The other morning, I joined dozens of other impatient customers in the aisles of my local Market Basket. I wished I’d gotten the scene on video. It sounded like a long overdue family reunion. The whoops and hollers were deafening, and the scenes of customers hugging meat managers and cashiers hugging customers were amazing. The joy and gratitude was palpable. And I thought: There isn’t a CEO, CMO, or HR manager in the world that wouldn’t kill to have an atmosphere like that in their workplace. Which got me thinking: How did that happen?
The saga has been called a business case for the ages, likened to the Arab Spring, and has filled the airwaves and cocktail parties around New England for weeks. Whatever you call it, the last eight weeks saw a demonstration of unprecedented customer and employee loyalty that brought a $4-billion dollar New England supermarket chain to its knees. More importantly it is a very real lesson in the tangible benefits of good relationships and costs of bad ones.
Imagine a family feud that makes the Hatfields vs the McCoys look like the Waltons, a kindly father-figure CEO vs. Ebeneezer Scrooge, loyal employees refusing to work unless their beloved CEO is hired back, and customers and suppliers supporting their efforts with a boycott that left empty shelves and reduced store traffic by 90%.
The feud started in 1961 when the original Demoulas died and left the chain of stores to two brothers who didn’t see eye to eye on how to run the company. It is their sons, both named Arthur, who catapulted the feud from the courts, to the board room, and into the streets.
For decades, Arthur T. Demoulas, whom everyone calls Artie T, ran a chain of grocery stories that had the lowest employee turnover rate, and the highest return per square foot of any store in the region. His cousin, Arthur S. Demoulas was content to be on the payroll as an “assistant product clerk” taking home $500,000 a year in 1992. But after awhile, Arthur S and other family members grew tired of Artie T’s imperious manner in the board room, and initiated a coup, taking control of 51% of the company. In a much anticipated board vote this past June, they fired CEO Artie T.
It took less than a day for the implication of the move to sink in, and on June 24th a bevy of top managers resigned and 300 people rallied outside the corporate offices. By July the protests had grown to thousands of employees, who were then joined by delivery truck drivers who went on strike in support of Artie T.
Customers, many of whom had built friendships with employees over the year, stayed home in support of the employees. They were also very willing to be interviewed by the media, complained that everywhere else was “so expensive” and “nowhere else could they find their favorite foods.” Customers believed “it’s worth the effort” to support their friends.
From a relationship measurement perspective, let’s face it, there isn’t a better measure of employee or customer loyalty, commitment and satisfaction than having customers and employees expressing their loyalty by standing in the street for weeks saying and waving signs that say “I love Artie T” and “Bring back our CEO” (never mind spray painting their cars with the same slogans).
Let’s examine what Artie T did right:
First, he clearly knows his key stakeholders — those groups with whom a good relationship is key to survival. In the world of retail grocery, customers, employees and suppliers are indisputably your most important stakeholders. On a daily basis, he cultivated those relationships. He paid suppliers in cash to keep prices low. He kept his employees loyal with generous bonuses ($43 million) , and incredible acts of kindness when they were in trouble. As a result the customers saw his employees as family — those friendly, helpful people you visited with every week while you got your shopping done.
He also exemplified best practices in brand management. Do good things, empower your advocates to talk about them, and watch the profits roll in. His stores had the lowest turnover and highest profit margins of any grocery chain in the region, and even his critics skeptics attribute that success to his management style.
But what he did wrong was to forget one key stakeholder group – his board of directors. The Boston Globe released transcripts of the board meetings and it is clear that as beloved as Artie T might be to his customers and employees, he was a pain in the ass to his board. He was imperious, secretive, and did everything he could to ensure an atmosphere of distrust and suspicion (which wasn’t hard to come by given the long history of acrimony).
And it was a costly mistake. After 8 weeks of empty stores and loses that were rumored to be $90 million a week, Artie T got his company back – or rather he was allowed to buy the company (which he already owned 49% of) back for $1.85 billion, saddling himself with enormous debt.
Like I said, case studies don’t get much better than this…!
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