The Market Basket Strike Really Matters

Every CEO should dream of being loved like Market Basket’s Artie T.

Aug 8, 2014 at 6:27PM

Something big's going on in the Boston retail landscape. Non-unionized, company-president-loving workers have launched a weeks-long strike. It has seriously shut down business as usual at The Market Basket. And now rumor has it that grocer Hannaford Bros. may bid for the company.

There's a strikingly personal story here, but there's also a big-picture one. In the last year, there have been many high-profile strikes aimed at management at retailers like McDonald's (NYSE:MCD). That's why this one is amazing: These are non-unionized grocery employees demanding that their ousted president return. That's some crazy talk.

In reality, it's not crazy talk at all. Every top corporate leader, whether a president or a CEO, should aim to be such a good leader, and so empathic about his or her employee "family," as to engender this kind of employee loyalty.

In many ways, positive businesses can make all of America happy. When businesses take care of stakeholders, success is in the cards. Things seemed to be going well at The Market Basket under the former leader, but now the picture has fractured.

Beyond the business textbooks
Many Market Basket workers seem to know more about what makes a great company than you'd find in business school textbooks. You also might never find in the textbooks that sometimes people will give up paychecks for something they really believe in. But you can find that in the pages of newspapers covering The Market Basket story.

The sad situation in Boston was set in motion by a longtime family rift. Former president Arthur T. Demoulas – affectionately known as Artie T. -- was pushed out of his role in June. The board of directors, which is controlled by his cousin, Arthur S. Demoulas, gave him the boot and put James Gooch, the former CEO of RadioShack (NYSE:RSHCQ), and Felicia Thornton in place as co-CEOs.

Investors will likely see some good reason to worry that a high-ranking person with "RadioShack" on his resume is in the front office, given that company’s struggles. Meanwhile, there are many reasons why employees have every reason to feel as if the business ran perfectly well under Artie T.

Under Artie T.'s design, Market Basket employees receive:

  • A profit sharing program
  • College scholarships
  • Internal promotions
  • Minimum wage is $12 per hour vs. Massachusetts' $8 per hour minimum wage

He's also apparently a really nice guy. He did the kind of thing once that more top leaders should do: In the tough times in 2008, he dug into his own pocket to make sure employees would get bonuses through the profit-sharing plan.

Given the Demoulas family's warring ways, apparently the real family Artie T. has embraced is his employee family. Market Basket's top management has a reputation for long tenure, and lack of turnover says a lot about a company's long-term strength. It also saves a company money.

Stakeholder value theory espouses the idea that if companies take care of their employees, customers, and communities, everyone will benefit, including shareholders who are looking for financial returns. Obviously, this theory eschews short-term profit maximization for shareholders at the expense of everyone else. For companies like Costco (NASDAQ:COST) and Whole Foods Market (NASDAQ:WFM), this management concept has built highly successful companies.

The current management at Market Basket has accused Artie T. of exhibiting financially profligate ways, but his stewardship has produced a profitable business, not a money-losing one -- a real achievement in the grocery industry. Although Market Basket has less than 100 stores, it generates billions in sales, turns a profit, and obviously hasn't taken its financial success out of its employees' hides.

Yet given some of the current management's "reasons" to oust Artie T., employees can't be blamed for worrying about cost cuts and "profit maximization" -- which very well could come out of their hides.

Feel the love
Every management team and board in America should aspire to create the type of loyalty at work in the Market Basket strike.

Workers who are willing to go unpaid to stand up for your leadership is no small thing. Customers vocally boycotting is also a major business risk for any company.

The situation has also done something that corporate managements should dread -- circulate on social media. Crowdsourcing through GoFundMe is raising funds to help out some of the striking workers.

Artie T.'s treatment of employees has clearly created engaged ones -- striking hits the word "engaged" on a bunch of levels. Engaged employees drive financial value -- that's a fact, not a theory. Just recently, the National Bureau for Economic Research posted a report compiled by researchers from Wharton Business School and Warwick Business School. They found that in markets like the U.S., companies that took care of employees tended to outperform the market.

Hopefully the Market Basket customers and employees will get their leader back. The board and all bidders like Hannaford should recognize that if they don't, they may end up with a shell of a grocer. Not only should a company have a good leader, workers and customers are actually the lifeblood of every company.

Regardless of what happens in this messy situation, there are big lessons about how we should view business in America. Caring and empathy work. If work's like a family -- and not a dysfunctional one -- every stakeholder wins.

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John Mackey, co-CEO of Whole Foods Market, is a member of The Motley Fool's board of directors. Alyce Lomax owns shares of Costco Wholesale and Whole Foods Market. The Motley Fool recommends Costco Wholesale, McDonald's, and Whole Foods Market. The Motley Fool owns shares of Costco Wholesale and Whole Foods Market. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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