Empty shelves. Protesting employees. It's any company's worst nightmare.
If you haven't heard about the Market Basket story yet, here it is in a nutshell: The Demoulas family that runs Market Basket has been feuding for decades, CEO Arthur T. Demoulas was fired by a Board controlled by his cousin, employees are protesting (and in some cases, have been fired), and the debacle is now taking place in the court of public opinion instead of the court of law.
In the wake of the coverage, executives everywhere have been left wondering: How did ex-CEO Arthur T. Demoulas become so popular with his employees -- enough that they're willing to risk their jobs to get him reinstated? Moreover, with protests and empty shelves abound, what exactly will it take for Market Basket's new CEOs to turn around their dissatisfied workforce?
How did Arthur T. Demoulas grow such a loyal employee base?
Arthur T. (also known as "Artie T.," "A.T.D.," and "Mr. D" by his employees) ran a business that offered great pay, benefits, career trajectories, and profit-sharing opportunities. But on top of that, he was different -- the kind of rare leader that defied the traditional gap between executives and the rest of their workforce.
"He cares more about people than he does about money," said Tom Trainor, who worked at Market Basket for 41 years as a district manager before he was fired Sunday for leaving his post in protest.
“He’s been to my kids’ weddings, my mother’s funeral, his sisters came to my mother’s funeral, to my brother-in-law’s funeral,” Michael King, Market Basket's controller, told the New York Times.
An article on Market Basket's blog reads: "Market Basket is so much more than brick and mortar buildings that sell groceries, Market Basket is an ideology that exists in every one of us, our culture is tied to this ideology and our ideology exists only with Arthur T Demoulas as our leader."
While Arthur T. is praised for his philanthropy and employee-centric approach to management, his cousin Arthur S. -- the one who took control of the Board that fired him -- has a spottier history. In fact, Arthur S. tried to fire his cousin about a year ago but was unsuccessful, partly thanks to employee protests. It was clear to employees, according to the Boston Globe, that Arthur S. was representing some of Market Basket's shareholders who were interested in getting more cash out of the business.
That same concern has bubbled up in the midst of the latest Arthur S. decision. Employees worry that the new CEOs will make sweeping changes to cut costs and boost revenue, which can happen at the expense of employee wellbeing.
"[They] are rightly worried that directors will now find new ways to extract more cash from Market Basket," wrote Jack Newsham for the Boston Globe. "None of the options would sound very good if you were one of those workers who helped build the chain."
And many of Market Basket's employees have indeed helped build the chain. Market Basket is known for keeping employees for 20, 30, even 40 years. To put that in perspective, the median tenure of supermarket employees is 97 days, according to a 2000 survey by Blake Frank of the University of Dallas. Even with the '08 crisis, Market Basket employees are sticking around significantly longer than the average supermarket employee.
Would your employees rally for you?
Only in the last decade or so have business schools and mainstream media begun popularizing years of research showing that paying your employees more doesn't hurt profits -- in fact, the opposite is true. In fact Zeynep Ton, author of The Good Jobs Strategy and Adjunct Associate Professor at MIT's Sloan School of Management, drew links between higher pay and higher profits in the service economy from years of detailed research.
Costco, for example, pays their employees 40% more than Sam's Club, according to a 2006 study by the University of Colorado, Denver. Costco just took home $457 million in profits, while Sam's Club laid off 2,300 workers. Other companies that pay their employees much higher than average are Trader Joe's, Spanish supermarket chain Marcadona, convenience store company QuikTrip, and, you guessed it: Market Basket.
What Ton's research shows is that companies like Market Basket and Costco are more profitable because they pay their employees more, not in spite of it. Once employees have the means to live comfortably, they can spend more of their effort working, strategizing, and bettering your business, instead of thinking about just getting by.
"To explain that appreciation and support for a CEO, we see common themes shared by employees, including clear communication from the CEO on where the company is going, how it's going to get there, and how each employee plays a role in this plan," says Scott Dobroski, Career Trends Analyst at Glassdoor. "We see a CEO who is accessible, transparent and personable, and who truly values his or her employees, and makes efforts to make their lives easier for them in and out of work.”
Other keys to fostering loyal employees seem to boil down to empowerment. For instance, give employees the authority and incentive to make customers happier; provide access to institutional knowledge; perhaps offer a profit-sharing program to give them some degree or responsibility for the company's performance; provide a mechanism to offer honest feedback without fear of negative recourse; show promotions happening from within, alongside well-defined career trajectories; and offer access to information, like company performance of goals.
Do the new CEOs have a chance at winning over Market Basket employees?
Although employee protests kept Arthur T. in the CEO position last year, it's doubtful they'll help reinstate him at this point. Legally, the Board had every right to fire the CEO, explained Communications and Legal Expert Michael Morris. The CEO serves the Board, and the Board directs the company.
"I assume the Board knew there would be some outcry among employees and customers when they took this action," says Labor and Employment Attorney Josiah Black, "but they felt the reasons for replacing the CEO outweighed the disruption and negative publicity that might result." Boards have been known to reverse course in response to public protest, Black says, but it's not looking likely at this point.
Now, it's up to the two new co-chief executive officers, Felicia Thornton and Jim Gooch, to take on the challenge of running a company with a very unhappy workforce -- and one of the first decisions they'll have to make is what to do with the protesting workers.
"Right now, who looks like the jerk here? The Board," says Morris. "But if the Board was fully within their rights to take an action and the employees stopped working because they didn't like the business results of that action, then the Board isn't at fault. So if you’re a populist, you would say the workers are right. But if you’re thinking strictly in business terms, the Board was within their rights -- so employees will need to go back to work."
"That being said, even in a non-union company, employees have many legal rights, including some rights under the National Labor Relations Act," says Black. "For example, if the Market Basket employees refuse to return to work, the Board will face a difficult decision about whether to discipline, fire or replace them (temporarily or permanently). If the Board took any of these actions, the employees might challenge that action as a violation of the NLRA. That law gives employees the right to form or join a labor union, and it also gives them the right to take 'other concerted activity for mutual aid or protection.' Generally, concerted activity includes the right to protest issues of safety, working conditions, wages, and benefits."
That's exactly why this story keeps coming back to employees' concerns about changes to their wages and benefits, says Black. "To prevail in a claim under the NLRA, the Market Basket employees would have to show that they were acting not just out of concern and affection for Arthur T., but also out of concern for the impact on them in terms of wages, working conditions, or benefits. I suspect the employees have been given advice about how to protect themselves from discipline by laying the foundation for a charge before the National Labor Relations Board if they are fired or replaced."
But every day Market Basket's not open because of protesting employees, they’re losing hundreds of thousands of dollars. There's tremendous financial pressure to get people working again.
"In light of the uncertainties and potential for a legal challenge, I think the Board will mount an aggressive PR campaign to persuade employees that they took action for valid reasons and the new leadership is best for them and the business," says Black. "They'll obviously have to consider that carefully and weigh it against the risks and costs of taking more decisive action towards the protesting employees."
Once Thornton and Gooch figure out what to do with their angry workforce, rebuilding the culture will be a feat in and of itself. "A culture is organic and can go up or down over time," explains David Niu, founder and CEO of TINYhr. "If it's in the crapper, you can pull it out, although that takes about 6-12 months of consistent effort from the top down. Many leaders want immediate change, though -- you send out an email Friday and expect results on Monday -- but that doesn't happen with culture."
In other words, Gooch and Thornton have their work cut out for them.
Originally published Jul 25, 2014 8:00:00 AM, updated July 28 2017