October 3, 2002

The Antioch Company grows, but not in Yellow Springs

CEO Lee Morgan

When Lee Morgan began working at Antioch Publishing in 1970, he joined a Yellow Springs-based company with 30 employees and yearly sales of $350,000.

Thirty years later, Morgan heads an organization — now called The Antioch Company — with 1,100 employees in four U.S. locations, plus six overseas offices. This year the company is projected to reach $340 million in sales, a number larger, said Morgan, the company’s CEO, than sales of the other three Yellow Springs industries combined.

One of the country’s 10 largest direct-sales businesses, The Antioch Company had more U.S. sales last year than Tupperware, Morgan said. And while this year’s 30 percent increase in sales over last year is exciting growth in anyone’s book, it’s not that unusual at The Antioch Company, which has seen a compound annual growth rate in excess of 20 percent for the last decade.

The reason for all this success?
Morgan sidesteps credit himself, other than to say he attracts good luck. More important to the company’s continual growth, he said, is the winning combination of the company’s unique structure of employee-ownership and the employees’ passion for their products.

“We’re the only employee-owned direct sales company,” he said in an interview last week. “The combination of mission-driven employees and employee-ownership has given us a competitive advantage.”
The uniqueness of The Antioch Company is evident as soon as a visitor walks in the door of the Yellow Springs operation. The building addition, which was constructed two years ago, offers an open, light-filled environment with a layout that emphasizes an egalitarian workplace rather than the traditional hierarchical structure. Visitors won’t find Morgan in a large private office — they’ll find him in his cubicle, which is identical to the other cubicles and just as accessible.

“Work is a communal activity,” Morgan said of his choice of office space. “If you value privacy, you might as well stay home.”

Several employees say that The Antioch Company is a business that lives its values. Those values, according to its most recent quarterly report, are to act with integrity, to enrich the lives of its employee-owners, customers and partners “through a sense of purpose, civility, community and fun,” to value people, and to “provide opportunities for a bright future through empowerment, encouraging and supporting new ideas, and the sharing of risks, rewards, and ownership.”

Placing people above profits has been the company’s guiding value since it began in 1926 as Antioch Bookplate Company, said Morgan, who is the son of the company’s founder, Ernest Morgan, a longtime socialist and Quaker.
“Ernest always said the purpose of business was to serve human needs,” Lee Morgan said. “That was his greatest legacy.”

While his father offered profit-sharing to Antioch Bookplate employees, Lee Morgan took his father’s philosophy a step further after he took over the business in 1979, offering employees the opportunity to become owners as well. Currently, 46 percent of the company is employee-owned, and those who have been employee-owners more than 18 years have become millionaires, Morgan said.

“We institutionalized what my father talked about,” he said.
Employee-ownership creates an atmosphere of open communication at The Antioch Company, Morgan said. Currently, nine members of the Board of Directors include two directors elected by employees, two managers and five outsiders, along with three employee-elected observers. All board meetings are open.

“Our employees know everything,” Morgan said. “They get all of our quarterly reports.”
That employee-ownership works well is clear in the company’s success in all its divisions, including the Yellow Springs location, Antioch Publishing, which employs about 175 people. This year the Yellow Springs operation, which produces book-related products such as bookmarks and bookplates that are sold to retail stores, is projected to increase its sales by 30 percent over last year, said Morgan, who cited several reasons for the growth. First, the company owns the franchise for several recently successful book-related products, including Star Wars and Lord of the Rings.

Second, Morgan said, sales were down for the Yellow Springs facility last year, which he described as a “terrible year for the bookstore industry” due to the increased number of superstores. This year the book industry bounced back and stores restocked their shelves, leading to the sales growth.

“This year has been a great year for Antioch Publishing,” Morgan said.
While Antioch Publishing is currently doing well, the “big engine” driving The Antioch Company’s growth — about $300 million of its $340 million expected sales — is Creative Memories, Morgan said. That division, which produces photo albums and provides workshops and classes in preserving family history, is located in St. Cloud, Minn. This year, said Morgan, the growth of Creative Memories led to the building of a new $20 million campus on 50 acres of land in St. Cloud.
Rather than selling the products through stores in the traditional way, Creative Memories uses the direct-sales method, in which employees offer classes and workshops in people’s homes, and sell products themselves.

As well as gaining from their own sales, employees also profit from the sales of those they bring into the company. The system works well because of its financial incentives and because many employees are “mission-driven,” Morgan said, and care deeply about “preserving the past and enriching the present” with the company’s line of products and classes.
“We have great leadership in St. Cloud,” Morgan said. “They have a mission and a passion for their work.”

While Morgan credits the division’s success to good leadership, he also notes that Creative Memories offers an example of his favorable relationship with luck. When The Antioch Company purchased the bankrupt St. Cloud manufacturer of photo albums in 1985, company leaders didn’t anticipate how much the product would tap into a growing consumer need.

“We had no idea Creative Memories would take off like it has,” he said.
The company’s success has led to new locations in Sparks, Nev., and, most recently, a new plant in Richmond, Va., plus sales offices in six countries, including Japan, Britain and Australia.

While the company will continue to grow, it will not do so in Yellow Springs, Morgan said.
“We do not want to grow here,” he said. “It’s not a good community in which to be a big business.”

Although Yellow Springs has historically been pro-business, with Antioch College incubating the small businesses that became Morris Bean & Company, Vernay Laboratories, and YSI Incorporated, the community tends now to be anti-big-business, Morgan believes. While city officials in St. Cloud offered the company a package of tax incentives to encourage it to build there, Yellow Springs officials would be less inclined to do so, he thinks.

“I believe the community here would view that sort of tax abatement as pandering,” he said.
Housing prices in Yellow Springs also work against the company expanding here, said Morgan. He said that when he brings in new managers to the Yellow Springs plant, they most often choose to live in other communities because “they can get a better buy someplace else,” Morgan said. “Yellow Springs is perceived as too expensive a community.”

The company has no plans to move its Yellow Springs operation, said Morgan, who stated that about 20 to 25 percent of its 175 employees live in town. While Antioch Publishing has recently begun renting additional warehouse space outside of town and will continue to need more warehouse space, the number of jobs affected will be negligible, he said.

Currently, the Yellow Springs facility houses both Antioch Publishing and The Antioch Company’s headquarters, while the St. Cloud operation houses the company’s international headquarters, the Creative Memories operation, and the company computer operation.

While Antioch Publishing will remain in Yellow Springs, the company’s headquarters might move after Morgan retires as CEO, he said. Now 59, he plans to retire at age 65, and hopes to turn the management of the company over to his daughter, Asha, who now runs Creative Memories and lives in St. Cloud.

In the meantime, Lee Morgan said he plans to continue growing The Antioch Company by creating a “portfolio of direct sales companies.” The direct sales strategy requires a complex computer system to identify the “lineage” of individual sales, he said, and a more complicated “infrastructure” than traditional sales. Since the company already possesses these capabilities, it makes sense to build on what’s already there, he said.

Recently, the company added a new direct-sales business, zeBlooms, which will produce and sell silk flowers. Other possible direct sales ideas are being considered, said Morgan.

“I’ve got more ideas than I can handle. It’s fabulous,” he said. “Opportunity is all over the place. We’re just trying to pay attention.”

—Diane Chiddister