If It Ain’t Broke…

…and Market Basket was not broken by any stretch of imagination. Market Basket is a 71-chain grocery store primarily serving the New England region. In fact, the company is doing better than fine; it’s a billion-dollar enterprise with good profit margin. So, what did the board of directors try to fix? They removed the CEO, Arthur T. Demoulas (affectionately referred to as “ATD” by the employees), in an ouster maneuvered primarily by his archrival cousin, Arthur S. Demoulas. Seriously, it’s worth paying attention to family dynamics; this has an eerie similarity to the “Vaughan-Bassett” case I used a couple of weeks ago.

I can't get excited about bargains of groceries, but I am fond of Trader Joe's.

I can’t get excited about bargains of groceries, but I am fond of Trader Joe’s.

The board’s formal reasons rehash familiar themes: ATD committed favoritism, made bad business decisions, etc. ATD set aside $46 million for profit sharing with its 25,000 employees during the 2008 financial crisis. Lest we feel sorry for the financial hardship this imposed upon the Demoulas family, according to the Boston Globe (via Washington Post Columnist Harold Meyerson), the family made $500 million during the previous decade.

Externally, Market Basket prides itself on the price advantage it affords its customers and on good customer relationships. As far as brand/image is concerned, it doesn’t suffer at all in the public eye. Internally, the company pays employees well; entry-level employees are paid $12/hour. Under ATD’s leadership, internal promotions have elevated many long-term employees to top management ranks with 6-figure salaries. Employees get bonuses and have their college tuition covered. Many anecdotes portray ATD in the image of “George Bailey” from “It’s a Wonderful Life.” He would visit employees’ hospitalized children, attend employees’ weddings, and he preferred walking around in his stores (and talking to people) over sitting in his office. In other words, in today’s business environment, he is an oddball.

Which begs the question, How can doing what everyone else is doing bring about competitive advantage? And its corollary, Why do business leaders perpetually do what everyone else is doing while expecting (and then claiming) an outcome superior to everyone else’s?

Basket of bountiful wildflowers from the nature's abundant rain.

Basket of bountiful wildflowers from the nature’s abundant rain.

It’s not surprising that the employees, including supervisors, have been protesting. The grass-root effort brought more than 5,000 people together, including customers. Their single demand: reinstate ATD to be the CEO.

The two people replacing ATD as the current co-CEO have since fired the supervisors who organized and joined the protests, and threatened to terminate protesting workers. One of these CEOs has a reputation for mergers and acquisitions. This fuels the employees’ fears that the board intends to sell the company (and its soul), eliminate jobs, lower wages, and take away some of the benefits. Of course, behind the employees’ loyalty to ATD is their fear for their own future. But why do we separate these aspects as if they are independent?nature's basket 4

We have a related example, with the difference that the company is not under threat (that we know of). Costco pays its average employees more than $20/hour, offers benefits even to part-timers, and its CEO doesn’t pocket an obscene salary (which was criticized by the Wall Street some years back).

Tony Schwartz and Christine Porath wrote in the NYTimes op-ed (that I cited last week), “Costco’s employees generate nearly twice the sales of Sam’s Club employees. Costco has about 5 percent turnover among employees who stay at least a year, and the overall rate is far lower than that of Walmart. In turn, the reduced costs of recruiting and training new employees save Costco several hundred million dollars a year. Between 2003 and 2013, Costco’s stock rose more than 200 percent, compared with about 50 percent for Walmart’s. What will prompt more companies to invest more in their employees?”

nature's basket 3Currently, policies focusing on “investing in employees” are rare and as rarities still attract media attention, such as “Paid Leave Encourages Female Employees to Stay.”

Sometimes, it is difficult to not feel a degree of despair. If we are in a position to bring to those around us some measure of workplace satisfaction, what stops us? (The answers are what prompted me to start writing on these issues.)

Till next time,

 

Staying Sane and Charging Ahead.

Direct Contact: taso100@gmail.com

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