Misc. Ramblings

I've talked before about the differences between Sam's Club/Wal*Mart and Costco. I've noted how Costco treats its employees with respect by paying a living wage and benefits while Sam's Club/Wal*Mart rabidly adheres to its anti-union, poverty-level benefits and wages while awarding their executives multi-million dollar salaries.

One must wonder how Costco stays in business with such cut-throat competition. But according to this article, Costco's CEO Jim Senegal says: "We pay much better than Wal-Mart. That's not altruism. It's good business." Chief Financial Officer Richard Galanti goes on to explain: "From day one, we've run the company with the philosophy that if we pay better than average, provide a salary people can live on, have a positive environment and good benefits, we'll be able to hire better people, they'll stay longer and be more efficient."

Who'd a thunk it? Treat people well, earn their trust and, more likely than not, they will work harder and be more productive than people who are treated like chattel who are one step above slaves.

Because Costco's employees are more productive ($795 of sales per square foot, versus $516 at Sam's Club), Costco's labor costs are actually lower than Wal*Mart's as a percentage of sales. What's more, its labor and overhead costs (classed as SG&A, or selling, general and administrative expenses) are 9.8% of revenues, compared to Wal*Mart's 17%.

Perhaps reflective of this, Costco's executives walk the walk when you compare their CEO salaries to Wal*Mart's. Costco's CEO gets $350,000 a year, Wal*Mart's CEO gets $5.3 million. It seems Wal*Mart executives feel they have to pay themselves well to hire and keep the best executives. But when it comes to employees, said employees are fungible, so why bother.

But, as this article appears to show, the business bottom line is that if pay a living wage and treat your employees with respect, you can hire and keep good employees. These very same employees, if management does its part, can make you profits beyond your dreams.

Aloha!