The new Ryland. (Ryland Group Inc.) (Cover Story)

Three years ago, Chad Dreier brought tumultuous change to a rigid company culture. Positive financial results have finally started to appear.

What's wrong with this picture? Chad Dreier, chairman, president, and CEO of The Ryland Group, proudly stands in the vaulted living room of one of the company's stylish new models, sun shining down from a two-story window wall, outlining his plan for improving the company's meager earnings.

Nothing may be wrong with the picture, but this isn't the kind of house historically associated with Ryland. Since its inception in 1967, the builder has seemed intent on perfecting the center-hall colonial. It offered customers little in the way of options or customization. Flexibility was not a word used to describe either the company's operating philosophy or its floor plans.

Dreier, who took over at Ryland in late 1993 and brought with him a new way of going to market, wants to change that. His strategy hinges on improved sales from new houses designed by some of the nation's best architects, with flexible floor plans, media lofts, tall kitchen cabinets, surfacing options, the best features new homes have to offer. The designs result from local marketing analyses, something Ryland never used to do.

"Only 20 percent of our sales were in plans such as this last year," says Dreier, pointing to a sweeping kitchen/family room with an optional bump-out for a very low cost per square foot. "But they sold faster than any other single-family homes we built, and they produced 2 percent to 3 percent more gross margin. We hope these designs will account for 50 percent of sales this year."

After two years of promoting the changes at Ryland, positive financial results have finally started to appear. Second quarter pre-tax earnings increased to $9.6 million (the company lost $4.7 million in the same period the year before). They rose on the strength of improved gross profit margins, which averaged 13.7 percent in the first half of this year, about 2.3 percent higher than they were the year before. "Our financial performance is starting to reflect the result of the many initiatives we have taken to improve profitability," says Dreier.

Some stock analysts agree. Morgan Stanley's Peter Dannenbaum notes that Ryland's stock outperformed the …