Crafton embraces ESOP to preserve company’s culture, legacy
Matt Crafton's entire life has been shaped by the company his father co-founded 56 years ago. Now, he's put forth a plan that will help shape the lives of the people who work for it.
On Sept. 3, Crafton Tull, a multistate engineering and design firm headquartered in Rogers, announced the formation of an Employee Stock Ownership Plan, or ESOP.
As a result, about 250 people are now employee-owners of Crafton Tull under the new ESOP. Crafton said it took nearly a year to pull the plan together, given all the legal and financial details that needed to be finalized.
"It has been an education for us," he joked.
Crafton Tull is now one of only a handful of companies in Arkansas to be owned 100% by employees through an ESOP. In Northwest Arkansas, Harps Foods in Springdale and Central States Manufacturing in Lowell are others.
Crafton, who will turn 52 in October, said a group of about 25 shareholders previously owned the business. For the majority of them, as well as the company's board members, they are in the age group where retirement is not in their immediate plans, but it is coming at some point.
"It's closer than it used to be," he said. "We're certainly not ready to [retire] right now, but we knew we needed to be thinking about this and planning for that day to come eventually."
Crafton said there were many discussions the past several years about the best way to transfer the company's ownership to the next generation. For a number of years as shareholders retired, others bought in.
"We could have continued that program. Another viable option was to sell to a [larger] company," Crafton said. "The thing we didn't like about that was losing who Crafton Tull was and the culture we have built over all these years.
"A lot of people put a lot of effort into that culture and making it what it is and the legacy and the reputation that we have. We just didn't want to lose that. This [ESOP] option allowed us to continue Crafton Tull as an independent company but also gave us the means for shareholders to retire."
A FAMILY LEGACY
In November 1963, Lemuel "Lem" Tull persuaded his friend Bob Crafton to join with him and move to Rogers, a city of approximately 6,300 people, to open a private consulting engineering company. They were University of Arkansas graduates who were both working as engineers with the Arkansas Highway Department in Little Rock.
Their first office in Rogers was out of a couple of motel rooms. From those modest beginnings, the firm experienced steady growth in business and number of employees, necessitating moves into larger facilities and expansion to several branch offices. Crafton Tull today employs 250 people in nine offices in Arkansas and Oklahoma. Besides its two primary service lines, the firm also offers surveying, landscape architecture and planning services.
Matt Crafton said the company is proud of its founding principals and the work they put into the business to make it succeed. Bob Crafton retired in 2000. Lem Tull retired in 1996 and died earlier this year. He was 85.
"We didn't want to lose what they had built," Crafton said. "But it was never about Bob and Lem, and they'd be the first ones to tell you that. They brought in some key people and partners that worked very hard alongside them for decades."
Crafton joined the business in 1998 after eight years of active duty in the United States Air Force. He rose through the ranks from project manager to senior vice president to chief operating officer to president and CEO in 2009. Two years ago, company shareholders elected him chairman of the board. He succeeded Tom Hopper, who retired late in 2016 after nearly 47 years with the company.
Tull's family legacy also continues in the company. His son, Jim Tull, joined the business in 1993 and is the chief financial officer. He said transitioning ownership to the ESOP allows the company to continue moving forward based on the core values that have always guided the business: integrity, respect, excellence, responsiveness, teamwork and safety.
"We really needed a transition plan that worked for everyone — for our current owners, our staff, the communities we serve and of course for our clients," he said.
A COMPETITIVE ADVANTAGE
An ESOP is a federally regulated retirement plan that is designed to invest primarily in the shares of the parent company. Employees will receive shares of Crafton Tull stock over time and will receive the cash value of those shares after they retire or leave the company.
As is the case with most ESOPs in successful companies, Crafton Tull's ownership transition will be funded with corporate earnings. Individual employees are not investing their own funds.
There are approximately 6,500 ESOPs in the U.S., according to recent figures provided by the ESOP Association in Washington, D.C.
"Most ESOPs are in small- to mid-sized firms that are very successful and that need a plan to transfer ownership to a future generation," ESOP Association CEO James Bonham said. "Crafton Tull is part of a growing trend of successful businesses making the decision to pursue employee ownership to position themselves for ongoing success.
"The most successful ESOPs combine employee ownership with effective participation, careful communications and education. Research consistently shows these companies tend to outperform their competitors in the marketplace in terms of sales growth, employee retention and other performance metrics. Not only are ESOPs beneficial for the employees and owners, but research is now showing they can be a true competitive advantage in the market."
Crafton noted the company already has several initiatives in place and plans a strong communications effort to explain the new ownership changes to employees.
"We are planning a series of employee communications — starting with written materials, meetings with employees and the formation of an employee owners' committee — to explain what we've done, why and how it will affect everyone," Crafton said. "We are truly thrilled with this outcome and look forward to many more years of successful operations in the communities we serve."
Crafton also said an enduring philosophy behind the company's success is that Crafton Tull has to hire — and retain — the right people. He hopes the ESOP will enhance that philosophy and, as Bonham noted, be a competitive advantage in hiring new employees.
"We would like to continue to grow," Crafton said. "Mostly organically but perhaps through some acquisitions. That's always been our mission. That was Bob and Lem's mission when they first started with just the two of them. Now here we are with 250 people."
As seen in Business Talk and written by Paul Gatling.