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At the turn of the 21st century, Locke Supply Co.’s founder, Don Locke, passed away — and passed the torch to his employees via an employee stock ownership plan (ESOP). The Oklahoma City, Okla.-based wholesale distributor has had tremendous success with this new ownership model.
The ESOP breathed a new sense of purpose into Locke Supply’s employees, judging from their testimonials:
• “[The ESOP] helps me keep in mind that I am an owner of this company, so the better I do my job and the more I help others be efficient, the more money the company is worth — and the more money I will make in the long run." — Jed Lung
• "An ESOP is more than just letters or a stock ownership plan. It means that this is my company as much as it is my coworkers — and that sense of pride of knowing you are doing a good job for your company." — Alicia Casper
• "The people are the best ... the environment is like no other. I wake up in the morning wanting to come to work, and I can say I haven't felt like that about any other job." — Brandan Gaddis
• “Locke Supply Co. associates treat each other with respect. It is like a big family. Because we are all in it for the long-run, the company proves it is worth it by fighting through hard times and coming out on top." — Adam Counts
The Wholesaler discussed the ins and outs of an ESOP — and more — with President and CEO John Orman III.
The Wholesaler: When did your company become an ESOP and what were the deciding factors to make that change?
John Orman: Our founder, Don Locke, passed away in 2000. His dream was that the associates own the company. His wife, Wanda, and his adopted daughter had not been involved in the company for quite some time.
Don’s succession plan was to get the company to the associates. After he passed, Wanda owned the company outright. The executive team at the time started the process and were able to purchase the company from Don’s family as an ESOP. Wanda was instrumental, and very generous, in the sale to the associates.
TW: How long did the process take to establish the ESOP?
JO: The process did not take long — less than a year. We initially purchased 66 percent in 2000 and the remaining 34 percent in 2004 for a very fair price.
TW: How did becoming an ESOP affect company/employee morale? Was it immediate?
JO: I do not recall it being immediate, but it has made a significant difference over time. The relevance takes a while to show up for most people, but when it does, it sticks. Our ESOP structure creates a phenomenal benefit (as it should) for all. Not all ESOPs are equal, but ours does have a substantial impact on morale.
The difficulty is educating newer/younger associates about the benefits. Often times, they struggle to understand or believe it to be true. We have to be intentional about our communication because the benefit is real.
TW: How did becoming an ESOP affect the company’s efficiency?
JO: Once the meaning set in, most associates’ behavior altered to more of an ownership mentality. Small things began to add up over time and the genuine caring for the company increased.
Many people look at their profession as a job. In an ESOP (at least ours), more people look at their profession as a career and the company as theirs — as they should. When you have that kind of mindset in a large number of associates, improvements in efficiency and many areas take shape and loyalty is created easier than if the ESOP was absent.
The constant challenge is bringing new associates into the fold and maintaining that culture.
TW: How does the company explain the ESOP benefits to get buy-in from new associates?
JO: After you have entered the plan (after a year of service at the first of January or July), you begin receiving beneficial shares equaling approximately 15 percent of your total compensation for the year. That happens every year.
Additionally, the company is valued once a year and the share price is updated. The ESOP is a retirement benefit and is designed for exactly that. It is designed for the long-term associate and significantly supplements 401K and other benefits.
TW: Did you see an even greater dedication as we continue through the COVID-19 pandemic?
JO: I do not know if I can say there was a “greater dedication,” but I can say that it did not wane. I think our associate owners are dedicated day in and day out, regardless of outside forces — they step up when needed. We would not be as successful as we are without their dedication.
I can tell you that there was some fear because of uncertainty and the unknown as COVID-19 began to spread. But once we figured out what was real, how we were going to approach our responsibilities to our communities, and those directions were given, dedication was never a question. The vast majority of our associates never missed a beat. We never closed a door and never stopped serving.
Kelly Faloon is the principal of Faloon Editorial Services. The former editor of Plumbing & Mechanical magazine has more than 20 years of experience in the plumbing and heating industry and more than 30 years in B2B publishing. She is a journalism graduate of Michigan State University.