BY DANIEL KORSCHUN AND GRANT WELKER
The following is an excerpt from the new book, We Are Market Basket: The Story of the Unlikely Grassroots Movement that Saved a Beloved Business (AMACOM, 2015)
“Blood Makes You Related, but Loyalty Makes You Family”
About the worst news a parent can ever receive is that his or her child is gravely injured. In 2012, Terry McCarthy, the director of the Middleton store (#45), received word that his twenty-year-old daughter Devin had suffered a brain injury and was being treated in a trauma center at a hospital in Rhode Island. McCarthy gathered family members and began nearly hourly briefings with hospital staff. The initial prognosis was not good. Her chances of survival were 50/50 at best.
McCarthy stayed by her side and would do so for as long as it took until her recovery. He had informed his immediate boss of the situation. Executives had always been understanding with store directors and associates facing hardship, and they told him to take the time he needed to be with his daughter and family. Nevertheless, he held a nagging worry that he was letting down his bosses and his store staff.
Before long, he received a call. It was Arthur T. Demoulas. “Mr. D. got on the phone call, very reassuring, very professional like he always is,” McCarthy recalls. Demoulas asked about the situation. Where was she being treated? How was she? How were McCarthy and his family holding up? After learning how serious the injury was, Demoulas probed further: “Terry, is that hospital able to handle her injury?” McCarthy thought so, but he was still unsure if she would make it.
Then Demoulas asked a question that forever changed the relationship McCarthy has with the company. He asked, “Do we need to move her?”
McCarthy says of that moment, “I’ll take it to my grave.” He had always felt part of the Market Basket family, but this made an indelible mark on him. He saw a level of commitment from Arthur T. and his team to his family that he hadn’t been aware of before. He felt that he was part of Market Basket’s extended family.
McCarthy’s story has a happy ending. The hospital was able to handle the injury. His daughter fully recovered. He told the story at a couple of the rallies in the summer of 2014, with his daughter—in tears—by his side. As he finished his story, McCarthy asked the crowd, “[Arthur T.] asked me, ‘Do we need to move her?’ I ask you, who’s we?”
There was a saying on many signs at the rallies and on the picket lines: “Blood makes you related, but loyalty makes you family.” This statement captures a core element of the Market Basket culture. It can be traced back to Athanasios, Arthur T.’s grandfather, who always stressed the importance of family. This would not have been uncommon for a working-class family of Greek decent at that time. What is unusual, in this case, is the extent to which Athanasios, Telemachus, and Arthur T. promoted this sense of a Market Basket family, a family that extends well beyond traditional boundaries.
When Arthur T. was moving up the ranks in the company under Telemachus, he did it as all employees do: step by step, proving himself at each step. But he was not alone. He was part of a cohort of associates and managers. This cohort became his closest friends and allies. Over time, it gelled into a close-knit team with extreme loyalty to Arthur T. and the company.
Bill Marsden, Joe Rockwell, Jim Miamis, Ron Carignan, Diane Callahan, Mike Maguire, Don Mulligan, Susan Dufresne, Tom Trainor, and Tom Gordon, among others, are the people whom Arthur T. has grown to rely on, and they rely on him. They look after each other, and they share everything openly as a family does.
Imagine a company in which meetings are a bit like Thanksgiving dinner. All the family members are there. Everyone knows each other intimately. They know each other’s strengths and weaknesses. They know what is important to them. They know what will set someone off. They joke, they argue, they disagree, and they resolve.
This is Arthur T.’s family.
While you might hear talk of family from other CEOs, no CEO takes the idea of family more seriously than Arthur T. It is rare that an employee at Market Basket has not shaken Arthur T.’s hand. He remembers people’s names and makes a special effort to greet them warmly when he visits a store. Often, he’ll ask about a spouse or child by name. For a $4 billion company, this sort of personal touch is unheard of.
Workers speak of how Arthur T. attended their family members’ funerals or weddings or offered to help cover time off if one of them needed to tend to a sick family member.
His sense of loyalty is reciprocal. He requires himself to be as loyal to others as they are to him.
“How can you not be loyal to someone so loyal to you?” said Elizabeth St. Hilaire of Lawrence, Massachusetts, a thirteen-year employee of the Indian Ridge Country Club, which is owned by Market Basket.
And surprisingly, this sentiment extends to all levels and functions of the company. Most employees have a story about a time when they faced difficulties, and someone (a colleague, an assistant manager, or an executive) offered a compassionate hand.
But loyalty is not bestowed unreservedly. To become a member of the family, one has to prove oneself. There is a period of what might be called vetting. During this period, there is a very real sense that the insiders are watching you. They are sizing you up, and they are definitely talking about you. It doesn’t feel like the typical gossip you might find elsewhere. This is more deliberate. It is a form of scrutiny to make sure that you don’t have an angle they don’t know about yet that could be harmful to anyone in the Market Basket family. They look for consistency, honesty, and respect.
The reward for those who pass the test is a commitment to reciprocal loyalty by those in Market Basket. For the most part, it is a group acceptance. A vendor or new employee may begin by speaking with only one contact person, but once the doors are opened, there is a sort of group acceptance by the larger Market Basket family.
Generations of families have worked at or with Market Basket—as associates or vendors. While Telemachus and George were alive, some members of the extended Demoulas family provided much of the company’s construction services. Now much of that construction management is provided by Retail Management and Development (RMD) Inc., a company run by two of Arthur T.’s brothers-in-law. Dating back to some of the earliest shopping plazas in which stores were located, other entities with family relations have owned and leased property to the company. These entities became trusted partners and played a sizable role in the company’s ascendance.
While the accent on family has been an ingredient in the company’s success, it has also made Arthur T. somewhat vulnerable to critics. Members of Market Basket’s board of directors once questioned whether Arthur T. was able to act impartially in real estate dealings. Shareholders on the Arthur S. side didn’t like that Arthur T. used money that they saw as belonging to the shareholders for capital projects for Market Basket. In a 2012 meeting, Arthur T. said he and his management team had, or would, spend between $165 million and $170 million on capital costs that year and were projecting to spend more in 2013. What some shareholders called a “substantial portion” of that money would be spent on projects with RMD.
They grilled him on David Sweetser, who ran the real estate firm High Rock, which rented space to Market Basket. Director Nabil El-Hage played coy on a few occasions: “How do you begin the negotiation on rent. If you’re going to do a land lease with High Rock—his name is Sweetser? . . . Literally what do you do? Do you sit in front of a mirror and talk? I’m being silly, but we know your wife is the sole [limited partner of High Rock]. . . . I’m really curious how you would normally go about deciding what the fair rent is.”
In a meeting a year earlier, El-Hage had used the same joke about looking in the mirror, recalling that people used the expression at a company he had worked at in the past. Arthur T. reiterated his commitment to representing the company forthrightly: “I would handle Mr. Sweetser no differently than I would handle any other landlord. You sit and you talk and you get the lay of the land, and you try to make the best deal you can.”
Arthur T. rejected suggestions that these dealings were improper. Yes, Market Basket did work with High Rock, but the board was “fully involved in evaluating High Rock from the outset.” The board had created a special litigation committee made up of three independent directors who worked with a retired appeals court judge, which in 2011 found that Market Basket’s dealings with family-run businesses were not a breach of Arthur T.’s fiduciary duty. Still the dealings remained a contentious issue all the way up to the protest in 2013–2014. The board would have to trust that his motivations were well founded.
This is the danger of building a business on strong relationships. It was a cornerstone of Arthur T.’s philosophy, and he had proven its worth over time. He is unapologetic about it, yet at times, he still finds himself defending his approach: “We’re a company that likes to cultivate and develop relationships. It works to the company’s advantage. You educate me a little bit and I educate you a little bit. We get in a groove. What we’re doing is good for you and it’s good for us.”
Those who know him best say that Arthur T. often speaks in inclusive terms of “we” rather than “I.” It is another way that he demonstrates that associates are in it together. Psychologists have a term for this shift from “I” to “we.” It’s called “social identification,” in which a person feels a strong belonging to a group and begins to see others through that lens.
Scholars began looking into social identity in earnest during the Brown v. Board of Education Supreme Court case during the 1950s. That case ended the practice of segregation in public schools where black and white students had been forced to attend school separately. But the ruling did not end the frictions in those communities. Some people protested the ruling, threatening to close schools rather than accept integrated classrooms.
Social identity provided an explanation for why these frictions lingered, even after the law became clear. Some people were using their race to define themselves in relation to others. They saw themselves as white, or they saw themselves as black. This identity became so strong that it crowded out other ways of thinking about oneself—as a mother, an architect, a citizen of Alabama. (Of course, in reality, we all share the same human origins, and race itself is more subjective than we realize.)
Psychologists realized that the more a person defines himself or herself as belonging to a particular race, the more likely they would be to help others who were deemed to be of the same race while simultaneously discriminating against those who were considered of a different race.
This effect is not limited to race at all. And it is powerful enough to be recreated in an exercise lasting only a couple of minutes. Imagine a group of sixty university students who agree to participate in an experiment. Each participant is shown a picture filled with hundreds of dots and is asked to estimate how many dots are there. There is a catch. The researcher doesn’t know, or care, how many dots are in the picture. No matter what his or her estimate is, each participant is told that he or she is either an overestimator or an underestimator. This is done entirely at random, so in our example, about thirty people are told they are overestimators, while the other thirty are told they are underestimators.
The researcher has now succeeded in creating two groups based on something completely trivial. The surprising result is that when research participants are then asked to share money or points with others, “overestimators” almost always give more to fellow overestimators and take from those who they think are underestimators. Underestimators favor fellow underestimators in the same way. If this effect can be detected in the lab in a matter of minutes, imagine how powerful a force identity can be if it is reinforced day after day as it was in many communities that resisted the Brown v. Board of Education ruling.
The same phenomenon is at work at many companies. When people feel a strong membership in a company (what researchers call organizational identification), it can create a sense of family very similar to what Market Basket employees, customers, and vendors feel. You hear this sense anecdotally when people use the words “we” and “us” rather than “I” and “you.” You hear it at companies like United Parcel Service (UPS) and International Business Machines (IBM), where employees call themselves UPSers and IBMers, respectively. It is based on a person’s belief that the company shares his or her values.
This sense of membership can have profound effects on how employees behave at work. In extreme cases, such as those of firefighters or soldiers, individuals can feel such a profound affiliation with their unit and the broader profession that they are literally willing to give their lives in order to save other members. But even in less life-threatening jobs, like selling groceries, that sense of family can be very motivating. The stronger this sense is, the more likely employees are to be satisfied in their jobs, the more likely they are to stay employed at the company, and the more likely they are to help fellow employees.
Scholars used to think that only employees could feel this sense of membership. But recent research finds this membership idea popping up in unexpected places. For example, many Harley Davidson customers think of themselves as more than just buyers of motorcycles. They see themselves as part of the Harley family and tradition. And, though perhaps not as strong as in times past, many Apple customers see themselves as Apple people. The same phenomenon is at work with sports teams; look for the fan with a Boston Red Sox tattoo.
Market Basket fosters this sense of membership more than most companies. “What you find in a lot of corporate America companies is ‘What about me?’ and that’s not here. It’s ‘What about us?’ ” said Joe Schmidt, operations supervisor for Market Basket. It might seem like just semantics. It’s not. It’s a different way of thinking about oneself. It’s the difference between saying, “I work for Market Basket” and “We are Market Basket.”
Such a feeling can lead to extreme loyalty to the group—in this case, the Market Basket family. Consider the words of Arthur DiGeronimo, who was once the CEO of Victory Supermarket. “We were always able to attract good help from other companies,” DiGeronimo said. “Name a company and we could get them. Except one. We were never able to get a Market Basket employee to jump ship.”
Market Basket actively fosters this sense of family. It begins with incentives. Market Basket is known to have one of the most generous profit-sharing programs in the industry. December bonuses based on company performance totaled $44 million in 2013 and then $49 million in 2014. That is more than $1.6 thousand per associate on average. The amount differs for each employee and is based on a combination of tenure and position in the company. Typically, it is calculated based on multiples of an associate’s salary. For example, the bonus might be three weeks’ pay for an associate who has worked at Market Basket for more than fifteen years. Bonuses have typically come twice per year, at Christmas and in March.
In addition to the annual bonuses, the company has sometimes provided company-wide rewards when a new store opening is particularly successful. Since Market Basket promotes entirely from within, management positions for new stores have to be filled by associates moving up the ranks at existing stores. The new store will pluck some of the best employees for an opening. This is exciting for the associate making the move. But it also means that associates at existing stores need to work extra hard to make adjustments for the loss of that worker. Recognizing this, Market Basket has occasionally cut additional checks for associates working at existing stores who have lost colleagues to a grand opening. The profit sharing ties associates’ fortunes to the successes of the company and reinforces a culture that everyone is in it together.
The company fosters a sense of family organically too. This happens through the actions of senior management. Every conversation and gesture that Arthur T. and others make toward other associates gives those associates the sense that they are valued family members. Especially during times of tragedy or hardship, Market Basket managers and executives step in quickly. They provide extensive sick leave with pay. They adjust schedules. They call after hours to provide comfort and support. Nearly every associate seems to have his or her own story. This book could quite literally be filled with these stories.
Arthur T. and other executives attend funeral masses for the loved ones of associates. When Arthur T. attends, he doesn’t usually stay long. He appears at the mass and then offers his condolences in the reception line. Then he leaves quietly without attracting attention to himself. The gesture from the CEO is always touching for the associate. Hearing the many stories, one could be forgiven for thinking that the atmosphere at Market Basket makes it an easy place to work. In actuality, Market Basket is a hard-nosed, fast-moving place. Associates are treated as individuals, but one’s value is viewed through the lens of the company based on how much the associate can be relied upon by colleagues to help the company grow. It is not an atmosphere of profligate generosity. Associates are expected to put in long hours and multitask while on the job. They are asked to make personal sacrifices for the good of the overall company. As is promoted by Arthur T. and others in executive management, loyalty at Market Basket is reciprocal and is offered once people have proven themselves. Sometimes that loyalty comes in the form of tough love.
Karla Foster has worked at Market Basket for twenty-four years. Like many others, she describes Market Basket as a family: “We are a family, but people don’t truly realize what that means.” She says they bicker like a family might, “but in the end, when [they] need each other, [they’re] there.” Family is a give-and-take process for Foster: “Mr. Demoulas is very generous,” she says, “and I want to make sure that I’m earning my way, trying to do a good job for him.”
One of the things that endears her to the company is the honesty she is given. Her oldest son, Philip, is autistic. In 2013, he was about to graduate from high school and would no longer be eligible for the special education services that he needed. Foster had worked at the Tewksbury headquarters for more than a decade and loved her job. She hoped to remain at the main office, but she needed a more flexible schedule to care for her son. Not sure what to do, she approached Bill Marsden. He did not sugarcoat the situation. “I’m going to be honest with you; the best thing for you is probably to go back to the store,” he told her. Soon after, Arthur T. approached Foster and asked her which store she would like to go to. He told her he wanted to make sure she had what she needed.
When she arrived at the Londonderry, New Hampshire, store, where she works now, she found a welcoming group, including a store director who continues to work with her to make sure she is able to take care of her son. Now she works on signs and pricing in the store. She serves departments around the store, making sure that customers have the right price and know how much they are saving each time they pick up an item. But if a department manager needs a sign as Foster is finishing a shift, she will drop everything, no questions asked, to make sure that the signs are made. When she does see Arthur T. now and then, he asks about Philip by name. Looking back to her conversation with Marsden, she says, “He just told me the truth.”
She carries this sense of family to her work every day. She tells of one customer, an elderly woman who visited her aisle every Friday morning in the years before the protest. “She couldn’t see [well],” explains Foster, “so she would come in my aisle and she would tell me what she needed. I would help her find it. I would help her pick out [greeting] cards for her family.” Foster does not know her name, but it is obvious that she has a sincere fondness for this woman. This is the devotion that Foster feels toward her extended Market Basket family, her way of paying it back.
It may be hard to imagine that this sense of family could extend to a company’s suppliers. After all, suppliers are typically considered outsiders; most academics call them “external stakeholders.” But as we will see later, Market Basket rarely fits the mold. In fact, a number of Market Basket’s vendors feel like a part of its extended family.
No vendor has a stronger sense of loyalty to Market Basket than Jim Fantini. Fantini first learned of Market Basket as a child, but his relationship with Market Basket predates his birth. His father Bob was the third generation to own the family bakery in Haverhill, Massachusetts. The bakery was started in 1902 (his father died ten years ago, but the bakery remains in the family). In the early 1960s, Market Basket became one of his key accounts, and the bakery grew with Market Basket. Fantini says that whenever Market Basket opened a new store, Fantini’s father “would put in routes, so he could service it.” Fantini grew up working in the bakery. Almost from the moment he got his driver’s license, his father had him driving a truck to Market Baskets all over New England. Fantini says Market Basket was so ingrained in their way of doing things that it was practically “in the DNA” of the bakery.
In the 1980s, Fantini Bakery made some missteps that sent it into bankruptcy for a time. Fantini says that many other chains would have kicked a weak supplier to the curb. Instead, Market Basket worked with Fantini’s father, which enabled him to get back on track and grow into the sizable regional player the bakery is today. The support he received from Telemachus, Arthur T., and other managers like Miamis and Lacourse not only saved the business but in Fantini’s estimation “saved [his] dad’s life.” These were gestures that Fantini and his father never forgot.
Fantini went on to college at the University of Massachusetts, Amherst, where he studied politics and history. He jokes that those majors don’t have much to do with bread, but he also says his political science education helped him understand the art of sales and relations between vendors and buyers. Looking back, his love of history is also what led him to value the heritage and traditions at Fantini Bakery and Market Basket. As he got older, he began to appreciate that these companies constitute a “historic and treasured part of this whole region.”
He no longer works at his father’s bakery. Since 2001, he has been an employee of a large regional supplier of English muffins, breads, and other bakery products to Market Basket. More specifically, Fantini oversees the sale of bakery products that Market Basket sells under its own name. These so-called private-label products are an important part of most supermarkets, and low-price supermarkets especially, since these products typically sell at lower prices than well-known national brands like Wonder Bread.
When Fantini first began to work with Market Basket through his new company, he knew few of the principals in the corporate office. He says Market Basket executives treated him well from the start but that he had to work to gain their trust. To do that, “you have to make sure that you are always putting Market Basket customers’ needs first and foremost.”
Many vendors are not prepared to work in the Market Basket way. Those vendors look for quick sales and try to squeeze buyers whenever they can. That approach rarely works at Market Basket. For example, Market Basket store managers frequently visit competitors to check prices. Market Basket associates would consider it a form of betrayal if a vendor appeared to sell to a competitor at a lower price, especially if it were done in an underhanded way. Someone would confront that vendor to find out what had happened. Fantini says, “Plenty of companies have burned themselves by not being forthright.”
Fantini explains that successful vendors at Market Basket temper their self-interest with a degree of selflessness. They are willing to invest in the relationship through gestures of give-and-take, such as accepting less profitable terms on a shipment today in the hopes of a large shipment next month. It is a tricky balance in the fast-moving, low-margin, and high-risk grocery business, but vendors who are able to do it find a willing partner in Market Basket. And once that balance is achieved and repeated over time, the vendor begins to feel like part of that extended Market Basket family. Once that trust is earned, the concessions and cooperation make the relationship quite resilient to the inevitable ups and downs of the industry.
Fantini would seem to be an uncommon example of a vendor, but he says many other vendors have a strong loyalty to Market Basket that fits with this sense of family. He points out that many account representatives he knows have been working with Market Basket for decades. Those reps, who visit the corporate offices by the dozen most days, may work for large national manufacturers, but those accounts have low turnover because reps enjoy working with Market Basket. While it is not uncommon to join the family as a vendor, Fantini says, “It takes an uncommon person—someone with a certain work ethic and an eye on the long-term goal of building something great.”
The purpose of the company, to enhance its communities, served as an ideal to aspire to. The strong social identity of being a Market Basket family member created a unity that was resilient. But intentions are not enough in a struggle like that of 2014. As Steve Paulenka said at a rally, “It’s not enough for you to like us on Facebook. That’s nice, but that won’t accomplish anything [on its own]. We need you to help shut this company down.”
This meant real and coordinated action. Paulenka got the action he hoped for because Market Basket associates had already been trained to act decisively. Market Basket’s culture empowers associates to do what it takes to get the job done, finding roles that advance the company’s cause.
READ OUR INTERVIEW WITH THE AUTHORS HERE
Grant and Daniel read from We Are Market Basket at Porter Square Bookstore on Monday, August 17 at 7pm, and on Monday, September 14 at the Thomas Crane Public Library in Quincy.