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Give out and Go Up? By the John Maxwell Company
“Expect more, pay less." That’s
the company slogan Target advertises to its customers. Unfortunately, it’s also
the management philosophy many businesses have toward their employees. Mindful
of the bottom line, some companies constantly search for ways to wring more
productivity out of workers while simultaneously attempting to reduce the costs
of their “human resources.”
It takes the average hourly employee at McDonald’s
30 weeks to make as much money as the restaurant’s CEO earns in an hour. In
such a world, former Costco CEO Jim Sinegal stood out as a refreshingly
generous leader. Throughout his tenure, Sinegal’s annual salary remained steady
at $350,000 per year, roughly one-third of the pay of other Fortune 100 CEOs.
At the same time, Costco paid its employees 42% more than their chief rival.
Sinegal was also committed to offering Costco’s workers healthcare costs at a fraction
of industry-average costs. Contrary to prevailing trends, Costco remains closed
on the Thanksgiving holiday so that its employees can enjoy time with family.
When the United States economy went into recession,
Costco did not lay off a single employee. In fact, Sinegal pushed through a
$1.50 hourly raise for his people in 2009. According to CFO Richard Galanti,
“The first thing out of Jim’s mouth was, ‘This economy is bad. We should be
figuring out how to give them more, not less.’” Sinegal was also passionate
about keeping down the prices of Costco products for customers. He limited
markup 15% of costs regardless of whether the market would allow Costco to
charge more.
Singegal’s generosity to employees hasn’t dragged
down the financial performance of Costco—precisely the opposite. When rivals
were cutting payrolls and shutting stores after the recession, Costco held
steady. Stock prices have more than doubled and sales have risen nearly 40%
since 2009.
Craig Jelinek, Singeal’s successor, has carried on
his legacy. He stresses the simplicity of Costco’s business strategy. “This
isn’t Harvard grad stuff. We sell quality stuff at the best possible price. If
you treat consumers with respect and treat employees with respect, good things
are going to happen to you.”
Thought to Ponder
King Solomon, author of Proverbs, touted the
benefits of generosity: “Give freely and become more wealthy; be stingy and
lose everything.” Costco seems to have followed this advice. It has given
higher wages and greater benefits to its people while growing at an astonishing
pace.
Why does generosity tend to increase, rather than
deplete, wealth? In your opinion, what holds businesses back from being more
generous to their people? I invite you to share your thoughts by posting a comment.
~ Murray Lincoln ~
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