business news in context, analysis with attitude

Pacific Northwest, a magazine published by the Seattle Times, has one in a series of stories exploring, in this case, how Costco is attracting engaged, energized and committed employees, and rewarding them not just with good salaries, but a level of returned commitment.

“Economists will tell you there are at least two reliable, legal ways to make money in America,” the magazine writes. “One is to fleece the workers, taking not only their wool but their skin. A proven model resulting, the Economic Policy Institute in Washington, D.C., tells us, in CEOs earning in a day and a half what took their beleaguered flock a year to earn in 2003.

“Or, there's the Henry Ford model: Pay people well enough that they stick around, cutting both turnover and training costs while boosting efficiency. Better yet, pay them well enough so they can even go out and buy something.”

Costco most assuredly follows the second model – and it seems to be working, since it is one of the biggest and most profitable retailers in the world. Not the biggest, of course – but a retailer that is holding its own.

It isn’t a new revelation, of course, but it bears repeating. The magazine writes:

    “Costco's health plan covers a larger percentage of employees than Wal-Mart's does, and workers pay less for it. Costco, in fact, provides among the best wage-and-benefit packages in hourly retail. And it pays the same wage scale everywhere in the country.

    “A cashier at Costco can make more than $40,000 annually within four years. The average store manager makes $107,000, with a crack at $40,000 in performance bonuses on top. The company also pays hourly workers annual bonuses from $4,000 to $7,000.

    “No wonder they stick around: Turnover at Costco is less than a third the industry average.”

This policy, the paper notes, also creates an employee class that is able to live the American dream – feed and clothe their families, send their children to school, even go on vacation.
KC's View:
Every once in a while we end up in these discussions about retail workers, and someone will make the comment that people who work at Wal-Mart are largely unemployable elsewhere.

Somehow, you don’t get that feeling about Costco employees. You get the sense about Costco workers that they are eminently employable, but that Costco is the place where their potential is recognized, and where they are rewarded financially and even spiritually.

We do note an irony, though.

One is that the story points out that Costco does not advertise and has no public relations agency…which is sort of interesting, since rival Wal-Mart has embarked on an enormous ad campaign designed to improve its public image.