During the summer of 2014 controversy at the board level of Market Basket erupted in the removal of Arthur T. Demoulas as CEO. Trouble had been brewing for decades, with family feuds between Arthur T. and Arthur S. Demoulas. The majority of the board members sided with Arthur S. and they voted Arthur T. out of Market Basket, temporarily halting the era of Arthur T.’s management style. However, Arthur T.’s supporters were not about to let the board get away with this decision.
The majority that controlled the board of directors had an agenda and disregarded the company culture. The Arthur S. side of the family wanted to see higher profit margins and didn’t seem care about keeping up the corporate culture that Arthur T. had built. The Arthur S. side of the family was also not happy when Arthur T. announced that every customer would get a 4 percent discount on their purchases in 2014, (with a few items exempted) (Pols, 2016).
After Arthur T. was terminated in June 2014, the board named Felicia Thornton, former CFO of Albertsons, and James F. Gooch, former president of Radio Shack, as interim co-CEOs (Ton, Kochan, & Reavis, 2015; Williams, 2014). The board expected the new management team to enable Market Basket “to maximize its potential and pave the way for continued success in the future” (Ton, Kochan, & Reavis, 2015).
Events began to occur quickly upon Arthur T.’s termination, with an organized employee walkout and customer boycott (Boston Review, 2014; Lustig & Finneran, 2016; Williams, 2014). Employees at all levels, from executives to warehouse workers, and large numbers of customers, took part in the boycott (Boston Review, 2014; IWER, 2015; Lustig & Finneran, 2016). Thornton and Gooch, the new interim-CEOs, began dismantling the profitable system Arthur T. had created, firing eight district managers involved in the walkout (Williams, 2014). In response, employees at the distribution centers walked out and the distribution of products to stores came to a halt (Williams, 2014). It was clear the executive team did not have a management plan in place and had lost control of the company. “Without the ability to supply the 71 supermarkets, the business was losing an estimated million dollars per day and no end in sight” (Williams, 2014). Thornton and Gooch ordered the employees to return to work or they would be replaced (Williams, 2014). Striking employees were not being paid while they were on strike. Thornton and Gooch planned to replace, instead of reinstating. the striking employees. These actions led to employees filing a law suit against Market Basket (Williams, 2014).
Employees refused to return to work under the conditions set by Thornton and Gooch. However, many store employees continued to show up at their stores each day, even when there were no products to sell (Rosenfeldt, 2014). With many loyal employees at their stores when the dispute was resolved, they were ready to get Market Basket “back on the track to success” (Boston Review, 2014; Rosenfeldt, 2014). The boycott, while costing Market Basket millions of dollars per day, eventually resulted in resolution in the long-running feud between the two sides of the Demoulas family (Lustig & Finneran, 2016). Due to a strong culture of loyalty Arthur T.’s firing, and eventual rehiring, brought everyone together.
On August 24, 2014 Arthur T. offered $1.5 billion to purchase the Market Basket Company (Slade, 2014). Four days later Arthur S. and the board of directors accepted the offer and striking Market Basket employees returned to work (Williams, 2014). The purchase, finalized in December 2014, effectively gave Arthur T. 100 percent stock ownership of Market Basket (Williams, 2014). After the purchase was completed in, Arthur T. distributed $49 million in bonus payments to 25,000 employees (Williams, 2014).
To understand why Arthur T. has such a big, supportive following, we only need to look at his management style to see that he is genuinely interested in his employees and their well-being. He is known for being an empathetic leader, showing up at stores daily, knowing the names of his employees, names of people in their families, and what is going on in their lives (Smith, 2014). He has built a strong, reliable team to run the daily operations while he goes out and promotes the business (Smith, 2014). Many employees say he takes care of his employees, puts their needs before money, and goes “more than the extra mile” (Lutz, 2014). “He is proud of what everyone accomplishes instead of taking credit for himself,” one supporter told Business Insider (Lutz, 2014).
When employees went on strike due to the firing of Arthur T., many employees lost their jobs for their roles in organizing protests (Williams, 2014). As Arthur stated himself, “This is not about me. It is about the people who have proven their dedication over many years and should not have lost their jobs because of it” (Lutz, 2014). Arthur T.’s vision of Market Basket as a supportive environment, rewarding employee participation, is one that employees and customers believe in (Rosenfeldt, 2014). The employee response when Arthur T. was fired was a direct result of that supportive environment, empowering employees to stand up for the company they believe in, putting their jobs on the line (Rosenfeldt, 2014). The employees, who were not unionized (Boston Review, 2014; Lustig & Finneran, 2016), and the customer response, brought Market Basket to a halt.
Market Basket considers employees to be assets, rather than liabilities (Gloucester Daily Times, 2014) and is known for respecting its employees, providing good employee benefits and better than average pay. In 2014, cashiers’ starting pay was $12 per hour for full-time and $8 per hour for part-time (Ton, Kochan, & Reavis, 2015). Part-timers were paid time and a half on holiday and received a $0.25 increase every six months until they reached $12/hour (Ton, Kochan, & Reavis, 2015). In addition employees enjoy “flexible schedules and room for advancement” within the company (Lutz, 2014; Ton, Kochan, & Reavis, 2015). Upper level management is typically hired from within the company, with employees working their way through the ranks (IWER, 2015; Ton, Kochan, & Reavis, 2015).
Employees receive profit-sharing and bonuses, making them very loyal to Market Basket (Lutz, 2014). As of 2014, the company contributed between 15% and 20% of an employee’s annual pay into the profit-sharing fund (Slade, 2014; Ton, Kochan, & Reavis, 2015). All employees, including part-timers, get several bonuses a year based on longevity rather than on performance (Ton, Kochan, & Reavis, 2015). If an employee is going through some financial hardship, they may go to Arthur for help, who will decide, along with the finance department, if the employee needs an emergency payment (Ton, Kochan, & Reavis, 2015).
Market Basket’s culture, where employees are committed to success, has been built over time with much effort and attention. Respect, loyalty and trust among employees, vendors, and customers are a large part of the culture (IWER, 2015). Maintaining this culture requires interaction on a personal level. “The care, concern and attention the CEO gives to every store and the individual employees who work there” is important piece of the culture (Smith, 2014).
As CEO, Arthur T. understands that executives and senior management must support employees on the front lines as they are the key to the organization’s success (Smith, 2014). There are several core actions that Market Basket management follow:
- Identifying values clearly and holding direct reports accountable (Smith, 2014).
- Communicating values through example, (verbal and action) as well as written policies (Smith, 2014).
- Allowing employees to submit feedback and taking their advice (Smith, 2014).
- Encouraging teamwork through recognition and rewards (Smith, 2014).
- Emphasizing culture through orientation and training (Smith, 2014).
Market Basket management is an example of distributed leadership. It has leaders at all levels (Boston Review, 2014) and utilizes lateral and horizontal management. Stores are managed by a director who is “assisted by assistant directors, front-end managers, a merchandising manager, and department managers (Ton, Kochan, & Reavis, 2015). The department managers report both to the store director and to a regional department supervisor who manages around 24 stores (Ton, Kochan, & Reavis, 2015).
In addition to its focus on employees, Market Basket’s management provides its customers with a simple shopping environment, “with no loyalty cards or self-checkout lines” (Ton, Kochan, & Reavis, 2015). One of Arthur T.’s core management principles is to “stay close to the customer” (Ton, Kochan, & Reavis, 2015), utilizing a “10-foot rule” in which employees within 10 feet of a customer should acknowledge the customer with a greeting or smile (Ton, Kochan, & Reavis, 2015). Employees can be found walking the aisles, ready to answer customer’s questions, or assisting customers by carrying groceries to their cars (Ton, Kochan, & Reavis, 2015). The company has no voicemail system, therefore any customer who calls speaks directly with an employee and will have his or her question answered, or problem resolved quickly. (Ton, Kochan, & Reavis, 2015).
In conclusion, Arthur T.’s leadership at Market Basket is successful because he leads “with the heart, as well as the head” (Rosenfeldt, 2014). Market Basket has a strong culture with intense loyalty among both customers and staff. This culture was created through Arthur T.’s vision of Market Basket as a place that attracts consumers with regular low prices and a place that feels “like a home to employees, treating them like part of a family” (Rosenfeldt, 2014). The Market Basket story highlights the power of employee engagement leadership (Rosenfeldt, 2014).