People or Profits? How About Both

Capitalism doesn’t have a reputation for taking care of the little guys. So it comes as a surprise that this summer a $3 billion privately owned retailer made waves among union specialists, business experts, politicians, and the public in a story that seems more about Marx than millions. In a spectacular showing that would make Occupy Wall Street protesters furrow their brows in puzzlement, workers at Massachusetts-based grocery chain Market Basket embarked on a six-week strike, not for fairer wages, but to reinstate their CEO after board members ousted him in late June. While the “how” of their ultimate success is still being studied, the “why,” in the minds of CEO Arthur T. DeMoulas and his workers, is exceptionally clear: Doing good is good business.

At the tail end of this past August, Artie T. stood on a podium rigged to the back of a pickup truck in a parking lot, his voice echoing out to a sea of supporters. “Each and every one of you, and thousands more who are not here today, have demonstrated to the world that it is a person’s moral obligation and social responsibility to protect a culture which provides an honorable and dignified place in which to work.” Cheers, tears, and T-shirts emblazoned with “Artie T. Our One True Leader” lent the scene more the air of a campaign rally than a CEO celebrating a $1.5 billion private equity-backed buyout.

Market Basket is a successful company. In 2013, the company made an estimated $217 million in profit, and it has paid out $1.1 billion in special dividends to shareholders since 2001. It’s the 127th-largest privately owned company in the U.S., and was ranked #6 among national grocers by Consumer Reports in 2014. It’s also a marked 20 percent cheaper than its competitors. All of this is lovely, if unexceptional, until you consider that on top of cheap prices and high profitability, it offers a starting wage of $12/hour to its employees and a profit-sharing plan to those who work more than 1,000 hours a year. As a result, “lifers,” who often start out bagging groceries, retire withseven-figure nest eggs. Generous quarterly bonuses are doled out to deserving employees. It seems like an impossible win-win scenario: how do you offer cheaper product, pay employees more, and make money in the process? The chain’s success story shows that putting loyalty to partners, employees, and customers first – perhaps sometimes before financial gain – can prove more lucrative in the long run.

It is Artie T.’s dedication to preserving this scenario that won him a fan base among employees and made him an enemy of board members; he protected the profit-sharing plan during the financial crisis, and his opposition to increasing shareholder profits at the expense of employee benefits is partly what led to his removal. However, it’s more than cheap prices that have won him acolytes on the customer side. Renee Richardson Gosline, assistant professor at MIT writes, “Choices as consumers are embedded in real-life, warm-blooded social relationships.” The words of Market Basket customers echo this sentiment. “There’s a definite different feeling at Market Basket,” says New Hampshire shopper David Hagner. “It’s hard to put your finger on, but a more humanistic kind of feeling.”

That humanistic feeling results in powerful loyalty that rakes in profits. In a world where 76 percent of shoppers divide their purchases between five or more stores, Market Basket has a cult following. After the ouster, the unofficial fan page, “Save Market Basket,” drew 90,672 followers on Facebook – and picketers to every store parking lot. Vendors such as Extra Virgin Foods, which sold $2 million annually to Market Basket, severed ties in droves. Loyalty on this level – loyalty more powerful than profit or self-preservation – is unheard of in modern business. It’s not loyalty from a rewards card or CRM; Artie T. and his merry band of butchers and bakers build it a different way – through a people-first culture connecting customer, employee, and employer.

Famously rejecting self-checkout lines, Artie T. stated that he wanted “a human being waiting on a human being.” He attends employee family funerals and is on a first-name basis with store staff. The length of tenure encouraged by generous benefits and opportunity for advancement gives each store the feeling of a tight-knit community.

All this, along with worker statements that Artie T. is “Absolutely the best guy in the world. We love him” and Artie T.’s own mantra, “We are in the people business first and the grocery business second” may provoke an eye roll from cynics. Indeed, the details of the family feud flatter neither side in the end, but the facts remain – Artie T.’s strategy has been successful in building loyalty among employees and customers, profits for shareholders, and growth for the chain, all while maintaining quality of product. Marketers and business leaders alike would do well to pay attention.

By now, the feverish media coverage has thinned. While the last pundits argue over the significance of Artie T.’s win, the chain quietly opened the first of five new stores planned for 2015. Bucking the predictions of skeptics, industry analysts estimate that sales across the chain are up 10% percent over the previous year. The takeaway seems clear: the way to strong profits and growth is through a human-centered approach to relationships. In the words of Artie T., “If everyone in the workplace is equal and treated with dignity, they work with a little extra passion, a little extra dedication. I think that’s a wonderful business message to the world.”

People or Profits? How About Both