Costco: Strategic Management And Employee Retention

Leadership Analysis: Costco Case Study

The importance of employee commitment

Discuss about the Leadership Analysis for Costco Case Study.

Costco is having more than 210,000 employees on a worldwide basis. The company believes that the path to continue towards growth and success based on the employees. The attraction for the business of Costco is that the company is successful for the retention and attraction of the great employees. (Mowday, 2013) ((Costco.com, 2017)

The employees of the Costco believe that the primary factor in the past and future of business and their employees commitment to the main principles, value, simplicity and fairness are the main components leading towards the success of the business. The high level of commitment of employees is due to the intrinsic motivation among the employees of Costco. The employees are being influenced to suggest ways in order to bring improvements in the business. The employees are being trained properly so that they can attend the customers in their store properly. (Noon, 2013)

The decision making process of Costco is another important way to determine the achievement of the business. Firstly, the aim of the business is to attain the highest quality with the process of reducing costs. The process of the company focuses on efficiency and speed of the increasing capacity. (Pettigrew, 2014) In its strategic decision, in the area of operation, the main aim of the company is to manage the effectiveness of the cost. Its wholesale style store has made its contribution to the objectives. The other decision making process incorporates the selling of products in the similar stores, the cost of the inventory was reduced. The Products move right directly from the truck to the sales of the floor (Pettigrew, 2014)

Costco uses the layout of the warhouses for its own stores. The goal of the company in this particular strategic arena of this management is to decrease the use of extra spaces in the warehouse.

The strategic management of Costco is the cost leadership. The strategy incorporates maintaining the possible lowest prices. The retail giants like Walmart uses the same strategy of cost leadership. The strategy of the Costco combines the warehouse membership in order to differentiate from the retail firms. ((Costco.com, 2017)

The business of the company is an important factor, which allows Costco to follow its mission or goals in the long run. In fact, the business aligns with the company’s goals. The study of the cost leadership under the generic strategy, which is needed to sustain the business model of Costco. (Hill, 2014)

Decision-making processes

Jim Sinegal, the former CEO of Costco focuses on two important philosophies. The dearth of the job tittles reflects a philosophy treating the employees equally. He always wanted both the employees and the customers in the first line of importance. (Barney, 2014) (Wagner III, 2014) The Costco company knows the way not to treat employees harshly by depriving them from the major benefits. In this regard, it is important to notice that despite the company is giving high rate of salaries or benefits to the employees, the company managed to retain its competitive advantages. (Barney, 2014) ((Costco.com, 2017)

The average wage of the employees of Costco is $21 per hour, which is double than the price of the Walmart company. There are even generous benefits packages for the both part time and full time employees which incorporate insurance along with the compensation packages. It is true to be noted that, despite the higher labor costs, the store is performing well and having great performance of stock. Their compensation strategy follows the concept what you get in the return for what you pay. (Wagner III, 2014) The concept of paying the employees carries the meaning that the company able to attract the higher quality workers who are more productive and loyal than only if their work is replaceable with any minimum retail options of wage. To top it, positive ambassadors and the employees who are well trained who wants to help the customers eagerly in order to promote the stores. (Barney, 2014)

The interesting feature of the website of Costco in website lists the exciting opportunities, career and personal growth, supportive and friendly environment and the company as well focuses on the ethics, obeying the corporate laws and offering greater benefits to the employees. It is evident from here that opportunities, development and growth are the important elements of the management of workforce. In the arena of the job design, this set an example to set a focus on the enrichment of the job and also at the same time, attracting customers to their stores. Assigning or enriching new roles and responsibilities are the ways t challenge the employees so that they can develop new ways, which would become a principle for the firm to adopt. The enrichment, which comes through the significance of the task as every employee at every stage, is highly respected and valued. (Hollensen, 2015). The company as well promotes communication and feedback between the management and staff. This task significance has to be high as through this mode of task significance, the ability of the employees to make changes and suggestions which are based on the contact with the customers to the store. Simply the enlargement of the job or adding the employees to the current duties is nothing in front of the enrichment of the job. The company Costco is always determined to keep its stored fully staffed with workers so that the workers are not overburdened with work and it makes sure that the customers can receive the helpful and immediate services whenever it is needed.

Cost leadership strategy

There are certain degree of specialization in the daily activities. Many employees function within their particular department: Administration, Deli, Food court, Bakery, Maintenance, Marketing, Merchandising, Membership and so forth. However, the enrichment can be realized at the long term by adding variety of the activities of work through utilizing the different sets of skills in order to complete tasks. (Stead, 2014) The management of the company states that Costco is being a dynamic company, the employee who is working in an area which is non food related today, tomorrow he gets promotion and start managing the area of food. The food certification and safety training enables the employees to gain knowledge and the employees are needed to be successful enough to into the different departments while the employees are pursuing their career. The other retail industry faces problems in terms of employee retention as they start focusing only on the profit of the company instead of looking into the matters of benefits of the employees. This results to the dissatisfaction of the employees and start affecting their attitude towards customers. Hence, they start reducing their competitive advantages in the market area. Costco is only being exception in this field. ((Costco.com, 2017)

The retail industry in general is having the problem of motivation, which they cannot provide to their employees. However, over here the Costco stands out to be different. The high pay, opportunities and respect in terms of advancement combine to build a highly influencing environment of work. Costco is always dedicated to give recognition and giving rewards to employees for their loyalty and hard work to their company. Costco is rewarded in return by the loyal employees’ turnover rate is only 5%. (Hollensen, 2015) (Avolio, 2013) The current CEO also stated the fact that it is a lot more profitable in the long term of business in order to enhance the productivity of the employee, loyalty and commitment. Working with the other employees who are satisfied with the company contributes to a lot more culture build by motivation.

All of these link with the strategy of Costco. The satisfaction of the employees as well proportionally increases the satisfaction of the customers. The customers who are satisfied start renewing their membership at a rate of 90% and this membership as a result yields or gets translated into gains within the business model of Costco. The company has made its commitment to its philosophy that if the wages are higher, then it increases profit as it is being exemplified by the surprising tactic of raising the wages during the recession, which took place in the year 2009. The references of Leadership states about the larger idea of having the corporate responsibility by stating about the higher pay, if money is put more into the realm of economy, this in return would create a healthier country. (Dalavagas, 2015) This is quite simple and this further states about the corporate values of the organization, which forms the part of their philosophy. In compare to this, the retail stores do not believe in paying their employees high wages and this resulted to the less retention power of the company. That is why the Costco rose to the level of competitive advantages and gained in attracting customers to their stores. Therefore, in this way the company retained its competitive advantages over time. ((Costco.com, 2017)

Job enrichment

Sinegal, CEO of Costco,  shows a strong concern for the employees working under him and he is considered to be as the dedicated, hardworking and caring. The rules and regulations that the company followed under him, through this, the firm gained more advantages in the market. Therefore, in this context, the charismatic theory would be applicable in order to describe the characteristics of the leader. (Avolio, 2013) (Mumford, 2013)

The charismatic leadership focuses on the persuasiveness and charm of the power holder or leader. The leaders are being motivated by the convictions and commitments of their causes. The leaders are also known as transformational leader as they share various similarities. The main difference exists is the audience and focus. The charismatic leaders always look forward to transform organizations into the vision of leader. For example, Dr.Martin Luther King junior was a charismatic leader who is having strong oratory power and the leader is committed to positive changes in the lives of the million people. (Mumford, 2013) The charismatic leader are essentially communicators who are highly skilled and they can able to communicate verbally and also have the ability to communicate the followers on a deep emotional level. They are the people who are being identified during the times of crisis and they exhibit their devotion in their respective fields. The leaders are having clear vision in the business field and have the ability to engage with a larger audience. Similarly, Sinegal, the former CEO of Costco tries to do what is best for the customers, vendors and employees. He is as well like a charismatic leader is intended to not to discourage the buyers of his product once they take risks on the new products. Employees are always encouraged to think more deeply and out of the box, so that they can come up with innovative ideas for the company. (Mumford, 2013) (Zehir, 2014)

Sinegal like a Charismatic leader focused on the sensitivity to the company’s environment and the demands of the needs of the employees and employers, the leader is a visionary person and always inclined him to take personal risk and believe in using unconventional behavior. As a charismatic leader, Sinegal gave inspiration to people to do their work for the common cause. (Parry, 2014) He made the organizations to get committed in the main mission. Sinegal to make the company famous always made the management to give priority to learn from the mistakes, which is an effort to succeed in their mission. This charismatic lead the companies to become cohesive which have made the workers having a clear purpose. The leader is having the extreme communication skills, which help to encourage the employees to do their work, and also render help to them stay down to earth when things are going good for them. The leaders are comfortable while waging communication in a group setting or one to one. (Zehir, 2014) (Parry, 2014)

Charismatic leadership

Sinegal in order to make the company stand, despite having a powerful personality a charismatic leader also have character and maturity. They do not believe in exhibiting empty showmanship, however Sinegal draws on their wisdom and knowledge which they have gathered over many years in the experience of life and business. In all occasions, he believes in mature and responsible. As a charismatic leader, it has also been reported that he even has a sense of humility. He places a lot of value on each of the employees and he even carries the ability to listen truly to the concerns of the employees. (Parry, 2014) That is why, it has been made sure in the company that no employees must suffer from the overburden of work and the leader show them how the contributions made by them influence the strategic interests of the company. They express a greater loyalty to the leader as a result through their work. He being a leader Sinegal in him has compassion, honesty, integration; these are the important qualities that as a charismatic leader exhibit. Therefore, it can be stated that he is a charismatic leader who is truly confident about himself and he is comfortable with who he is. He has the capacity of being a good listener and while listening he do not feel even distracted. He as a leader, always listens to the employees and take interest. They are being engaged in the act of conversation with the empathy. (Avolio, 2013)

The influence of Jim Segal, is huge on the success of the company. He is a person who is down to earth and never tried to misuse his power as a CEO. He carries out operations without any frills and he is the leader who inspires and influences the workers under him. He tends to visit every store of the Costco. ((Costco.com, 2017)By taking a small amount of salary, he passes the benefits to his employees who all have received from the company almost 50% of the wages than their arrivals. When he comes to the employees, the employees take interest and approach him, which signifies that everybody likes him without any biasness. There is no space for playing games and fear mongering as people work hard as they loved him, which is rare. ((Costco.com, 2017)

Sinegal founded the company Costco and expanded the company in the year 1990. In the year 2003, Costco did not raise its premiums in health care to the employees for at least 9 years. Sinegal who was initially against the increasing premium, finally the CEO relented. In the coming nears, the employees were paid more. In compare to this, most of the CEO might have welcomed the savings of cost and pocketing the differences. However, Sinegal handed over each employee a bit of stock in their 401 (k)s in the year 2008. Sinegal was successful in installing these types of sensibilities in the mind of his executives , with whom most of them worked for decades. ((Costco.com, 2017)

The attiude as a charismatic leader influences the company more. Sinegal has won the employees’ love and adoration and even in the mouth of the employees of Costco, it has been stated that Costco is best for everything which includes the president as well as the board of directors. Sinegal as mentioned before always tried to approach the employees and make them feel and they belong to this company. Under his charismatic administration, the company did a lot better and it is continuing to do so.

(Costco.com, 2. (2017, october 31st ). Costco.com. (2017). Welcome to Costco Wholesale. Costco.com. Retrieved 31 October 2017, from https://www.costco.com/. Retrieved from https://www.costco.com/

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