Are corporate culture and values really important? Here’s an example. A few years ago, a controversy was brewing in the Boston area over the “Market Basket” grocery supermarket chain. “Market Basket” is a chain of about 71 grocery supermarkets in New England that generates about $4 billion in annual revenues – it has been a family-run business founded and managed by the DeMoulas’ family for several generations.
The Market Basket Story
Arthur T. Demoulas has been the CEO of Market Basket and has been highly regarded by all company employees and customers for building a strong company culture based on the strong leadership and values. However, some other members of the Demoulas’ family who have an ownership interest in the company didn’t see it that way. They felt that Arthur T. wasn’t paying enough attention to the bottom-line and was putting too much emphasis on corporate culture and values including developing a clearly-defined brand image with very strong employee satisfaction and strong customer loyalty. So, they fired him as CEO and hundreds of employees who were intensely loyal to him promptly walked out of the company in protest. Customers also started boycotting the stores in response to his firing.
The company was paralyzed for some number of weeks in the midst of this controversy as deliveries by suppliers almost stopped because:
- There were no employees to accept deliveries and stock the shelves and
- Customers have walked away.
As it turned out, Arthur T. decided to buy out the other shareholders in his family to gain a majority and controlling interest in the company. The Boston Globe magazine had several excellent articles on this – here’s an excerpt of one of them:
“Under CEO Arthur T. Demoulas, Market Basket had a winning business model: He treated employees, managers, and customers as members of a common enterprise, from which everyone gained. Arthur T. rolled out a 4 percent discount on nearly all goods at the beginning of 2014, arguing his customers could use the money more than his fellow shareholders. He paid his employees and managers decent wages, and he treated them with respect. He made sure they understood the objectives, and then let them decide how to achieve them. The greed team that ousted Arthur T., by contrast, is running the company as if they’re take-it-or-leave-it martinets and everyone is losing.”
“At least one of the bidders who emerged to buy Market Basket was said to be offering more than Arthur T. was offering. They said they can squeeze more profits out of the company than when Arthur T. was CEO. They’re deluding themselves. Arthur T.’s business model worked precisely because he didn’t follow this route. Trying to squeeze out more profits will drive customers away, destroy employee loyalty, and increase worker turnover.”
“There’s abundant evidence that a company organized as a common enterprise does better over the long term than a company designed to maximize shareholder returns over the short term. Arthur T.’s business model wasn’t based on zero-sum thinking. He understood that giving everyone a stake in the business would generate gains for everyone, including the shareholders.”
“The reactions to Arthur T.’s ouster proves the point. Customers are staying away from Market Basket stores, even though its costing them, forcing them to buy more expensive food elsewhere. Striking employees are sacrificing paychecks and risk losing their jobs, but giving in means getting stuck with new CEO’s and a board that are likely to cut pay and raise prices. Local politicians have weighed in with some statements of support. This isn’t the age-old labor versus management conflict. It’s labor, management, customers, community, and fired CEO versus greedy directors – something rare in the annals of American business.(Source: Reich, Robert, “Anatomy of a Meltdown”, Boston Globe, Globe Magazine, 8/24/2014, p 20)
What Does This Have to Do With Agile Project Management?
What does this have to do with Agile Project Management? I believe that the conflict between a bottom-line, numbers orientation that focuses on results and a more systemic and holistic approach that focuses on people, culture, and values and other factors that drive results is also one of the key issues behind the conflict between traditional plan-driven project management and Agile.
Some years ago, I published a book called “From Quality to Business Excellence – A Systems Approach to Management” which is directly related to this problem. The figure below is a diagram from that book:
(Source: Cobb, Charles, “From Quality to Business Excellence, ASQ Quality Press, 2003)
Should a Company Only Focus on Bottom-line Results?
The idea behind this is that many companies are very short-sighted and reactive – they focus primarily on bottom-line results and when the numbers in a given quarter don’t meet expectations, they try to take some kind of corrective action without really understanding the cause-and-effect relationships that drive those numbers. This can lead to erratic and unpredictable performance. Companies who take a more systemic approach and understand these relationships are able to be much more proactive by focusing on at a deeper level on the performance drivers behind the numbers rather than simply reacting to the end-results. That should result in more consistent, sustainable, and predictable performance.
This pendulum has swung back-and-forth – should a company focus only on bottom-line results or focus on the internal factors like customer loyalty and employee satisfaction that drive bottom line results? The Market Basket controversy in the Boston area is a perfect example of that. In the 1980’s and 1990’s many leading companies and enlightened managers successfully developed this kind of softer leadership approach that Arthur T. Demoulas is noted for; however,
- Over the years since then, increasing pressure to produce fast-paced, short-term results has caused many companies to lose sight of this concept.
- To some people, the focus on numbers and bottom-line results may seem incompatible with a focus on some of the softer issues like corporate culture and values; however, enlightened companies and managers are able to successfully develop what I call a “systems approach to management” to achieve both
Relationship to Traditional Project Management
Traditional, plan-driven project management is also very results-oriented and numbers-oriented with a focus on meeting planned costs and schedules and many people see that approach as incompatible with Agile that focuses heavily on a softer leadership approach, an emphasis on culture and values, and empowered, self-organizing teams.
- I don’t see those approaches as mutually exclusive and focusing on one of those extremes or the other is not likely to produce optimum results.
- I think it’s naive to believe that you can focus on company culture and values and empowered employees alone and the bottom-line numbers will somehow come out right as a result; but
- Its equally problematic to focus on bottom-line results only without an appreciation of the factors that drive those results.
The right balance of these two approaches will vary from one situation to another but, in general, a focus on both is needed to some extent to achieve optimal results.
Market Basket has a very well-defined corporate culture:
Respect, loyalty and trust are a large part of their culture. This is true across employees, vendors, and customers. Market Basket locations are considered members of their town’s community. Market Basket does not use a typical top down structure. The management takes care of the associates. Because they do not hire upper level management from outside the company, each employee has worked his or her way through the ranks. Additionally, vendors have to earn trust but are included in the culture of respect, loyalty, and trust.http://iwer.mit.edu/2015/03/02/learning-organizational-culture-market-basket/
However, corporate culture, in itself is not sufficient. Operational excellence and a numbers-orientation is equally important. My wife and I do grocery-shopping at both Market Basket and Shaw’s which is one of their biggest competitors in this area. As an epilogue to this story, I have to say that we actually like Shaw’s better than Market Basket in many ways. Shaw’s has much better prices and much nicer and cleaner stores.
The following are some related articles on the topic of Agile Business Management: