Costco: Join the Club
The interesting formula for success that CEO Jim Sinegal has implemented at the nation’s fifth-largest retailer: Sell a limited number of items, keep costs down, rely on high volume, pay workers well, have customers buy memberships and aim for upscale shoppers, especially small-business owners. In addition, don’t advertise – that saves 2 percent a year in costs.
Which of the three management-skill categories do you think Costco CEO James Sinegal draws upon most during his year-round visits to local Costco warehouse? Managing warehouses like Costco require an organization that is flat, fast, and flexible. Sinegal uses many techniques and skills to manage his business but the most prevalent one is the Human Perspective. He focuses in on customer and employee needs and wants which gives an understanding of behaviors and attitudes. This abandons the hierarchy of command-and-control mindset while replacing it with coaching, motivation, and empowerment. Unlike some competitors that seemingly give a small pat on the back or a promotion to an employee as a reward for their performance and never fully acknowledges them for the hard work they do, Sinegal actively partakes in every aspect of his companies. During his visits he walks around the store to create a bond of trust and loyalty with his staff. He demonstrates everything at once as a monitor, leader and disturbance handler. He is not afraid to be in the front line of customer service.
What aspects of Costco’s business model exemplify the transition from “the old workplace” to the “new workplace,” and why? What allows Costco to be successful is that they know their niche and have both the business strategy and operational capacity that allows them to perform remarkably well in passing along savings to their customers. Costco's low prices help the retailer maintain positive growth during tough economic times. Narrowing the number of options increases the sales volume of each...