Research Paper Help on Costco

Costco

            Costco, the second largest U.S retailer, is characterized by a frugal shopping experience and a satisfied workforce. The retail giant is founded on the principles of both customer and employee satisfaction. The company pays an average hourly wage of $20.89 excluding overtime, a stark contrast from Walmart’s $12.67, and almost triple the minimum hourly wage of $7.25 (Stone 1). The company also sponsors health insurance for its workers, with a total of eighty-eight percent reaping the benefits. More than half of those employees with coverage pay premiums of less than ten percent of the overall plan costs.

            The Costco management believes that increased employee benefits lead to improved profitability. Jelinek, the new company chief executive, articulates that productivity improves with employee health. He posits that in the long run, maximizing employee loyalty, commitment, and productivity while minimizing turnover will lead to increased profitability. Jelinek is correct in his assessment. While workers in other retail stores like Walmart and Amazon are staging labor strikes, Costco has had minimal labor difficulties in the 30 years that it has been in existence (Hollon 1). In the middle of lost sales due to online purchasing and increased investor pessimism, the company’s stock price has doubled, and sales grew by thirty-nine percent in the last six years.

            Costco’s case is a reminder that retail enterprises can still increase profitability while treating workers and employees well. When a person walks into any Costco store, healthy, happy, and helpful employees accost him/her. That is untrue for most of the other American retail stores. In fact, the only negative experience an individual derives from shopping at Costco is the endless string of clueless shopping carting away their purchases and blocking the aisle.

            Zeynep Ton from MIT’s Sloan School of Management opines that viewing employees as overheads to be reduced, and hence investing less in them leads to operational problems. Employees encountered with these challenges tend to be surly and less helpful, with the result of chaos in most stores (Hollon 1). The outcome is customer dissatisfaction accompanied by a migration to online purchasing. Ultimately, both the employee and the employer suffer from the underinvestment in employees; the employer from reduced profitability, and the worker from the subsequent layoffs.

It is a fact that most conscientious companies perform well financially. Costco’s headquarters exudes frugality, but they still manage to keep their employees happy and in so doing improve profitability. It is with this in mind that Jelinek wrote a letter to Congress urging them to raise the minimum wage (Stone 1). In the letter, Jelinek pointed out that increased employee morale and productivity increases long-term company profitability. However, with a Congress marred with partisan issues, they are yet to think about the issue.

            The management style at Costco teaches valuable lessons on management. Firstly, employees are critical to business success and as such should be kept happy, even at the expense of added benefits for top management. Secondly, happy employees lead to improved customer satisfaction, which ultimately drives up profits. Keeping employees happy and contented will also eradicate labor strikes that result in lost revenues for companies. Another lesson is that corporate America is greedy with the exception of a few companies. Customers are not blind to such facts, and adjust their shopping experiences in accordance to the employer who cares more about his/her welfare and that of employees.

Works Cited

Hollon, John. “Weekly Wrap: What Costco Can Teach About Treating Employees Right.” tlnt (2013): 1. 04 March 2015. <http://www.tlnt.com/2013/08/09/weekly-wrap-what-costco-can-teach-about-treating-employees-right/>.

Stone, Brad. “Costco CEO Craig Jelinek Leads the Cheapest, Happiest Company in the World.” Bloomsberg Business (2013): 1. Document. 04 March 2015. <http://www.bloomberg.com/bw/articles/2013-06-06/costco-ceo-craig-jelinek-leads-the-cheapest-happiest-company-in-the-world#r=most%20popular>.