Peck leaves Ryland set for next boom

December 26, 1990|By Timothy J. Mullaney

Nine years ago, Jim Ryan and Charles E. "Ted" Peck had a short chat on the front steps of the Ryland Group Inc.'s Columbia headquarters. The topic: Each of them was thinking of chucking his job.

Mr. Ryan was an entrepreneur who had founded Ryland and was its chairman and chief executive officer; Mr. Peck was a long-time executive of Owens-Corning Fiberglas Corp. and a member of Ryland's board. Mr. Ryan liked to make decisions fast; he offered his job as CEO to Mr. Peck on the spot. Mr. Peck liked to make decisions slowly; he told Mr. Ryan he needed 90 days to study the building industry and think it over. He ultimately decided to take it.

Nine years later, Mr. Peck is retiring, leaving as triumphantly as any CEO of a cyclical company can if he has the bad luck to turn 65 during a down cycle. Ryland's sales have more than quintupled during his tenure to $1.4 billion. Ryland's net worth has grown at an annual rate of 21.8 percent, well above the company's goal of 17 percent. From $3 million in the recession year of 1981, the company earned $58 million last year -- a record, albeit one Ryland won't match this year or probably next, when its homebuilding division could lose money for part of the year.

"I think the earnings record of the company speaks for itself," said Barbara Allen, a securities analyst who follows Ryland for Kidder, Peabody & Co. in New York. "Their earnings from the peak of the last economic cycle to the peak of this one -- 1979 to 1989 -- quintupled. They've been phenomenal, and without betting the farm."

"I never studied anything in my life for 90 days," Mr. Ryan says now, laughing at the memory of his impulsive offer. But Ryland needed a big-company executive like Mr. Peck after its founding entrepreneur left, he said -- someone who knew how to plan, how to delegate, how to create decision-making systems as well as simply make decisions. The fact that Mr. Peck wanted 90 days to decide whether to take the job -- well, that sort of proved he was the right man, Mr. Ryan said.

As the homebuilding industry hunkers down for the bust that has followed the late-1980s boom, Mr. Peck's approach to the homebuilding industry is looking pretty good. Competitors such as NVR L.P., the parent of NVHomes and Ryan Homes, which scorned Ryland's characteristic caution and adopted more aggressive tactics during the 1980s boom are having trouble dealing with today's downturn. Ryland is only doing decently but is preparing to capitalize when the economy rebounds.

"This period is demonstrating the wisdom of their operation," said James Rouse, founder of the Rouse Co. of Columbia and a member of Ryland's board of directors until this year. "Their earnings are down, but there's a big difference between earnings being down and earnings disappearing."

"They're sitting pretty for the inevitable turnaround," Ms. Allen said.

Mr. Peck also leaves looking like a throwback to a time less rough-and-tumble than the 1980s. He doesn't buy Milton Friedman-like theories about how business' only social responsibility is to make money -- Ryland gives away part of its profits every year.

He and his wife also set up a trust fund to provide annual income to the Columbia Foundation with their own money, foundation director Barbara Lawson said.

"He has a real global view," said Jean Gerding, vice president for corporate, regional and strategic management at the United Way of Central Maryland in Baltimore. "To say that the corporation has a social responsibility is very enlightened and increasingly rare."

Ms. Gerding gave Mr. Peck especially high marks for his role in persuading suburban companies and executives to become more involved in supporting regional non-profit groups, many of which support services aimed mostly at Baltimore.

Mr. Peck dismisses such praise. "The way you make money is by doing the work better than other people," he said. "An important part of that is fitting into your community. Making contributions to the community will help you do your work better and make more profits."

Ryland is known in the industry as one of the most conservative homebuilders, a strategy that is often attributed to Mr. Peck, a Wharton School graduate who projects an old-school, gentlemanly air.

Ryland has low debt, for example, and doesn't pile up inventories of land to build houses on, except in California. Instead, it pays smaller amounts to put options on land it wants, and actually buys the land when it is ready actually to build the homes.

The company also has eschewed "junk" bonds and hostile takeovers, which have been key tools for some other builders, notably NVR.

But Ryland insiders say Mr. Peck's contribution was knowing when to be flexible enough to bend the house rule, and when to be smart enough to enforce it. The staunch conservatism of the company had been established under Mr. Ryan.

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