How Market Basket's Deposed CEO Earned Employee Loyalty
Question for you, dear leader: If you lost your job--if your board ousted you--would your employees and customers really care? Would they protest in public? Maybe, maybe not. You can dream. But when the dust clears from this week's Market Basket protests, one fact will stand high above the rest, unseen in the recent history of American enterprise: Thousands of employees and customers took to the streets to show support for an ousted CEO.
Last month, the board of Market Basket, a New England supermarket chain with 71 stores and 25,000 employees, fired CEO Arthur T. Demoulas, who was extremely popular with employees. On Sunday, eight other senior employees were fired. A rally on Monday on behalf of Demoulas and those senior employees drew 7,000 people to the Market Basket in Tewksbury, Mass.
Friday, also in Tewksbury, another crowd of roughly 7,000 showed support for Demoulas. At the same time, in the Boston law offices of Ropes & Gray, the current management of Market Basket mulled several offers for the company, ranging from $2.8 billion to $3.3 billion, according to the Boston Globe. One of those offers was from Demoulas himself.
That's where things stand, in terms of the Market Basket story. But there's a larger story at work too, one providing lessons for all leaders hoping to build strong cultures with engaged employees. What was Demoulas like, as a leader? How have his actions in the stores and his interactions with employees helped him earn such loyal support?
On Friday, I visited the store in Chelsea, Mass., to find out. Chelsea is a small (2.5 square miles) city bordering East Boston, not far from Logan Airport. The Market Basket there is one of the largest stores in the entire chain.
The secret to Demoulas's success as a leader, it turns out, boils down to two things: Kindness in person, backed up by company-wide care for employees' financial welfare, in the form of better-than-average pay and benefits and profit sharing.
Jay Hilbert, 28, a manager at the Chelsea Market Basket, has worked for the company for 13 years. He began as a bagger when he was 15. He continued to work there part-time while he earned his bachelor's degree in business management at the University of New Hampshire. He recalled a time not long ago when Demoulas started a conversation with him. "It was early in the morning, and I wasn't wearing my jacket yet," he says, referring to the official company uniform--a jacket with a name tag indicating how long you've worked at Market Basket.
"He knew my name, and he asked, 'How are you doing? How's your wife?' He's got 25,000 employees, and he remembers who I am and my situation," said Hilbert.
The personal touch is important. But Hilbert also recalled how Demoulas put money back into the profit-sharing plan--which had lost money in the financial meltdown of 2008--so employees could still get their bonuses. It was a landmark moment for Market Basket employees.
Paola Ponce, 23, a manager's assistant, began at the Chelsea store six years ago as a bagger. "Every time he comes in here," she says of Demoulas, "he will say hi to everyone. He's very nice with us. If he sees you he will say hi to you and give you his hand every time."
For Ponce, too, there was a strong connection between Demoulas' leadership and strong employee benefits. "The health insurance here is not that expensive," she says, adding that the pay for hourly workers is generous. (It's $12 an hour; the Massachusetts minium wage is $8 an hour, going up to $9 on Jan. 1.)
Clearly, Demoulas' formula for earning loyalty isn't rocket science. It is what, in today's management parlance, is known as an employees-first culture. Though you might never think to compare supermarkets to software, in many ways the culture at Market Basket reminds me of the one at Open Systems Technologies (OST), a $108-million Grand Rapids, Mich.-based IT consultancy which was on the Inc 500 list for seven straight years.
The secret to its success, says marketing manager Mike Lomonaco, is its employee-centric, family-oriented culture. Of OST's 155 full-time employees, 37 own a piece of the company. The shareholders "all treat this like this is our company," says president Meredith Bronk. "There's a huge pride in ownership."
In other words, it's not just the top team that's invested in long-term performance and the preservation of the culture. There's an entire cast of veterans who literally have an interest in the company's future.
Why aren't all companies run this way? That's a larger question. But some experts believe Market Basket employees' loyalty to Demoulas is a reflection of this larger question--based on real-world knowledge about how hard it is to find companies that treat workers well.
"If you peek behind the large signs and pictures of Arthur T., you might see that the underlying problem--one of workers' resentment and insecurity [without him]--is the real issue," Gary Chaison, a professor of industrial relations at Clark University, told the Globe.
Given how the Market Basket story has shaken out, it's all too easy to anoint Demoulas as a benevolent philosopher king who can do no wrong. That's reductive. And it hardly does justice to the nuances and multiple perspectives in this ever-shifting story about a family business that began as a single food store in Lowell, Mass., in 1917.
Market Basket's current management did not immediately return an email from Inc. requesting comment. Demoulas himself did not respond to messages left on his home phone.
How the century-old saga will end, no one knows. But we do know what the employees want. The leader who gave it to them has lost his job--but not their loyalty.