This Focused Performance Weblog is a "business management blog" containing links and commentary related primarily to organizational effectiveness with a "Theory of Constraints" perspective. TOC is noted for its applications in Project Management and Multi-Project Management (Critical Chain) and Operations Management (Drum-Buffer-Rope), as well as in Marketing, Strategic Planning and Change Management (TOC Thinking Processes). If you are on an archive page, current postings are found here.
Monday, March 29, 2004
Who Matters More - Workers or Wall Street? -- Friday's WSJ Online features a story on Costco, the warehouse retailer --
"From the perspective of investors, Costco's benefits are overly generous," says Bill Dreher, retailing analyst with Deutsche Bank Securities Inc. "Public companies need to care for shareholders first. Costco runs its business like it is a private company."
Costco appears to pay a penalty for its largesse to workers. The company's shares trade at about 20 times projected per-share earnings for 2004, compared with about 24 for Wal-Mart. Mr. Dreher says the unusually high wages and benefits contribute to investor concerns that profit margins at Costco aren't as high as they should be.
Fortunately, the firm has some enlightened management, who...
...disputes the contention that it takes care of workers at the expense of investors. "The last thing I want people to believe is that I don't care about the shareholder," says Jim Sinegal, Costco's president and chief executive [...], "But I happen to believe that in order to reward the shareholder in the long term, you have to please your customers and workers."
As I've written before, the success of an organization depends on a tri-partite goal of satisfying owners, customers, and employees, and one very effective way of assuring all three -- especially in a low-margin, customer-touching industry like retail -- is to address them in the reverse order. Taking care of employees will encourage their participation in improvements as well as enhance the customer experience, which will lead to consistent profitability for the owners "now and in the future."
From a personal standpoint, I live about equidistant from a Costco and a Sam's, and there's a Wal-Mart even closer. After several breakdowns in the service encountered at the latter (which kind of jives with their treatment of their employees), my wife and I stopped shopping there, even before the recent spate of stories about the political, economic and social problems associated with their business model. We've naturally gravitated to shopping at Costco on a regular basis for a variety of reasons. Now that I know how they respect their people compared to their competition, my loyalty to them is enhanced.
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