4 Small Business Lessons Emerge from the Market Basket Standoff

by Margot Carmichael Lester, Staples® Contributing Writer

In July 2014, a corporate drama began as the owners of Market Basket, a New England grocery store chain, ran afoul of loyal employees and customers. The 71-store chain, which sells moderately priced groceries and has a reputation for treating workers and consumers well, faltered as family members squared off and one cousin’s faction ousted another cousin from the corner office.

Both shoppers and staffers took to store parking lots to protest the firing of CEO Arthur T. Demoulas by his cousin, Arthur S. Demoulas, who assumed control of the company. Store shelves weren’t restocked and cash registers weren’t ringing. Some employees were fired for missing shifts in protest, pushing discontent to new heights — “Artie T.” loyalists brought the wheels of commerce to a screeching halt.

The situation is now resolved — Artie T. reached a deal to buy the company from his relatives in late August — but there is much to learn from the standoff, especially if you're a small business owner. For example, ask yourself: Would your employees and customers go this far for you? Here are four takeaways about company culture from this tale of family feuds and affordable foods.

Lesson 1: A Strong Company Culture Is Crucial

One enduring lesson from the Market Basket situation is the power of corporate culture to instill loyalty. In positive cultures, leaders are “not only looking out for top management but also caring for their employees, while at the same time providing true value to the customers,” says Sandra Powers, human resources manager at LawyerReviews.com in New York. “Corporate responsibility demands that an organization balance the needs of all their stakeholders and not always focus on management and the bottom line. A corporate culture that takes everybody into consideration will, in the long run, be in the best interests of the company.”

Successful owners create a culture of “we” — a work environment in which everyone from stock clerk to CEO is valued. One aspect of that is fair compensation. Market Basket is known for good starting salaries (reportedly $12 per hour for store employees), a decent benefits package and profit-sharing. Work with your accountant to determine what pay and benefits options make sense for your enterprise. But that’s only part of the equation.

Culture is also exemplified by smaller acts, too. For example, Artie T. was famous for knowing employees’ names. In a small enterprise, it’s not too difficult to know employees’ personal needs and aspirations, such as saving for college or retirement, learning a foreign language, or helping an aging or sick relative. Keep them on a spreadsheet or index cards if you have to — employees will appreciate the personal touch.

“It may sound trite,” says Lauren Fritsch, a strategist, entrepreneur and founder of The Coaching Collective in New York, “but small gestures like officially celebrating birthdays and work anniversaries among teams in larger companies and company-wide in smaller ones can make employees feel more like family, or at least like they matter as people and as employees. Respect your employees in little ways, and they will perform even the most mundane tasks well, not to mention the big ones.”

Action items: Compensate fairly. Learn employees’ names. Establish a policy and a process to acknowledge special occasions for all employees.

Lesson 2: People Need a Mission and Goals

To employees and consumers, the actions of Arthur S. and Market Basket’s board of directors seemed contrary to the company’s mission and culture. “Missions should inspire,” says Jeannie Walters, CEO of 360Connext, a customer experience company in Chicago, who adds that a company’s mission and the actions of its employees should be closely aligned. “Start meetings by repeating your mission and asking others how they deliver on it. Then recognize and reward those who deliver.”

Set clear targets for each employee and show how their individual performance helps the company — and their careers. “Create clear paths for employees by outlining steps and requirements for career advancement within the company,” says Jonathan Erwin, CEO of Red e App, aLouisville,KY, developer of a mobile communications platform for business. “Employees are more likely to stay with an organization where they can see the potential for future growth. Communicate these opportunities clearly and often to remind employees that their hard work in current roles could help them land a more advanced role.”

These actions create a shared vision for the company and show respect for the people helping you achieve it. “Show employees the vision you have for what they can become and what they can accomplish,” advises business consultant Barry Maher of Barry Maher & Associates in Corona, CA. “If your people think you have a high opinion of them, it’s amazing what they will do to maintain that opinion. The more they respect you, the harder they will work to hang on to your regard.”

Action items: Articulate your mission for the business and align employees’ tasks to it. Identify and support business and personal goals.

Lesson 3: Transparency Builds Trust and Equity

The toppling of Arthur T. and the firing of employees shocked many outside the boardroom, prompting distrust of the board of directors and Arthur S., and strengthening loyalty to Artie T.

“Employees can detect the motivation of executives,” Fritsch explains. “Market Basket employees believe the new leadership cares more about distributions — i.e., their own wealth — than the brand, employees and customers. Whether or not this is true, the employees’ perception is a huge problem and poisons both the culture internally and the brand's equity among consumers.”

Transparency in how and why decisions are made prohibits speculation and wariness. “Executives can mitigate most negative reactions to changes in company policy and leadership just by using effective communication and managing expectations,” Fritsch says. Communicate clearly and frequently about the process, the rationale and the results. Otherwise, you create a problem like the one Market Basket is facing.

“The new Market Basket leadership team has botched the goodwill of employees and customers unnecessarily, and has demonstrated how little they understand the Market Basket brand,” she says.

Action items: Communicate frequently. Show how and why decisions are made.

Lesson 4: Customer Care Counts

Employees aren’t the only people you need to be loyal. Customers patronize small businesses for a more personalized experience, explains Adi Bittan, co-founder and CEO of OwnerListens, a customer feedback company in Palo Alto, CA. “It's something big companies struggle with, but the small business owner can easily make this a part of his or her strategy.”

Walters agrees. “The number one factor in creating a strong customer experience is having engaged employees, and Market Basket had that in spades,” she says. Company culture gets you most of the way there, but you also need to set and review customer service standards frequently and cross-train staff on key tasks. This reinforces the “we’re all in this together” mindset and reminds staff that customer care is paramount.

Just as fair compensation matters to employees, fair prices matter to consumers. Set product or service pricing at a point that creates profits for you and value for your customers. You may lose a few pennies off each sale, but you make it up with increased volume from repeat business and new referrals. Further illustrate your “care” by getting involved in the community by sponsoring events, donating goods and services, and serving on boards or committees.

And finally, respect customers’ power. “Market Basket wrongfully assumed the internal strife wouldn't have an impact on the business,” says Walters. “Customers and employees both felt like they were part of a special organization and culture, but the press releases and announcements from leadership seem disconnected from that culture. Customers feel they are being betrayed, so they use the only real recourse they have, which is taking their business elsewhere.”

Action items: Train for exceptional service. Get involved in the community. Price goods and services fairly.

The Bottom Line

The Market Basket mess shows how a change at the top can foil a strategy and spoil a brand. Arthur S. reportedly wanted his cousin out to increase margins and financial performance metrics. That may not happen now that there are barely any revenues to be maximized. It's safe to say there's plenty of work to be done to repair what was broken under Arthur S, now that his cousin is back on top.

“The culture of the company, including the loyalty of the employees, is what built Market Basket into a strong organization in the first place,” Walters says. “The fact that employees felt so strongly about their connection with leadership that they walked off the job to support him underlines how strong the ‘family ties’ of employees were. It sounds like communication at the top levels failed to consider these loyal employees at every level, taking a bad situation and making it much, much worse.”

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