. He attended Westminster College in Fulton, Missouri—financing 75 percent of his collegiate expenses while receiving a two-year Reserve Officer Training Corps scholar-ship—where he completed his BA degree in economics and earned honors as a distinguished military graduate. After college, from 1971 to 1974, Tomnitz served in the U.S. Army Signal Corps, first as a second lieutenant and eventually as a captain.

During college Tomnitz did not perform well in premed classes, so he decided not to pursue a medical degree. Instead, he received his MBA degree in finance from Western Illinois University (WIU) in Macomb, Illinois. After graduation in 1975, Tomnitz taught at WIU's College of Business for one year. In 1976 he became a vice president of RepublicBank of Dallas, Texas. In 1981 Tomnitz began his real estate and home construction career when he became vice president of Crow Development Company (a Trammell Crow Company) and partner in the Land Acquisition and Development and Custom Home divisions, working in land development around Forth Worth, Texas.

In 1983 a land development associate introduced Tomnitz to Donald R. Horton, a small homebuilder in Fort Worth, who owned a number of building companies in Tarrant County. Within about six months Tomnitz had joined Horton to form a development company within D. R. Horton (Horton owned 51 percent and Tomnitz owned 49 percent) that would sell property to other builders.

Tomnitz was a vice president in charge of various divisions of D. R. Horton from 1983 until he was elected vice president of the Western Region in August 1994, a position he held until 1996. From 1996 until 1998 Tomnitz was president of D. R. Horton's Homebuilding Division; in January 1998 he was selected to be executive vice president of D. R. Horton. In November of that same year he was elected vice chairman and CEO of the company, and in March 2000, he became president as well.

KISS

Even though they were very different in personality, Tomnitz and Horton complemented each other while running the company. They both agreed that their business was run best under the slogan KISS: Keep It Simple, Stupid. Throughout the company's history, they operated by keeping land no longer than was necessary. Tomnitz and Horton also continued a specific business strategy that was set early in the company's history. Both men agreed that the majority of buyers would be in the middle-income group of people. They continued to build most of their homes at that under-$250,000 level.

SIMPLE IN ACTION

Tomnitz developed a corporate culture of frugality. During the early years, Horton told Tomnitz to start every morning like the company was broke, because if that were true, then they would not spend any more money than was absolutely necessary. This philosophy helped them survive the difficult times, especially the hard Texas real estate market of the late 1980s and early 1990s. When times improved, the two men continued to operate under the same thrifty attitude: no private jets or company cars, no company cell phones, and no first-class airplane travel (unless they or the employees paid for it personally). Tomnitz aimed to keep total expenses under 10 percent of total overhead, and as of April 2004 the company was at 9.6 percent, the lowest overhead in the home-building industry. Tomnitz compared D. R. Horton to Wal-Mart, calling it the Wal-Mart of the housing industry in its ability to keep expenses as low as possible.

CUSTOMER SATISFACTION

Tomnitz gave each D. R. Horton customer a one-year general–ten-year structural warranty on all of the company's houses. However, company policy stated that the company would go beyond those minimum requirements if customers were unhappy. Tomnitz realized early that it did not matter who was right and who was wrong: the company's reputation would be hurt with respect to public opinion if they did not satisfy every customer. In fact, Tomnitz often remarked that one unhappy customer would result in at least ten lost referrals. As a result, D. R. Horton implemented no fancy slogans about quality and value, only calling itself "America's builder." Instead, Tomnitz preferred to build value and quality into the company's homes and let the homes advertise themselves. This marketing strategy worked well for both Tomnitz and D. R. Horton.

Besides the attention to quality and customer service, Tomnitz offered many more choices within D. R. Horton houses than did its competition. About 50 percent of revenue came from these custom options. Floor-plan changes were built into any standard home, even at the entry-level house, a feature not available with D. R. Horton competitors. Tomnitz proudly stated that such degree of customization within its homes had not been successfully duplicated anywhere else in the industry.

EXPERT MANAGEMENT TEAM

Tomnitz developed authority on a regionalized basis throughout his company's structure. That is, each of its 53 division presidents was empowered to respond quickly to whatever happened within their local areas. In return, each division president could count on fast action from Tomnitz and his staff in making decisions based on his or her recommendations. Tomnitz disliked bureaucratic layers that often paralyzed other companies. For instance, Tomnitz realized that he could close a land deal much more quickly when the already informed and experienced division president was able to act fast to secure all the necessary information. As a result, there was always a direct link between him and his staff and the senior field managers. In addition, division presidents averaged about 13 years of Horton experience, and regional presidents averaged about 15 years. Senior management positions were filled by promotions, and prospective new employees were hired only if management believed they would fit in with the company's culture. Tomnitz stressed on-the-job training—making sure that the right people were in the right positions—and then calibrated their success with such statistics as customer satisfaction ratings and sales performances.

Aggregate (total) purchasing was instituted in 1998, and when Tomnitz took over in 2000, he enhanced the strategy. His initiative was a three-part approach to save over $3,000 on a $250,000 house. First, national contracts were negotiated for products that were used across the country. Second, regional purchasing managers were responsible to negotiate for products only applicable for their own region. Finally, manufacturers were given larger contracts when they provided better prices and were more efficient. Tomnitz reported that the company saved about $100 million in 2003 with such cost-saving practices.

ACQUISITIONS

About 40 companies had been added to D. R. Horton by the early 2000s, with 17 of them acquired since 1994. In 1998 Tomnitz purchased Phoenix, Arizona-based Continental Homes, which helped to generate sales of both customized and standardized houses, both with lower per-square-foot costs. The acquisition enabled Tomnitz to make national purchases. In 1999 he directed the acquisition of Chicago, Illinois-based Cambridge Properties. Tomnitz secured the largest acquisition in 2002 when the company purchased El Segungo, California-based Schuler Homes for $1.2 billion. In that year the addition of Schuler doubled D. R. Horton's sales; they sold 31,584 homes, making the company the largest builder of houses in the country, based on closings.

CONCENTRATING ON INTERNAL GROWTH

Beginning in 2003 Tomnitz focused on internal growth rather than acquisitions by increasing market share, reducing debt, and improving margins. In 2003 D. R. Horton was among the top five builders in 70 percent of its markets. Tomnitz felt that success was in part due to providing bonuses for his division presidents if they made the list of top five builders or accomplished double-digit market share in their area.

OLD-FASHIONED VALUES ARE HOMEMADE

Tomnitz ran his life both personally and professionally with old-fashioned values. His well-ordered and disciplined life began early as he ran five or six miles before arriving at the office at 7:30 a.m. for a workday that usually lasted 12 hours. Most of his day involved strategy and organizational meetings with his divisional presidents, members of various company departments, legal professionals, and members of investor relations. He usually spent at least two weeks per month visiting salespersons and construction people in the 20 states where the company did business. When time allowed, he also liked to snow ski, hunt, and fish.

Due to a consistent work plan, honest ethics, and a very effective management strategy, Tomnitz saw the company grow to $8.7 billion in revenues in 2003 with a net income of $929 million. Along with these impressive results, the company produced 105 consecutive quarters (as of April 2004) of increased revenues and profits. Alone among publicly traded companies, D. R. Horton had never lost money in any quarter, a statistic that Tomnitz was proud to state. Tomnitz also predicted that the company would have revenues of $10.2 billion to $10.4 billion in 2004. Tomnitz headed an expert management team that had been the country's fastest-growing homebuilder for 10 years, a statistic that seemed likely to continue into the future.

See also entries on D. R. Horton, Inc. and Trammell Crow Company in International Directory of Company Histories.