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Sat Nov 24, 2012, 09:32 AM

Costco vs. Walmart - Lessons from investing in employees

A 6 year study of small and large companies around the world that invest in employees at the bottom of the ladder found that businesses can profit well from raising compensation at the bottom and treating employees well. Investing in employees can be an advantage in good and bad economic times.

http://www.iveybusinessjournal.com/topics/the-organization/how-businesses-can-profit-from-raising-compensation-at-the-bottom

Here is their advice to employers:

1. Understand who performs the majority of the essential work. At professional services firms, this may be lawyers or paralegals; in surgical clinics, this could include surgeons, nurses, technicians, paramedics, and individuals preparing the operating room; and in manufacturing, those working on the factory floor clearly carry out most of the essential work.

2. Realize that the firms’ success depends on the quality of the work performed by the majority of workers. Remarkably, few firms currently design their organizations to optimize the efforts of employees at the bottom of the corporate ladder—even when these employees are central to the firms’ ability to add value. At Costco, the sales staff was instrumental in ensuring the high-quality shopping experience that would draw customers to return. At Great Little Box, the company beat competitors because of its ability to respond rapidly to customized orders.

3. Recognize that the quality and productivity of employees at the bottom of the ladder depend on whether these employees are motivated, healthy, adequately rested, and well-prepared to carry out the tasks they are asked to perform. Employees at Costco were motivated to work harder and perform better by a combination of higher wages and opportunities for promotions. Great Little Box employees had a direct financial stake in the company’s performance.

4. Realize that line workers are often the ones who know best how to increase efficiency. Great Little Box benefited from suggestions from line workers that led to cost savings and greater flexibility in production. Managers at Costco had a better understanding of how to improve production because most had served as hourly workers.


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Arrow 42 replies Author Time Post
Reply Costco vs. Walmart - Lessons from investing in employees (Original post)
spedtr90 Nov 2012 OP
99Forever Nov 2012 #1
etherealtruth Nov 2012 #2
primavera Nov 2012 #7
etherealtruth Nov 2012 #17
tblue37 Nov 2012 #23
jmondine Nov 2012 #24
svpadgham Nov 2012 #36
tblue37 Nov 2012 #42
AllyCat Nov 2012 #3
roguevalley Nov 2012 #6
cstanleytech Nov 2012 #29
mopinko Nov 2012 #13
David__77 Nov 2012 #27
jody Nov 2012 #4
Arctic Dave Nov 2012 #5
pangaia Nov 2012 #9
Arctic Dave Nov 2012 #16
pangaia Nov 2012 #22
valerief Nov 2012 #8
TahitiNut Nov 2012 #10
freshwest Nov 2012 #21
SCRUBDASHRUB Nov 2012 #30
TahitiNut Nov 2012 #32
SheilaT Nov 2012 #11
patrice Nov 2012 #12
DreWId Nov 2012 #14
nilram Nov 2012 #18
Voice for Peace Nov 2012 #15
xfundy Nov 2012 #19
SCRUBDASHRUB Nov 2012 #31
SomethingFishy Nov 2012 #20
WillyT Nov 2012 #25
luv_mykatz Nov 2012 #26
Heathen57 Nov 2012 #28
HiPointDem Nov 2012 #33
ErikJ Nov 2012 #35
HiPointDem Nov 2012 #37
ErikJ Nov 2012 #34
Fire Walk With Me Nov 2012 #38
Victor_c3 Nov 2012 #39
cantbeserious Nov 2012 #40
davidpdx Nov 2012 #41

Response to spedtr90 (Original post)

Sat Nov 24, 2012, 09:39 AM

1. K&R

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Response to spedtr90 (Original post)

Sat Nov 24, 2012, 10:31 AM

2. Very interesting

Sadly, very few corporate entities in the U.S. recognize the points this article makes.

Thanks for posting

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Response to etherealtruth (Reply #2)

Sat Nov 24, 2012, 11:02 AM

7. When treating US workers like slaves doesn't work...

... there's always the option of offshoring and treating third world workers like slaves.

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Response to primavera (Reply #7)

Sat Nov 24, 2012, 12:56 PM

17. That seems to be the SOP for jobs that can be outsourced

It is really very sad.

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Response to etherealtruth (Reply #2)

Sat Nov 24, 2012, 04:53 PM

23. The core problem is captured in a line from the villain in the [i]Superman III[/i] movie.

The villain is a super wealthy guy (played by Robert Vaughan) who has blackmailed a low-level employee who happens also to be a computer genius (played by Richie Pryor) into helping him with his evil schemes. I don’t remember the plot details, but Mr. Rich SOB forces the Richie Pryor character to help him engineer a total rip-off of the world’s wealth, or something like that—you know, the typical over-the-top evil mastermind plot.

Anyway, at one point the Richie Pryor character asks Mr. Rich SOB why? He points out that the rich guy already has more wealth than anyone else in the world and couldn’t possibly spend it all no matter how long he lived. The villain utters this line, which has stayed with me all these years: “It is not enough that I win; everyone else must lose.”

I think that is at the bottom of a lot of the evil the super wealthy and super powerful do. They want to see the peasants desperately scraping and scrambling to barely survive—and they delight in watching the “little people” fight each other, even to the death, for the few crumbs that fall from the tables of the wealthy.

That need to watch others suffer and scrape is far more important than profit to such people. (Think about how much of a loss Murdoch and Clear Channel are willing to suffer to keep FOX News and Limbaugh, respectively, on the air despite advertising losses.)

They might not even be conscious of that vicious need in themselves. No doubt they twist their own perception of reality (we all know how easily they do that) to convince themselves that they are actually protecting their profit margins and that they really, really need to do those evil things to protect their wealth and their business success. Most of them probably also convince themselves that they are not being selfish, but actually going the extra mile to protect liberty and the rights of the individual.

But what they are really doing is feeding their Jabba the Hutt-like need to watch others tremble, suffer, and be destroyed so that they can feel supreme in their own power and control.

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Response to tblue37 (Reply #23)

Sat Nov 24, 2012, 05:02 PM

24. You hit the nail on the head

What these people fear more than anything is their own common humanity. They must constantly prove to themselves and their peers that they are one of the "elite". Certainly, they rationalize, someone who identifies so little with the common person that they would repress and exploit them in the thousands and millions couldn't possibly be one of them.

Yet at the back of their minds is always that nagging doubt... that reality that they eat, drink, eliminate, sleep, think and feel just like all of the other ordinary folks out there. The idea that this might be exposed for themselves and those around them to see terrifies them to their very soul.

To them, to be one of us is to die.

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Response to tblue37 (Reply #23)

Sun Nov 25, 2012, 12:38 AM

36. Wow...

you quoted Superman III. I never thought ANYONE would do that. Sorry, I couldn't help myself.

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Response to svpadgham (Reply #36)

Mon Nov 26, 2012, 11:21 PM

42. Why wouldn't they. It's a fun movie. nt

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Response to spedtr90 (Original post)

Sat Nov 24, 2012, 10:33 AM

3. When we go to Costco, the workers seem genuinely happy

I don't see dour faces. I see people engaged in those around them, customers and other employees. My kids have fun when they go there. I haven't been to Wally World so I don't know if they do the same thing, but I can tell you I never see the "People of Costco" photo streams in my email inbox.

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Response to AllyCat (Reply #3)

Sat Nov 24, 2012, 10:46 AM

6. i feel the worker despair at wal mart. this whole

Weekend will harm their brand greatly.

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Response to roguevalley (Reply #6)

Sat Nov 24, 2012, 07:53 PM

29. Its not just walmart though, the majority of the retail industry could do with learning to treat

even their lowest part time workers better.

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Response to AllyCat (Reply #3)

Sat Nov 24, 2012, 12:10 PM

13. i never hear them grumbling, either.

i can't tell you how many times i have stopped shopping at stores because i have overheard employees bitching about the management or each other.

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Response to AllyCat (Reply #3)

Sat Nov 24, 2012, 07:21 PM

27. Yes, the hopelessness of Walmart employees is palpable.

I sense it clearly when I go there, which is rarely.

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Response to spedtr90 (Original post)

Sat Nov 24, 2012, 10:33 AM

4. Article compares Costco with Wal-Mart’s Sam’s Club not other Wal-Mart stores. "Lessons for leaders"

 

are basic teachings in any business school.

Unstated is the sheer boring nature of work required of most workers at the lowest level and how few career tracks there are for those workers.

Highly automated inventory management systems have reduced to mostly manual, menial tasks much of the work that is physically and mentally draining.

Much of that will be automated in the future.

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Response to jody (Reply #4)

Sat Nov 24, 2012, 10:39 AM

5. All work is boring if you do it long enough.

 

Automation has also reduced the need for top tier employment.

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Response to Arctic Dave (Reply #5)

Sat Nov 24, 2012, 11:24 AM

9. I understand, I think, where you are coming from.



But,as for myself-- I have been a musician for 45 some years and have done musical instrument repair for 36 years. I don't get bored because, 1- I enjoy what I do-not all the time, of course, but most of the time. And 2- My attitude toward myself as I work.

Would I be bored as a cashier at Walmart? That would again depend on what attitude I had toward myself. . At the same time, the thought of doing that task is not a pleasant one.

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Response to pangaia (Reply #9)

Sat Nov 24, 2012, 12:46 PM

16. Yes, I think you understand my meaning.

 

I have been in the same field of work for over twenty years. I enjoy it and I am compensated well for what I do. My job now consist mostly of managing and passing on knowledge to new people. Luckily I still get to get out from behind the desk.

But I do have days that remind me of the movie, Groundhog's Day and I want to bang my head against the wall. LOL.

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Response to Arctic Dave (Reply #16)

Sat Nov 24, 2012, 04:38 PM

22. Yes, a great film.

And the way Bill Murray reached 'the next day' and get out of the vicious cycle was to change his attitude toward himself and the world..

Bill also used to be part owner, and maybe still is, of the St Paul Saints minor league baseball team. :>

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Response to spedtr90 (Original post)

Sat Nov 24, 2012, 11:15 AM

8. But isn't it cheaper to buy a Congress who'll pass laws that protect your money? nt

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Response to spedtr90 (Original post)

Sat Nov 24, 2012, 11:37 AM

10. CostCo sees employees as partners, assets, and resources.

Wal*Mart sees employees as a cost and threat.

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Response to TahitiNut (Reply #10)

Sat Nov 24, 2012, 03:37 PM

21. +1,000 to what you said.

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Response to TahitiNut (Reply #10)

Sat Nov 24, 2012, 09:36 PM

30. I had a terrible experience at the Hellmart near me.

I don't like shopping there, and Wed. afternoon was the last straw.

Three items were missing from my bags when I got home. I called the store to let them know and said for me to come back to customer service. After waiting 15 or so minutes, I was told by one of their employees that they had "proof" I had indeed taken my items (they had me on video). I said I bought about $150 worth of items, so there were multiple bags. All I know is the three items I purchased which were listed on my receipt were not in my car or in my home.

After being basically called a shoplifter and a liar, I went home. I emailed corporate Hellmart, posted stuff on FB and called their corp. office this afternoon and told them what happened.

At Target, this has never happened to me. They believe their customers and don't assume they are guilty right off the bat. Their employees greet me, ask if I need help and have been excellent when I've needed to return an item.

I have a feeling the items were left in the carousel thingy and the next person in line got my items. Wouldn't surprise me in the least.

Assholes.

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Response to SCRUBDASHRUB (Reply #30)

Sat Nov 24, 2012, 09:51 PM

32. I wouldn't shop there if I were paid to.

They're running a "lose-lose" business ... predation and animosity. It's all negatives. Employees are treated like dirt and many of them will live DOWN to the way they're treated.

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Response to spedtr90 (Original post)

Sat Nov 24, 2012, 11:45 AM

11. This nails it.

It's been my experience that upper management not only does not fully understand what the front line workers even do, but don't respect those very front line workers. Many of those bosses could not successfully do the very jobs that keep the company in business. Look at the show "Undercover Boss" and you see that over and over again.

When it comes to flying, for instance, what ultimately matters is not how cheap your ticket is, but what that experience was like for you. So it is those employees who work out of the airport, plus the reservations people if you actually call up to make your booking, who matter. So the ticket counter agent, the gate agent, the baggage handler, and the mechanic are crucial. And then the pilots and flight attendants. Back in the Golden Age of flight the CEOs of airlines had often started out in one of those jobs. But for about thirty years now it's just all the graduates of MBA programs, who are taught that if you can run one business you can run any other one, and that employees are fungible items. And they're wrong on both counts.

I only wish I had a Costco here in Santa Fe.

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Response to spedtr90 (Original post)

Sat Nov 24, 2012, 11:50 AM

12. What is value? How is real value shared? nt

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Response to spedtr90 (Original post)

Sat Nov 24, 2012, 12:11 PM

14. What's Costco?

The nearest Costco to me is 57 miles away. In that radius, there are over 10 Walmarts alone, not counting Sam's Clubs.

While yes, I'm sure Costco has great relations with its employees, especially with winter coming, driving about 60 miles just isn't a feasible option for me.

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Response to DreWId (Reply #14)

Sat Nov 24, 2012, 01:49 PM

18. Costco is a membership warehouse club.

The nearest Costco to me is 3.7 miles away. The nearest Walmart store is 9 miles and in that radius there are four Costcos. Costco is closer than their Walmart 'market', which is 4 miles away. The nearest Sam's club is 160 miles away.

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Response to spedtr90 (Original post)

Sat Nov 24, 2012, 12:16 PM

15. It's such simple common sense. Really!

Where do people learn it's ok to treat other people
badly, to step on them, manipulate them, use them,
and disregard their well-being? Throw-away people,
a dime a dozen.

Employers who understand people -- their consumers
as well as employees -- are most likely to succeed.
Life itself, not to mention business, flourishes.

Bad businesses with ill-treated employees create a
dark sinkhole of meaningless emptiness & hopelessness
which eventually sucks everything in, including the
CEOs.

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Response to spedtr90 (Original post)

Sat Nov 24, 2012, 02:10 PM

19. Have always heard good things about Costco.

Thanks for the reminder. I just sent in a job application.

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Response to xfundy (Reply #19)

Sat Nov 24, 2012, 09:39 PM

31. Costco rocks.

I've ordered a lot of office supplies (started a business this year), and their prices are excellent.

I bought an office chair from them, but I needed to return it. No problem; in fact, one of the employees carried it out of my car and brought it to customer service for me.

I love their towels, sheets, etc.

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Response to spedtr90 (Original post)

Sat Nov 24, 2012, 02:15 PM

20. Costco also has a cap on CEO and upper management pay..

When you don't spend millions upon millions in bonuses for upper management it's amazing how well you can treat your employees.

I use Costco "Executive Membership" it's $100 for a year but every year you get a check back for 2% of your purchases. I'm feeding 6 people so by the end of the year the 2% covers my membership plus a weeks worth of free groceries. I cannot recommend them enough.

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Response to spedtr90 (Original post)

Sat Nov 24, 2012, 05:12 PM

25. HUGE K & R !!!






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Response to spedtr90 (Original post)

Sat Nov 24, 2012, 05:22 PM

26. @Voice For Peace

Great comment, and spot on!

Too many employers don't seem to get those simple facts.

And, the privatizers are constantly after government employers to treat their employees badly.

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Response to spedtr90 (Original post)

Sat Nov 24, 2012, 07:43 PM

28. K&R

We use Costco for everything we can. Sams and Walmart are visited only when we can't find what we want elsewhere.

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Response to spedtr90 (Original post)

Sat Nov 24, 2012, 09:52 PM

33. lesson: you can be rich, or you can be super-rich. don't just extract profit

 

from your employees, screw them, your suppliers, your distributors, and anyone else you can.

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Response to HiPointDem (Reply #33)

Sun Nov 25, 2012, 12:16 AM

35. Dont be naive. The only way to do that is to tax them much higher.

That way they share the profits instead of giving them to the tax man.

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Response to ErikJ (Reply #35)

Sun Nov 25, 2012, 01:30 AM

37. i think you misread.

 

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Response to spedtr90 (Original post)

Sun Nov 25, 2012, 12:11 AM

34. Trader Joe's too

Trader Joes pays their employees 50% more than union scale. And they have the highest per square foot sales for food stores in the country. The owner is a German but its entirely managed and run by a guy from California.

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Response to spedtr90 (Original post)

Sun Nov 25, 2012, 01:46 AM

38. Walmart's policies involve methods of control and manipulation of employees,

 

which is the first symptom of their entire fail.

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Response to spedtr90 (Original post)

Sun Nov 25, 2012, 04:20 AM

39. I used to work at Amazon.com a few years back

Much of what the article explains is what Amazon does (or at least did when I worked for them).

There are a lot of things that I don't like about Amazon, but they always paid everyone respectable wages, shared restricted stock units to even the lowest hourly employees, sought their input with ideas for increasing productivity, and made sure that you worked at least 40 hours a week. Their pay wasn't the top payer in our area, but for the work that the employees did, they were paid better than 75% of their peers in the same jobs in the same area.

The way that Amazon fights unions is by giving everything that employees want so that they don't need to unionize in order to get it. There was starting to be some grumblings about low wages in our building. Management took that very seriously and gave everyone a raise.

Maybe walmart should learn from this lesson.

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Response to spedtr90 (Original post)

Sun Nov 25, 2012, 05:20 AM

40. I Would Gladly Shop At Costco If One Was Available - Closest Store Is 85 Miles Away

eom

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Response to spedtr90 (Original post)

Sun Nov 25, 2012, 07:26 AM

41. Costco treats their employees well

The article makes good points. I am doing my doctorate in business with a focus on retail companies. It would be interesting to find out how retail employees are treated in other countries as well.

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