Flood wrote much of the script for the company's present three years before he became CEO and part owner, and his vision included two key components -- turn the company into a public concern by making it a real estate investment trust (REIT), and do it while taking care of the staff and making the company the best place in the country to work.
Flood accomplished the first goal in 2004 when the company launched HomeBanc Corp. as an REIT and completed a public offering of nearly $1 billion of notes backed by adjustable-rate, residential first mortgage loans.
"We expect that the loans that we had historically sold to the marketplace -- between 50 percent and 75 percent of the loans that we make -- will now be held by the investment portfolio. And we believe that holding those loans from an investment standpoint offers a substantially improved value versus having sold those loans historically," Flood says.
He says the restructuring allows the bank to realize the benefit generated by HomeBanc Mortgage Corp. in its origination activities.
"That company historically sold loans and realized gains immediately," he says. "Now, on a substantial portion of the loans ,we will hold them for investment. And the holding for investment activity, we believe, has a far greater value than the selling of our loans, which had been our historic strategy."
HomeBanc is also well on its way to reaching its second goal of being a great place to work.. Fortune magazine ranked the company No. 20 on its annual Best Companies to Work For list for 2005, up 19 spots from the previous year.
"I don't want HomeBanc to be unique and different because I think being unique and different is a way to get me attention," Flood says. "I think that brilliance is sometimes in simplicity. And to a great extent, I think many businesses have lost sense of, if you do the simple things right every day, over a long period of time, you can still build an enormous amount of value. I'm not one of those guys who believes that the day and age of Wall Street that I've gotten involved with today changes that.
"We have a unique operating strategy and we think that that strategy is and has been our past success, and will continue to be our success. The only thing that is different today is we have a lot of new responsibilities at the board of director level and from an operating standpoint that we need to comply with," such as Sarbanes-Oxley.
In other words, Flood doesn't make decisions based on the short-term stock price.
"In life, you've got to make choices and decisions -- I'm not talking about being stubborn now," Flood says. "I'm talking about what matters to you and what your belief is about success. My job is to get 1,300 people here and throughout the Southeast focused on what we think success looks like, motivated to do everything they can to achieve that, and the results are going to take care of themselves."
He says it's the leader's job to motivate employees because he knows the company better than anyone.
"When I spend 10 hours a day in a job and a lot of other people spend a lot less time with that same company, they're never going to understand it as well as the CEO does," he says. "You just have to find where the right balance is. Telling them what they want to hear is not the right idea; telling them you plan on succeeding is."
He must be doing something right. Under Flood's leadership, the company has grown enormously. Ten years ago, HomeBanc was an Atlanta-based mortgage company with about 150 employees, one office outside the state and a mortgage volume of about $500 million. Today, it has offices in Georgia, Florida and North Carolina and it closed about $5.9 billion in mortgage loans in 2003.
If, in the future, despite his success, investors believe another CEO is a better fit for the company, he'll leave knowing he held to his convictions of not settling for short-term gains, although he can sympathize with CEOs who take the stock price into consideration when making decisions.
"The average CEO in a public company in American has less than four years on the job," Flood says. "So to the extent that they are more amenable to the ebb and flow of protocol and convention in the marketplace, that probably makes sense to me. If I have to ... make a decision that does not breed the best long-term value for the people that work here and for investors, and that's an unfavorable position to put me in with investors today, I'd rather do that than make a decision that investors might think is interesting and appealing and brings benefit today.
"Six months or a year down the road, (I can) stare at people that work here and investors ... and say, 'I've done my job properly.'"
And Flood has no intention of ever compromising those principles.
"I have a tremendous conviction about our operating blueprint, and we believe that is the best way for us to find success," he says. "Investors, just like boards of directors, will challenge our ideas and will challenge our performances. We expect that's part and parcel of having a publicly held company.
"But the question that comes up is, does that mean we should change our thinking about what's going to enable the company's success, which ultimately breeds the best enterprise value, which ultimately breeds investor return."
People make it happen
Flood may be the leader, but he knows the company would not be as successful as it is if not for the 1,300 employees.
"We started out building it that way years ago," Flood says. "In the financial services industry, every consumer knows the brand of companies, but they don't think very much of them. They don't have an emotional connection. What we're trying to do is build a culture where we can understand the needs of consumers, in this particular case, on a financial service like mortgages, and create a fanatical way, from a services standpoint, of meeting and exceeding that need and building our business through that simple brilliance of having people be wildly happy with having done business with us and tell their friends and family members and come back."
Once the company found the formula, Flood made sure future hires would fit with the company's philosophy.
"We took 100 people who'd been at Homebanc for five years or more, who were considered cultural icons, the most productive people working in our company," Flood says. "They were diverse in background and diverse in responsibility. We profiled them.
"Today, to get an interview in our company, you've got to go online and meet a cultural and competence assessment test that those 100 people were the backdrop for, so we know that we can replicate the culture as the footprint and the size of the company grows."
Flood modeled the program off of that of the U.S. Marines Corp.
"The marines take average people, and nine weeks later, they're anything other than average, and they are marines for life," he says. "Years ago, we said if we can get people to be marines at HomeBanc and then we can get the right training, boot camps, in place, which we have, we can largely copy what they've done."
So every new hire goes through the company's boot camp, where they learn to be HomeBanc marines.
"We've spent a substantial amount of money to get the vetting systems in place," Flood says. "That allows me to go to sleep at night because if somebody asked me two years ago the biggest risk, I would have said not the market, but the next thousand people we hire. What we've done now is, we've created a very sophisticated way of establishing that the new people that we're hiring very much fit the same culture values and capabilities as the people who have already built the success of the company."
That approach not only leads to happy employees, but to happy customers.
"My hero companies are companies like Southwest Airlines and Starbucks who have developed a simple idea that says culture and service, and being unique and different with customers, offers the opportunity to build something special in what most people would say is a set of commoditized businesses. I love Nordstrom for the same reason."
Flood expects other companies will follow suit and adopt the model.
"More companies in the future, as we move to a service economy, are going to realize the importance of investing in people systems if you're going to replicate a cultural experience or service experience," he says. "You can't build a great service company without having a culture identified and replicated over and over again. Assuming people can just hire and know that they have that similar set of values is just unrealistic. It's just not going to happen. The screening system that we use enables us to make sure that we hire people with like values."
Since the company's employees are scattered across three states, Flood works hard to make sure everyone stays on message.
"We are really focused on making sure communications are a big part of what we do, so once a month, we do what's called an 'All Hands' call," he says. "We go through an update on the corporate scoreboard and key activities of the business and talk about the macro happenings in the industry. That connects everybody on the operating strategy and reaffirms what we focus on, all that kind of good stuff."
And Flood is confident that with his strategy in place, the company will continue to succeed.
"I'm eight months into being a public company chairman, and we, in large part, established guidance for our first two quarters and achieved it," he says. "We've not had a quarter yet where we've misguided, so if all that happens is I get yelled at a lot -- I grew up playing sports, I got yelled at a lot on fields too -- it didn't necessarily change my confidence in my capabilities or my commitment to outcomes being the best they could possibly be."
And while past performance is no indication of future results, if Flood continues to run HomeBanc Mortgage as successfully as he has, his tenure as CEO should far exceed that four-year average.
HOW TO REACH: HomeBanc Mortgage Corp. (404) 459-7400 or www.homebanc.com