Below is the second post in a three-part series exploring this summer’s Market Basket leadership struggle. Ted Clark, professor of entrepreneurship and innovation and executive director of the Center for Family Business at D’Amore-McKim School of Business, explains what stakeholders from all angles should learn from the saga of the summer.
The battle for Market Basket is over and the plans for the supermarket chain to get back to business are in action. One question has been on everyone’s minds: Will Market Basket ever be the same?
Features that made the chain special, such as significantly lower prices and generous compensation for employees, may not be sustainable under the debt that Arthur T. Demoulas agreed to take on to keep the business. Ted Clark, professor of entrepreneurship and innovation and executive director of the Center for Family Business at D’Amore-McKim School of Business, breaks down the challenges Market Basket will have to overcome in 2015 to get itself on sure footing for the future:
1. Show me the money
There’s a new management team in place, including creditors and equity partners who will have one thing in mind: money. While Arthur T. will certainly try to hold tight to family values, he needs to make up for a $1.5 billion shortfall on the balance sheet.
“Once the debt starts kicking in, there will be more pressure on cash flow,” said Clark. “Every decision from here on out will have to contribute to refilling the tank.”
2. Focus on existing stores
Market Basket has spread quickly across Massachusetts, New Hampshire and Maine, but following this summer’s power struggle, we can likely expect to see fewer new store openings.
“In order to service the debt, Market Basket management will likely have to focus more on cash flow and less on expansion of new stores in the years to come,” said Clark. “The investment team isn’t likely to have the same long-term view as the family did, so the pace of expansion will most likely slow down and money will instead be invested into existing stores.”
3. Regain employee support
Market Basket’s employees have proven their resiliency and lobbying power, but now the grocery chain needs to deliver on its promise to continue providing high wages and great benefits with the added burden of debt.
“Employees across New England rallied to get Arthur T. reinstated, fearing new leadership would cut compensation and benefits,” explained Clark. “As Market Basket moves forward and if growth slows, it should hopefully have sufficient means to pay its employees what they deserve.”
4. Continue the culture
Market Basket is the beloved family grocery store and customers across the region flocked to its aisles upon Arthur T.’s reinstatement. Suppliers who had ceased business with Market Basket again honored their contracts and shelves were quickly restocked. The question remains: Will loyalty continue as changes are put in motion and tangible effects are felt?
“The leadership teams now need to be prepared to adjust for a period of change. Market Basket’s ‘vacation from operation’ could prove to be detrimental to the organization’s success,” said Clark. “It’s imperative for the leaders to be highly adaptive and foster an attitude within the organization that change isn’t necessarily a bad thing.”
What other changes do you think shoppers can expect to see in 2015 with the New England supermarket chain? Comment on the post and share your opinion below.
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