Small Business Q&A: Daniel Korschun, author

Kehlan talks with the co-author of the book ‘We Are Market Basket’, Daniel Korschun. Voted one of the best business books of 2015 by Forbes, it chronicles the true story of popular New England shopping chain Market Basket in the US. Its CEO was ousted by his cousin. What followed was an extraordinary fightback by employees, customers and suppliers.

Daniel, can you give us some background to how this story begins?

Market Basket is one of the largest grocery chains in New England.

Arthur T. Demoulas is the great-grandson of the original founder of Market Basket and the CEO. They have about 80 stores across the North East. 

It is a very successful company, in fact, one of only a few companies like this that are growing and still opening stores in the region. 

His cousin, Arthur S. Demoulas, is the majority shareholder of the company at the time.

It starts as a family feud. Arthur T. is the CEO while his cousin Arthur S. had the controlling share of the company. 

When he got that controlling share, he was able to revamp the board of directors and shortly after that he was able to fire Arthur T. from the company. 

This is where the crisis all began.

The argument from the board was that Arthur T. was too combative and had become too generous with customers and staff. 

He was accused of giving away too much money in profit-sharing with employees or discounts for customers.

This rubbed some of the shareholders the wrong way. 

Arthur T. had built up a relationship with employees and customers over decades. 

This ultimately led to a lot of loyalty and respect from a lot of people. 

Employees shared the benefits of the company and customers were rewarded too.

Is it a quick backlash, or a slow-burning movement that happens?

It happened slowly over about a year and a half. 

It really only began to get traction with the media around the summer of 2014. 

That summer was one of real crisis for the company as it looked like it was about to go bankrupt and go under. 

A lot of jostling had happened behind the scenes too.

Employee representatives were lobbying the board members, sending e-mail campaigns and protesting outside of board meetings. 

So there was unrest within the company for a while before it spilled out on to the streets in out and out protests.

These protests were happening before Arthur T. even got fired as they knew something might be happening.

Several weeks after that, in the spring of 2014, Arthur T. was fired and that’s when things really started to escalate. 

Shortly after the firing the warehouse distribution centres had a major walkout. 

The hubs that make sure that all the stores of Market Basket were supplied decided to down tools.

Workers from other parts of the company then began to rally around the warehouse workers and soon there was a full-scale slowdown of operations within the company.

The really amazing part of the story comes when customers began to support the workers and the people that served them every day.

Almost overnight, people stopped shopping at the stores, so much so that retail dropped by 95% in a matter of a few short weeks.

The stores were losing $10m (€8.7m) a day, an enormous amount of money. 

Vendors and independent suppliers stopped sending their goods to the company. 

One vendor, who had $30m account with Market Basket, refused to keep selling to them unless there was a change.

Many people — with a lot to lose it has to be said — put themselves into this protest to get Arthur T. back.

Was it that the new regime was heavy handed or was it about just total love for Arthur T.?

Well let me tell you a story that may explain that.

One of the store directors, one of the head managers within one of the 80 stores, his daughter had a very serious accident. She had an accident that caused a heavy head trauma. 

She was in real trouble and didn’t look like she was going to make it.

He’s at the hospital and he gets a call from Arthur T. 

The CEO of this large company is on the phone with this guy to see how his daughter is doing. 

During the conversation he asks the guy whether or not the hospital is good enough to deal with the injuries and if ‘we’ need to move her to a better hospital.

In one of the lowest points in this guy’s life, he has the CEO of the company ringing him to see what they can do for his daughter.

I didn’t know Arthur T. before I started writing this book, but those are the kinds of stories that come out again and again when you talk to people about their experiences with Arthur T. within the company.

There was a tight bond between him and the way he treated people.

The board caves in and Arthur T. comes back, but they were still losing €10m a day, how did they turn that around?

It was really a heroic effort from what I could see. 

When the announcement came through that Arthur T. was to come back and also now get the controlling share of the company too, it was quite amazing. 

People were literally at the doors at 11:59pm so they could start a new day of going back to work, starting at midnight of that new day.

People knew they had to move fast to get the company back on its feet again.

Social media was an important component of this and many people posted a lot of great things when the news was announced.

One person on Facebook said: “I don’t own a dog, but if the last thing on the shelf today is dog food I’ll buy it!”

So, even customers got behind the swing to get the company back to its former glory. 

Within two to three weeks you wouldn’t have noticed that anything had actually happened.

And the villain of the piece, Arthur S. Demoulas?

Well, he was forced to sell his share of the company to Arthur T., but still came out with $1.6bn.

But they wanted to sell their share to anybody but Arthur T. and his side of the family. However, the damage was done and Arthur T. took the controlling share of the company. 

But we still don’t know much about what made him tick. 

He was cornered in an elevator by a journalist during the crisis, but he kept out of the spotlight really.

So is the lesson in all of this about relationships?

I think that this was the key to all of this.

The relationship between the customers and the staff. The relationship between the staff and the CEO. 

The company purposely creates situations in which there is an interaction between customers and staff.

A lot of places now you’ll see these automation services where customers swipe their own shopping. Market Basket doesn’t have this yet.

They also keep a lot of people on the floor of their stores to stock while people shop.

Now some people say that it’s a nuisance having to get by a pallet in the middle of an aisle. However, if you look at what it does, it puts lots of people on the floor. 

Lots of people to help if there is something you need. There is generally five times more people on the shop floor than in other stores.

There is a lot of efficiencies you can get from automated services in stores, but in the long term, customers want a shopping experience rather than feeling like they are being churned through to the exit.

In this case, you can see why it’s so important to have that relationship.

’We Are Market Basket’, written by Daniel Korschun & Grant Welker, is available online and in bookstores.


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