Understanding the 2014 Market Basket Crisis through Symbolic Organization Theory

Authored by Daniel T. Murphy

A Pre-Symbolic View

The drama that played out at Market Basket in 2014 left business leaders, management consultants and educators around New England scratching their heads. In its initial days, the crisis resembled many previous situations in other organizations. By the time that the crisis came to a close at the end of August, it was clear that, from an organizational theory perspective, something unusual had taken place, and some significant organizational “givens” warranted reconsideration. For example: (1) That a for-profit organization exists to maximize shareholder value; (2) That power resides at the top of an organization; and (3) That power is contested between the organization and the external market.

Trying to understand what transpired at Market Basket by looking through a modernist lens is a difficult task. From an epistemological standpoint, a modernist would have expected the crisis to play out based on an established set of norms. According to Hatch and Cunliffe (2013), those norms are based on an accumulation of knowledge and experiences by many organizations through many years. For example, one norm is that a for-profit organization exists to maximize shareholder value, and all business decisions are made toward that end. A second norm is that leadership and power resides at the top of an organization. A third norm, especially in a non-union environment, suggests that when the CEO demands that managers return to work, managers return to work. Managers do what they are told, because managers do not have the power to do otherwise. A fourth norm is that Market Basket customers would continue to make shopping decisions based on the same cost and convenience-based criteria that all grocery customers in society always make decisions. If we try to understand the crisis through the modernist lens, we might seek to find the flaw or flaws in our original constructions of those norms. Positivists seek to find the reasons that the situation deviated from what a modernist would call universal principles and laws that govern organizations. In other words, why did the norms of shareholder value, power and distribution, and market forces not prevail at Market Basket during the summer of 2014. In the words of Weber (Hatch and Cunliffe, 2013), why did Market Basket not react like a rational-legal industrialized “iron cage” organization?

The one pre-symbolic theorist whose perspective might be useful in this case is Karl Marx. Marx (Hatch and Cunliffe, 2013) argued that economic efficiency creates a surplus of wealth. In a capitalist society that wealth is contested by those who own the means of production and those who do the work for the organization. Conflict between the two parties is always inherent. As the demand for profitability increases, conflict between the two parties also increases. Marx would argue that Market Basket was historically a relatively peaceful organization because the demand for profitability was low. In other words, the organizational was communal. According to Mackin (Boston Review, 2014c), with the firing of Arthur T. Demoulas, employees saw the writing on the wall that the company was likely to be sold to the Delhaize Group, and that the high-wage business model was likely going to disappear. Marx would argue that the level of conflict was increased simply by the rumblings of a demand for greater profitability. Yet, Marx’s perspective only partially explains the dynamics that unfolded.

Given: That a for-profit organization exists to maximize shareholder value

The Market Basket crisis makes significantly more sense when viewed through a symbolic (Hatch and Cunliffe, 2013) perspective. The symbolic perspective is subjective. The organization does not have any objective reality apart from the awareness of those who are members of it, or who interact with it in some way – In other words, the employees and customers of the organization. Thomas (Hatch and Cunliffe, 2013) suggested that if men define situations as real, then those situations are real in their consequences. Berger and Luckmann (Hatch and Cunliffe, 2013) argued that organizations are products of a collective search for meaning by which experience is ordered, which is a process they called sensemaking. Geertz (Hatch and Cunliffe, 2013) and Giddens (1979, 1984) might explain that the Produce Department is the Produce Department, because we buy produce in the Produce Department. Every time we buy produce in the Produce Department, and every time an employee or customer calls the Produce Department the Produce Department, it reinforces the norm that the Produce Department is the Produce Department. It is not a universal principle to be discovered, but rather a context that is defined and redefined by perception.

Geertz would argue that a similar construction and reconstruction is always at play regarding an organization’s purpose, the roles of leadership roles, and the distribution of power. For example, somewhere in Market Basket’s organizational history, the purpose of the organization must have been reinterpreted from something other than what is the norm in the greater world, which is that a for-profit organization exists to maximize shareholder value. Somewhere in the organization’s history, the organization’s stakeholders redefined organizational purpose as something other than that. Geertz (Hatch and Cunliffe, 2013) would agree that that redefinition was less likely a purposeful renaming of shareholder value (e.g., Attention shoppers, shareholder value will now be redefined as . . .), and more likely an evolution of norms through rewarded behaviors. Schein (1984) would identify the event as a cultural artifact, perhaps purposefully enacted to create a culture, perhaps a byproduct of underlying values, or perhaps both. For example, Nickish (Boston Review, 2014b) told a company story about a customer who forgot to take home his groceries. When he returned to the store, he was told by a manager to just “go inside and grab whatever you need.” Nickish tells this as a typical and celebrated story at Market Basket. And, if it is a typical and celebrated story, it is likely that that employee emulated the behaviors he had seen in upper management, and that such behaviors are rewarded. Every time a behavior is rewarded, either through an actual or tangible award, or through a nostalgic account, that behavior becomes more ingrained as a truth – Again, not because it is a fundamental truth, but rather because it has been interpreted by the actors in and around the organization as true.

Given: That power resides at the top of an organization

Also, somewhere in Market Basket’s history, the norm that employees recognize that power resides at the top of the organization was redefined as well. Macklin (Boston Review, 2014a) hinted at that symbolic or heuristic redefinition when he talked about the “language of ownership” at Market Basket. Employees consistently used such terms as “our stores” and “our CEO.” I can personally contrast that to the many client organizations where I have consulted, and only occasionally heard clients say such things as “our stores” or “our bank branches” or “our pharmacies”. According to Mackin (Boston Review, 2014a) Market Basket is a company where “managers and employees are the natural owners of the firm.” Ancona (Boston Review, 2014a) made the argument that Market Basket had traded the traditional notion of leadership in favor of a distributed leadership (DL) model where power is distributed throughout the organization. According to Ancona, for the model to be successful, it must be combined with a compelling and well-understood strategic business model, and with managers and employees who are freed to become adept at “sensing” the situation and “seizing” and opportunity. The customer who was told to “go inside and grab whatever you need” is a good example of sensing what is the right thing to do, according to the organizational norms, and seizing on an opportunity to act, and in turn, reinforcing those norms. The fact that nearly all store managers joined the cause, but did so in ways that were appropriate to their particular locations is another good example. Through the symbolic/interpretivist lens, we can understand how the managers were able to interpret their role as something different than the role that would be considered the “norm” at another company. Thus, when employees revolted, managers did not respond with the “normal” response of supporting the CEOs. They responded by doing what was best for the company, because they believed that power resided, not with the CEOs, but with they themselves. On a side note, the company likely inadvertently reinforced the normalness of distributed or, at least shared leadership by appointing two CEOs rather than one.

Given: That power is contested between the organization and the external market

The Market Basket crisis also raises debate about whether a for-profit organization and the external market are, by nature, Marxian adversaries. How much power is wielded by customers and other stakeholders such as community leaders and the press, and how much control does the organization have regarding how much power it allocates to the outside? This too is difficult to understand through a modernist perspective. A modernist/positivist might see that the universal principles and laws that govern the company-customer relationship were established decades ago. In the modernist/positive paradigm, Market Basket allowed the shelves to go bare. Customers would therefore need to start shopping elsewhere. And, even if the crisis was resolved, a percentage of customers would likely never return. The company would be permanently damaged, both from a financial position, and from a brand standpoint.   A modernist/positivist would likely wonder why the employees and managers had committed organizational suicide, and destroyed their own livelihood.

However, the symobolic/interpretivist would understand that the managers, employees and customers of Market Basket had re-interpreted the company-customer relationship in a totally different way. Whereas most CEOs, and most business people in the world think and talk in terms of “company and customers” (internal and external), Arthur T. Demoulas, his managers, employees and customers of Market Basket see the situation more akin to a partnership or cooperative. When employees hung signs saying, “Thank you for shopping Market Basket. Boycott Market Basket,” they were reinforcing a norm that was already present. That norm was that the company and the customers were partners in the world, that the employees trusted the customers to come back when things returned to normal – Not society’s normal, but the company’s and customers’ collaboratively perceived normal. That collaboratively perceived normal where the company happily shared power with customers was firmly in place before the crisis. Hence, Michael Devaney said “We don’t need emails to tell us what our customers think.” (Boston Review, 2014b).

Market Basket employees and customers also use the term “family”. Morgan (2006) would call this a constructive falsehood, false because employees and customers are not really together in a family, but constructive in that family members take care of one another. This would make sense to Giddens as well. Every time Market Basket employees and customers use the word family, it reinforces that they take care of one another. Equally important is that it proposes power is not to be competed for, nor wielded by one constituency over another, but instead is agreed to be shared between constituencies. Compare, for example, most marketing models that emphasize customers’ power of the purse over the organization. Similarly, consider the typical government organization mindset that the agency (e.g., IRS, EPA, RMV, etc.) wields the power over the customer. While the modernist scratches their head and ponders why Arthur T. Demoulis would bet money that the customers would come back after the employees had purposely emptied the shelves, the symbolic/interpretivist would say, “Of course they will come back, family always comes home.”

Personal Perspective

I have spent more than twenty years as a management consultant, consulting to managers and executives across multiple industries and countries, in the largest companies in the world. This week was quite a moment for me when I realized how much of my own perspective is based on a modernist paradigm. If we were not studying these very concepts while reading this case study, my modernist brain would have glossed over some of the most important things that were happening in this situation, especially Market Basket’s reinterpretations of organizational purpose, organizational leadership, and the relationship of an organization to its external constituencies. For me, this case study made real many of the readings that until this week were simply conceptual to me. I especially had an “aha” moment thinking about what Geertz would say about the Market Basket crisis. The powerful in an organization are the powerful, not because they have power, but because they are interpreted as having power. Freire (1970) would say they are named as having power. The more they are named powerful, the more they are considered powerful. The more they successfully USE power, the more they are acknowledged to have power. I believe that that is the key to understanding the phenomenon of the “hero leader” in American society. However, what if the leader tries to use power, but is ignored. Geertz would say that power at Market Basket is no longer power as one would traditionally understand it, because it no longer resides where it has traditionally resided. Power is now something else. That is what happened at Market Basket. The crisis arguably permanently disassociated power with the CEO role. Geertz might analogize that the dining room is no longer definitively the dining room anymore, because it’s now being used as an extra bedroom. That is likely what Arthur S. Demoulas recognized. That is why he likely saw no option other than to sell the company – Because no appointed CEO would be able to wield the top-level power that had been either stripped away from the top level by the crisis, or more likely, had never resided at the top level at all.

References

Boston Review (Producer). (2014a). Lessons from Market Basket: Corporate governance and leadership. Available from https://vimeo.com/108838862

Boston Review (Producer). (2014b). Lessons from Market Basket: Introduction by Curt Nickisch. Available from https://vimeo.com/108827244

Boston Review (2014c, October 8). Lessons from Market Basket: An MIT Sloan and Boston Review roundtable. Retrieved from http://bostonreview.net/us/lessons-from-market-basket-forum

Freire, Paulo (1970). Pedagogy of the oppressed. New York, NY: Bloomsbury Academic.

Giddens, A. (1979). Central problems in social theory: Action, structure, and contradiction in social analysis (Vol. 241). Berkeley, CA: University of California Press.

Giddens, A. (1984). The constitution of society. Berkeley, CA: University of California Press.

Hatch, M. J., & Cunliffe, A. L. (2013). Organization theory: Modern, symbolic, and postmodern perspectives (3rd ed.). Oxford, England: Oxford University Press.

Morgan, G. (2006). Images of organizations. Thousand Oaks, CA: Sage Publications.

Schein, E. H. (1984). Coming to a new awareness of organizational culture. Sloan Management Review 25(2), 3-16.

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