The “Cost” of Growth

Paul Heagen Vision and Strategy Leave a Comment

A board of directors fires a CEO for not being aggressive enough in pursuing profits.

Ho-hum. Dog bites man.

An entire workforce quits over the board firing the CEO.

Man bites dog.

Headlines: Butchers, cashiers, stockers, produce stockers all out on the sidewalks of towns in New England over the last few weeks in a gallant and costly show of support for their beloved CEO Arthur T. Demoulas, recently deposed in a coup led by his cousin Arthur S. Demoulas. (They are separated by way more than a middle initial, as court record attest).

The curious spectacle of the Market Basket grocery chain civil war is Family Feud on steroids. Mr. T., cast as the kindly, avuncular protagonist in mortal conflict with Mr. S., the greedy, villainous and scheming cousin. The truth likely lies somewhere in between, but when you consider that Mr. S. in his first move installed two consultants to run the company – one of which is a former Radio Shack executive – you have to ponder assigning your sympathies to Mr. T. on principle alone.

While this whole mess is a case study-in-waiting about governance and conflict resolution in family business ownership, I wonder if there is something else in play that can be missed – the whole notion of business purpose.

By most accounts, the Market Basket stores are community assets – they offer a range of ethnically diverse products to match the neighborhoods, they are often the “first job” among youth, they offer comparatively generous benefits and work/life balance to their employees, and they keep prices low in recognition of the thin wallets and purses of their customers. Their CEO has created a “family” atmosphere with his policies and presence. Lower EPS, but his “return on investment” is fierce loyalty from their employees and customers and perhaps a bit folksier connection to his neighborhood markets. There are other models, but that is his.

Except it apparently is not that of his cousin Mr. S., who employees now accuse of wanting to strip mine the business to increase returns.

As quaint as it may seem, the notion that purpose might trump earnings performance carries a contrarian appeal in a world where success is often measured more in market share and CAGR than in other, subtler outcomes. There is an element of growth that is grounded in the need to stay ahead of market, financial and operational realities, and to honor the stake of investors and shareholder/employees alike. But sometimes “growth” takes on a life and purpose of its own, like an amoeba on a nuclear dump site that grows beyond all reasonable proportions.

Maybe this is just a discussion best suited for privately held or family businesses that don’t face the same relentless pressure for earnings growth as do CEOs of public companies, but this growth-for-the-sake-of-growth mantra can be pretty destructive when it comes into conflict with the real underpinnings and purpose of the business. We have seen plenty of brands get eroded, derailed, diluted and flat-out weird trying to “grow” beyond what made them successful to begin with.

Maybe some businesses choose to be – to exist – to serve, not just grow. And in doing that well, real growth comes anyway.

Perhaps it’s vicarious, but somehow I’m cheering just a bit for those folks protesting outside Market Basket. Maybe they know something we too easily forget.

Leave a Reply

Your email address will not be published. Required fields are marked *

thirteen + 10 =