Focus on Customers and Employees

As I have stated I believe it is the purpose of organization to serve many stakeholders (customer, employees, stockholders, community…). Thankfully some companies agree: Compensation at Whole FoodsStarbucks: Respect for WorkersGoogle: Ten Golden RulesAmazon Innovation. Here is another example – How Costco Became the Anti-Wal-Mart:

But the Pièce De Résistance, the item he most wanted to crow about, was Costco’s private-label pinpoint cotton dress shirts. “Look, these are just $12.99,” he said, while lifting a crisp blue button-down. “At Nordstrom or Macy’s, this is a $45, $50 shirt.” Combining high quality with stunningly low prices, the shirts appeal to upscale customers

Costco’s average pay, for example, is $17 an hour, 42 percent higher than its fiercest rival, Sam’s Club. And Costco’s health plan makes those at many other retailers look Scroogish. One analyst, Bill Dreher of Deutsche Bank, complained last year that at Costco “it’s better to be an employee or a customer than a shareholder.”

I am happy to invest in companies where all stakeholders are winning – I think that is a great long term strategy. Especially since so often, so many of the rewards seem to, inappropriately, go to the senior executives and everyone else [the employees seem to get the most abused but that is just my wild guess] including the owners share what is left over). I don’t own Costco, though: I prefer Tesco. I also don’t mind owning companies for a decade or more – unlike many “owners” which contributes to supporting such a long term strategy.

Despite Costco’s impressive record, Mr. Sinegal’s salary is just $350,000, although he also received a $200,000 bonus last year. That puts him at less than 10 percent of many other chief executives, though Costco ranks 29th in revenue among all American companies.

“I’ve been very well rewarded,” said Mr. Sinegal, who is worth more than $150 million thanks to his Costco stock holdings. “I just think that if you’re going to try to run an organization that’s very cost-conscious, then you can’t have those disparities. Having an individual who is making 100 or 200 or 300 times more than the average person working on the floor is wrong.”

Besides paying considerably more than competitors, for example, Costco contributes generously to its workers’ 401(k) plans, starting with 3 percent of salary the second year and rising to 9 percent after 25 years.

Related: People are Our Most Important AssetSeven Steps to Remarkable Customer Service

4 thoughts on “Focus on Customers and Employees

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