Chairman, Eagle Materials
Born: 1946, in New York, New York.
Education: University of Pennsylvania, BS, 1967; Villanova University School of Law, JD, 1971.
Family: Married Susan (maiden name unknown).
Career: Bracewell & Patterson, 1973–1975, lawyer; Southdown, 1975–1985, CEO and president; Centex Corporation, 1985–1988, president and COO; 1988–1991, CEO and president; 1991–2004, chairman and CEO; Centex Construction Products, 1999–2004, chairman; Eagle Materials, 2004–, chairman.
Address: Eagle Materials, 3811 Turtle Creek Boulevard, Suite 11, Dallas, Texas 75219; http://www.eaglematerials.com.
■ Laurence E. Hirsch joined Centex Corporation in 1985 and eventually became CEO and chairman of the company. During his tenure there, Hirsch helped build the company into the nation's largest home-construction business before diversifying into smaller businesses ranging from cement to pest control, which he did partly in order to offset the impact of the cyclical nature of home building on the company's bottom line. After retiring from Centex in 2004, Hirsch continued his role as chairman of Centex Construction Products, which was renamed Eagle Materials. Analysts credited Hirsch's strategy of extending the reach of both his company and his management power with being a vital key to Centex's success.
Hirsch was born in New York City and attended the Wharton School at the University of Pennsylvania, where he majored in industrial relations and met his wife, Susan. Although he was interested in business, he did not stay on at Wharton in order to earn his MBA, instead deciding to attend law school at Villanova University. In an article by David A. Stevenson that appeared on the Web site of the Wharton Club of Dallas/Fort Worth, Hirsh was quoted as commenting, "I wanted to broaden my education. My wife's father was a lawyer in Philadelphia and I saw him as a role model" (February 12, 2001).
After graduating from law school in 1971, Hirsch spent a year in the U.S. Army Reserves before joining an established Philadelphia law firm, where he stayed for a year. While doing work for one of the firm's client's in Houston, Texas, Hirsch was recommended by the client to the smaller Dallas firm of Bracewell & Patterson, which subsequently recruited him. Seeing the job offer as an opportunity to become involved in more diverse activities, Hirsch accepted the position and practiced law with Bracewell & Patterson for about two years.
As a part of one of his cases at Bracewell & Patterson, Hirsch became involved with Southdown; he was representing a family from New York that was mired in a proxy fight for control of the company. The family eventually obtained three seats on the board and later proposed its own slate of directors. Having helped the family assume control of Southdown, Hirsch approached the 80-year-old family head and asked for the opportunity to run the company; the family head complied. At the age of 29 Hirsch became CEO of a conglomerate that owned oil and gas properties, a cement operation, and a brewery and bottling operations. Hirsch stayed at Southdown until 1985, when he was recruited by Centex.
Hirsch's career at Centex was characterized by exceptional results. He started out as president and COO in 1985, became CEO in 1988, and added the title of chairman of the board in 1991. Over the course of his career at Centex, Hirsch helped oversee an increase in the company's revenues from $1.2 billion in 1985 to more than $10 billion in fiscal 2004.
Although Hirsch had helped Centex become the nation's largest home builder, in 1991 the company still had less than 1 percent of the national market share. In addition, Hirsch realized that the company was dependent almost solely on the new-home market and was thus highly vulnerable to general economic fluctuations. The company's profits had lurched from $62 in 1989 to $34 million in 1991.
Yet, even when Centex's bottom line seemed unstable, Hirsch remained optimistic that the company could grow, and so he oversaw its expansion into new markets. Around 1996 he started to slow down Centex's emphasis on home building, starting fewer projects in suburban subdivisions. Centex had diversified into the manufacture of cement and wallboard when Hirsch joined the company in 1985, and he wanted to diversify further. While researching possible directions in which to lead the company, Hirsch found that mobile homes accounted for nearly one-third of all new homes sold in the mid-1990s; he decided to plunge into that market. In 1997 he bought 80 percent of Cavco Industries, which was the number-one mobile-home maker in Arizona. He also bought a small mobile-home retailer and started up one business that financed mobile homes and another that built trailer parks. By the end of fiscal 1999 Hirsch's decisions had paid off: that year Centex's mobile-home operations earned around $12 million, up from the $6.7 million of three years before.
Hirsch's efforts at diversification also included investment in pest control. The company installed porous plastic pipes in the walls of its new homes, then sold pest-control services in which a Centex employee used the pipes to fumigate the house every three months. In many communities up to 90 percent of home buyers signed up for the services, leading to more than 100,000 pest-control customers in 1999 and $31 million in revenues. All in all Hirsch led Centex's non-home-building businesses to account for 44 percent of the company's sales and 50 percent of its operating profits in 1999. Many analysts credited his expansion tactics with helping the company to remain strong through a subsequent falloff in home building. Although Hirsch's strategy of keeping new-home sales flat at around 13,000 units a year allowed another company to gain the market-leading position in the home-building industry, Centex nevertheless became the top home builder on the 1999 Forbes list of platinum companies, with an average five-year return on capital of 13.4 percent.
By 2001 Hirsch had directed Centex's initiation of an international home-building operation that functioned primarily in the United Kingdom and Mexico. He also started a sub-prime lending operation and continued to spur growth in the company's home-services businesses, which grew to include security and lawn and garden fertilization as well as pest control. Overall the company's stock went from $18 to $42 a share between 2000 and 2001. Meanwhile Hirsch had kept home sales increasing at a rate of 16 percent over the years, and analysts credited him with helping the company leverage costs, thus boosting net income by 51 percent. Still, many analysts were questioning Centex's and other construction companies' ability to continue to grow as worries about the stability of the economy heightened.
Hirsch remained confident that he could keep all of Centex's gears running smoothly in spite of the signs that the economy was entering a slump. While Centex had fallen to the number-four position in the U.S. home-building industry, an alysts remained bullish largely because of Hirsch's diversification strategies. They noted that the Dallas-based company was extremely strong in construction contracts in states such as Texas and Florida, and they also emphasized the company's strength in not being entirely reliant on the cyclical construction business for profits. In 2002 one-third of Centex's profits came from home-building services such as home finance and pest control. By cutting back on new-home construction, Hir sch had ensured that the company would retain a low inventory of unsold homes.
Hirsch also established a mortgage unit called CTX Mort gage that played solidly into the firm's strategy for increasing income. In an interview with National Mortgage News , Hirsch noted, "CTX Mortgage will add about $75 million to the company's earnings this year," (December 17, 2001). On April 31, 2003, Hirsch boasted of a truly spectacular quarter in terms of finances, in which Centex's revenues increased 28 percent to over $2.3 billion.
Analysts noted that Hirsch's emphasis on diversification in the 1990s helped make Centex one of the most successful building companies in the nation. They observed that part of his management style was also to spread out his management power. For example, he redesigned the company's home building operations so that they were split into 40 profit centers, each run by a local president. These presidents took complete responsibility for regional aspects of the businesses—aspects that were typically overseen at headquarters at other large building companies—such as the purchasing of land and construction materials and the contracting of services. Analysts noted that this approach provided real incentive for regional presidents to turn large profits, as their salaries could be doubled or tripled as a result of their performances.
With respect to his personal philosophy on business leadership, Hirsch maintained that there was no single "best" approach. He once noted that leadership-development professionals often said that their specific practices could be applied at any firm; Hirsch, however, maintained a more independent view of leadership. As quoted in the book Leading the Way: Three Truths from the Top Companies for Leaders , by Robert Gondossy and Marc Effron, Hirsch noted, "Let's take that best practice and really think how it fits our people, and what the needs of our people are. We need to 'Centex-ize' it" (2003).
Although Hirsch had outlined many plans for Centex's future, the company suddenly announced in early 2004 that he was retiring as CEO and chairman. Some analysts were surprised at his resignation, which became effective March 31, 2004. Arthur Odama of Morningstar told the Miami Herald , "This appears to be an unexpected change at the top" (January 7, 2004). Although he was no longer Centex's chairman and CEO, Hirsch continued to serve as the chairman of the separate company Centex Construction Products, which was renamed Eagle Materials after it was spun off from Centex Corporation. Eagle's businesses included ready-mixed, aggregate, and cement operations in Texas, Nevada, California, and Illinois. During his career, Hirsch was also a member of the boards of directors of Luminex Corporation and Belos Corporation, an advisory director of Heidelberger Cement, and a trustee of the University of Pennsylvania.
See also entries on Centex Corporation and Southdown, Inc. in International Directory of Company Histories .
"Centex CEO to Step Down," Miami Herald , January 7, 2004.
Gondossy, Robert, and Marc Effron, "Chapter 1: The Looming Leadership Crisis," in Leading the Way: Three Truths from the Top Companies for Leaders , New York, N.Y.: John Wiley & Sons, 2003.
Hirsch, Laurence, "Home-Builder Stocks Punished Too Much?" interview in National Mortgage News , December 17, 2001, p. 16.
"Home Building Plus," Forbes , March 8, 1999, p. 89.
Stevenson, David A., "Laurence E. Hirsch," Wharton Club of Dallas/Fort Worth, February 12, 2001, http://whartondfw.org/alumninews/alumninews1.html .