What can a trip to the supermarket teach us about the need for succession planning?
It was hard, if not impossible, to avoid stories on the Market Basket dispute that erupted over the summer. The company's crisis was unprecedented on a number of fronts. First, most private companies take “private” very seriously and are loathe to have battles play out in the press. Second, never before have rank-and-file employees banded together and had so much say as to who should be running the company.
Stories of “overnight” successes often leave out the long periods laying the groundwork for success. Similarly, what gets lost in many of the stories about Market Basket’s summer crisis is just how long this battle had been brewing. Arthur Demoulas turned the company over to his two sons in 1954. In 1971, one of those sons, George, passed away, and the difficulties began. There were disputes (and lawsuits) involving who had rights to purchase shares, what should be done with corporate profits, how fast the company should expand, and many other issues.
Finally, this summer the company reached a tipping point. Votes were in place to change control from one side of the Demoulas family to the other. That transition did not go well, and now Arthur T. Demoulas’ side of the family will be buying out the 50.5% of the company it didn’t already own.
For a succinct recap of the timeline surrounding the Market Basket dispute, see this great link from Supermarket News.
- There were issues of control – Who had rights to how many voting shares?
- There were issues of business direction – Should the company distribute profits to shareholders or retain profits to expand?
- There were issues of culture – Should the company hold lower prices or earn higher profits?
- There were issues of governance – How much say should non-employee shareholders have?
Sadly, these issues are not uncommon in private companies. But they are avoidable.
We have been working with private business owners who are transitioning their businesses. The transition isn’t a simple transaction. Many factors are at play. A transition plan should address the culture of the business, the long-term strategy, the corporate governance, who has control, and what the anticipated benefits of ownership will be.
If you would like us to help you avoid a Market Basket fiasco in your private company, contact BerryDunn's Exit and Succession Planning team to talk about your transition plan.