Market Basket: A case study unfolding before our eyes

Various disciplines of business have well-known case studies: in crisis communications it’s the example Johnson & Johnson set while communicating about the Tylenol crisis of 1982; for business cost-cutting it’s the story of American Airlines discovering it could save $40,000 per year by eliminating the olive in the salad served to passengers. The story has moved to the national stage, where we are all watching a future business case study unfold—the saga of Market Basket. We just don’t know—yet—what the result will be.

For those unfamiliar with Market Basket, it’s a small, regional grocery chain with 71 stores in Massachusetts, New Hampshire, and Maine. For decades, two members of the family that owns Market Basket—Arthur T. Demoulas and Arthur S. Demoulas—have been fighting for control of the business. In late June of this year, Arthur S. and other board members fired then-CEO of Market Basket, Arthur T. Less than one month after Arthur T.’s removal, Market Basket employees began protesting the move. As of this writing, it's nearly two weeks into the protests, which have left store shelves empty of products, rallied customers on the side of the protesting employees, and even prompted some elected officials to weigh in.

While the story itself is fascinating and dominating the news in the region, what are the business lessons that are unfolding? Is it a labor strike, with workers making demands of management? Is it an example of how to not handle communications? Is it an example of why investing in employees is a smart business decision? At this point, it looks like the answer is yes to all the above. Here’s why.

What are Market Basket employees really striking for?

On the surface, Market Basket employees (who are not unionized, and therefore not protected from the ramifications of walking off the job) are merely protesting the ousting of the popular former CEO. But on a deeper level, the protests are driven by fear that the new management will cut wages and benefits and change the business from one that is viewed as a good employer to just another cost-cutting retail chain, focused solely on profits.

As Thomas Kochan, Professor of Work and Employment Research and Engineering Systems at MIT Sloan, wrote on WBUR’s “Cognoscenti” blog, “It demonstrates the growing frustration building among workers at all levels with short-term, self-interested owners and corporate executives who choose to line their own pockets at the expense of the workforce and their customers.”

How is the new management handling the protests?

In short, not well. The new management’s first response to the protest was to fire eight employees, some of whom reportedly worked for Market Basket for 40 years. Then the two new Co-CEOs took out an ad in the Boston Globe that apologized to customers, but also made a statement about the protesting employees who “had lost sight of the top priority—taking care of you [the customer]—and instead engaged in actions that harm Market Basket’s reputation and prevent us from meeting our obligations to you.”

Shortly after that, the new management team hired a new public relations firm to help change the public’s perception of the management team, company, and (most likely) the protest in general. With the help of the PR firm, Market Basket issued a “softer” statement claiming, “There will be no change to Market Basket’s unmatched compensation and benefits.” 

As Kochan notes in a separate “Cognoscenti” blog post, “Protestors pointed out the divide between the softer, gentler public relations approach and prior threats to replace protesting employees. It seems unlikely that the board’s after-thought attempt at conciliation will return matters to the status quo.”

Earning the loyalty of employees

News story after news story attributes the employees’ loyalty not only to the above-market compensation and benefits, but also to personal connections to Arthur T. One of the eight managers fired for organizing the protest told the Boston Globe a story about Arthur T. taking an interest in his son after needing reconstructive surgery. Boston Globe Columnist Adrian Walker wrote about walking through Market Basket last summer, observing that Arthur T. knew almost every employee’s name and was hugged and cheered by customers. How many CEOs can make similar claims? How many CEOs could reasonably expect workers to fight for them?

It comes down to the culture Arthur T. built throughout the organization. “Market Basket employees think that without Arthur T. they won’t be able to hold on to their values and will fall into a vicious cycle,” said Zeynep Ton, Adjunct Associate Professor of Operations at MIT Sloan School of Management, in a comment to the Boston Globe . “I don’t blame them for fighting to keep the integrity of their business.”

Kochan referred to the protest as being “unprecedented in modern U.S. labor history.” Unprecedented, yes. But also likely to set a lot of new precedents on how to manage changes in business operations, communicate well, gain public favor, and earn—and keep—the loyalty of employees. 

Thomas Kochan is the George Maverick Bunker Professor of Management and Professor of Work and Employment Research and Engineering Systems at MIT. He is also the Co-Director of the MIT Sloan Institute for Work Employment Research. He has taught in the Executive Education Strategies for Sustainable Business program.

Zeynep Ton is an Adjunct Associate Professor of Operations Management at MIT Sloan and teaches in the Advanced Management Program, Developing a Leading Edge Operations Strategy, and Strategies for Sustainable Business at MIT Sloan Executive Education. She is the author of The Good Jobs Strategy: How the Smartest Companies Invest in Employees to Lower Costs and Boost Profits.

This entry was posted in on Fri Aug 08, 2014 by

Comments (1)

Thomas Davidow

One needs to understand Family and their emotional connection to the family business in order to fully appreciate the culture/business model of Market Basket. Conversely one also needs to understand the strength of emotion that exists in families to understand why the two cousins were willing to risk the company and billions of dollars in shareholder value to "win".

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