Business of Learning Part 3 – Levitt Homes

By Brad Nelson

Levitt Homes is another company that was significantly altered in the 1950’s.  This is their story and some beneficial lessons that they learned.

Previously in this series, we were introduced to five companies which began or were significantly altered during the decade of the 1950’s. We have examined the first two of these companies, General Motors and Holiday Inn, and identified lessons that an electronic systems contractor can use to improve how it does business. In this installment, we will look at the next endeavor: Levittown.

Let me briefly recap the story of how the staff of Sound Solutions Northwest Inc. considered these five businesses. The stories of the companies are discussed in five chapters of the book The Fifties by David Halberstam. As part of a brainstorming session, each staff member read a chapter about one of the five companies and from their viewpoint, answered seven basic questions. The seven questions were:

• 1.) What was the story of the company and the men who ran it?
• 2.) What was good about the company?
• 3.) How can we use that in Sound Solutions?
• 4.) What was bad about the company?
• 5.) Are we doing that right now?
• 6.) If so, how can we stop it?
• 7.) If not, how can we avoid it?

We then discussed everyone’s insights and, as a group, identified lessons we could apply to improve how we work.

LEVITTOWN (Bill Levitt)

The Story

Like Holiday Inn, the third venture we examined was started by a home builder, but one who took a different approach than Holiday Inn’s founder, Kemmons Wilson. William J. Levitt looked at the mass production techniques pioneered by Henry Ford, and adapted them to the housing industry. The Levitt brothers, Bill and Alfred, started the trend of affordable housing developments.

As with Kemmons Wilson’s work in home building, Bill Levitt began during the pre-war environment of the Great Depression. During this time, most home builders constructed between two and five houses per year. They tended to be custom designed, custom built structures. This began to change with World War II. In 1941 the Levitt brothers won a government contract to build 2,350 homes in Norfolk, Virginia. As they moved forward on this massive project, it quickly became a disaster. Due to the labor resources available, the Levitt brothers found themselves behind schedule and losing money. They recognized that the then-standard method of building houses would never work on such a massive scale.

The Levitts began to change this by breaking down a house-building project into twenty-seven basic steps. Using Ford’s idea of mass production, they established and trained twenty-seven teams. Each team would specialize in one step of the building process. The homes couldn’t be moved on an assembly line, like a car, however the teams could move from house to house. This concept allowed them to work around the shortage of skilled workers and also sped up the overall completion. Base salaries were determined by the average expected production within each team, and bonus incentives were given for those who exceeded the average. This enabled a worker to make more money without laboring more hours.

Their approach was recognized as successful, and ultimately, Bill Levitt went to the Pacific Theatre with the Navy, to build airfields for the war effort. Time was the critical factor in this work.

In the evenings, Levitt would brainstorm with the military personnel that worked with him during the day. They would analyze what was done that day, and discuss how they could do it better and faster next time. These opportunities allowed Levitt to refine and test his concept of mass-construction.

During the course of the Great Depression and WWII, U.S. housing starts had fallen by more than 90%. But after the war ended, the demand for new homes exploded. In 1944, there were just 114,000 new houses started across the nation. Within six years, this number had grown to 1.7 million. Bill Levitt had decided that the market for custom houses was dead. The only way to meet the voracious national appetite for housing was through mass-production. So Bill Levitt began building on a thousand acres of farmland on Long Island, and Levittown was born. Following initial ramp-up, his construction process was so polished that by mid-1948, Levitt’s crews were finishing an average of 36 houses in each 8 hour shift.

At first, Levitt took this concept of standardization as far as offering only one style of house intended for young families, much the way Henry Ford said that the Model T was available in any color you wanted, as long as you wanted black. Yet even within this methodology, there was willingness to adapt to meet the customers’ needs. Early on, the home design was changed to relocate the kitchen so that mothers could watch their children playing in the back yard. The design also allowed the home owners some future expansion by converting the attic or building a small addition. Eventually, with his third development in the late 1950’s, three different styles of home were made available, and they were geared to reflect the growing affluence of his target customers: middle-class families.

In spite of the persistent criticism by those who disliked the uniformity of his developments, Levitt focused on building homes that would meet the needs of as many families as possible, as quickly as possible. One application of this focus was by providing cutting edge technology – power tools – to help his workers build faster. In this, everyone benefited – he got more homes built, and the workers had a better opportunity to receive their performance bonuses. Also, when Bill realized that disruptions by suppliers could bring the whole process to a grinding halt, he looked for ways to become self-sufficient. He bought nail-making machines and scrap iron to produce nails. His workers made their own cement. Wholly-owned subsidiaries would supply the appliances. He even purchased timberland in Oregon and built a lumber mill there, so that he would not be dependent upon the supply schedule of another company.

Some eschewed Bill Levitt’s philosophy as an undesirable cookie-cutter method. But thousands of families saw that it met their needs, as well as their long-hampered desire to live the American Dream. As a result, Levitt’s construction approach became known and implemented nationwide. By 1955, 75% of all new housing starts across America were in Levittown-type communities.

Though we did find things to dislike about Bill Levitt’s business tactics, it is clear that he was a successful businessman, and that he started a revolution in housing that affects where many of us live today.

Our Lessons

• 1.) Determine where your company should be on the continuum between cookie-cutter and custom. In the systems contracting industry, there will always be opportunities to provide a completely customized system. However, that is rarely the most profitable approach. There must be some level of standardization in our work. For instance, simply opening a dealership shows a certain intention to standardize product offerings. And beyond this, we learned that the more we can standardize our projects, the greater the opportunity to complete them quickly and profitably.
• 2.) Approach a project as a series of standard processes. By pre-defining the workflow from one step to another, as well as the tasks which need to be done within each step, the company is better equipped to complete a project in a smooth and successful manner. The vast majority of your projects should fit within your work-flow template. The template should be changed to allow better performance of the company, but not on a whim for one job. If a single opportunity comes along that requires you to break out of the template, perhaps it is not a project that your company should accept.
• 3.) Use performance bonuses as incentives for increasing staff productivity. Nowadays, this is commonplace business advice. But as a systems contractor, we found it difficult to identify what criteria to tie the bonuses to, and what those bonuses should be. The answer will be different for every company, but for Sound Solutions, we determined three fundamentals: 1.) our bonuses should be tied to billable hours; 2.) they should be individually earned; 3.) they should be available to every staff member, including support staff. Though a different set of criteria could provide a better result for your company, the important thing is to find a way to implement this valuable tool.
• 4.) Limitations are meant to be removed, not accepted. As good as any company is, there will always be at least one limiting factor that holds back performance or growth. (For example, at various points, Bill Levitt found this to be the availability of lumber, nails, cement, and appliances.) Yet, it is all too easy to accept that limitation and become complacent with the level of success achieved. It takes consistent, open questioning to identify the next thing that needs improvement. In my office I have posted the saying, “The key to a vital life is an eagerness to learn and a willingness to change.” That statement holds true for both people and businesses. bn