Atlanta Flooring Design, which has 15 locations in 6 states, recently announced a major transformation. It has become an employee-owned company. That means its 425 employees will now have a direct financial stake in the company's success. Here, we speak with Donnie Phillips, who started the company in 1990 and Frank Winter, executive vice president, who joined in 1998. The leaders share why they chose to use an employee stock ownership plan as their plan for succession.
FLOOR Trends & Installation: Can you tell us a little bit about the background? You mentioned it's been a few years since you've been thinking about it. Why was this option a good strategy for you?
Phillips: Frank and I both have always considered the culture of our company to be extremely important. We're both hands-on guys, him more so than me, but with that said, we felt that one of the best exits we could ever do for Atlanta Flooring would be to take care of our employees. So as we've matured and gotten older, that process was looking like it would take place around 2019 or 2020 and something called COVID delayed all that, having to just continually look for employees and once again return to do a little more work than we planned on 21 and 22 as we were very busy. So as the dust settled in the first of 2023, we picked it back up and thankfully have made it a reality.
FTI: You started the company in 1985 and today you have more than 400 employees.
Phillips: Yes, started May 17th, 1985, and had the good fortune of meeting Frank around '97. In 2000, we became partners on Atlanta Flooring Design Centers, and it's been a great journey ever since.
FTI: Being that you've been in business so long, obviously succession planning must have become top of mind. Did you consider working for a long time?
Winter: When you grow up in a business, we started as a smaller business and we've kind of grown and our job is basically the same, it's just expanded so a lot of our personal or individual duties we have some of our down line has taken some of that stuff. We divide and conquer between Donnie and I as far as operation sales, so finding the right person just made sense for us with the ESOP. We always told our leaders or the company to treat it like it was your own when you're making decisions and that's why it just feels right for us to do this. We're looking for people to take more of our duties.
FTI: What do your timelines look like as far as retirement?
Phillips: I plan to work for some good years. We're still very, very active in the company. We have both signed a two-year agreement to stay on for two years. I foresee us staying on longer than that, mainly because part of what goes on with the ESOP is the finance component. Frank and I chose to do the financing ourselves which means it'll owe us payments over the next 10 to 15 years. As those payments come in, we have a vested interest in making sure that it will succeed but we're very excited about whatever new leadership will take place over the next two to five years. We have two years to put that in place and three more years to make part-time. So we hope that new leadership will be in place within the next two to five years.
FTI: When you spoke with this idea with your employees, how did you get them on board?
Winter: One of the things when we first decided to do this was our attorney was in our trustee for the ESOP said, "You're going to go in front of all your employees and you're going to say we sold the company and everybody's going to be in shock." The reason they do that is because there's a lot of questions. So this has been building for two years. So we've had a lot of questions over this. And the truth is we're still learning on the ESOP. It's been a learning curve for the employees. Our trustee is going to be at our leadership meeting this week and to do a live cast to all the employees. It's been a little challenging getting it out there.
Phillips: We were transparent with telling our employees more than a year ago that this was our end objective, and part of that was because sometimes they would ask us what we were going to do, and it was always pointing back to the ESOP.
FTI: There’s so many different strategies for succession planning for a company as big as yours. What do you think that this will do for both of you in terms of legacy long-term?
Phillips: I really don't wake up in the morning and think about a legacy or anything different. I do think about leaving my day better than I found it, my year better than I found it, our employees better than when we hired them. So training and growing and listening to people succeed has always been exciting.
So I don't know that I’d use the word legacy, but I do like to use the words positive influence. If we can leave this company with a positive influence after a few years of working in it, I'm going to be a happy guy.
Winter: We always want to be better tomorrow than we are today. We’ll keep improving and we always hire great people. The company has been built by the efforts of everybody involved, so why not have them share in the ownership. It just makes sense for us.
FTI: What guidance would you offer to other retailers who might be thinking about this as an option?
Phillips: I think culture is part of it, that in our case we believe that if you have a career and a long-term interest in a company, then I think that culture benefits it mostly. Frank and I have tried to always say that it's not in any way a get-rich-quick scheme today. It's not about any money we can make on any job today. It's about what can we do long term. So I think that most independent-minded flooring dealers out there feel the same as we do. But there's a cost associated with it. So for the very small stores, the cost would not probably be a good amount to tackle but for a larger store, whatever that number is — 40, 50 or 100 employees or more — I think it's a very good end game if their culture allows it to happen.
FTI: What are you looking forward to this year? What's your outlook?
Winter: Our theme this year for our leadership meeting is “Better Together”. So as long as we're continuing to grow and continue to do things, even with a slower economy, if we can look internally and stop some of the profit leaks and just continue to grow and grow healthy is important to us.
Phillips: I've been at it for a long time, 38 and a half years, and I really can't get my mind around looking to do something different. I'm much too late in life to start a different career. So what I look forward to is the handing off of the company to new leadership over the next couple years, seeing someone that I guess has as much energy, enthusiasm, and interest of taking it to the next level. And if we can go through that process and successfully hand it off, I just think that'd be the greatest accomplishment I can have. As an individual, I would like to have a little more time off along the way, but it's been great. I've not missed much in life. It's been a great journey. I've been extremely blessed.
