Leadership In Business: Costco Case Analysis On Leadership Essay


Discuss about the Leadership in Business for Costco Case Analysis on Leadership.


The Success of Costco in Terms of the Following three Determinants

Employee Commitment

Costco is an organization that has the most motivated employees working with them. The commitment of the employees can take different types of forms. These forms are either related to the HR of the company or the employees. Costco believes that the investment done in the employees play a vital role in every organization. The employment policies of Costco are very effective and good for the employees. They believe that if the employees and workers get good wages, salary, benefits, etc. then they work with full capability. The main motive of Costco is to connect the employees with the goals and objectives of the organization. It is observed that if the employees remain in touch with the objectives then they work hard to achieve them. It also reflects the commitment of the employees towards the organization as they are motivated to work more and achieve more. In return, Costco, provide them extra benefits, rewards, incentives that keep the morale of the employees on the top (Avolio, & Yammarino, 2013).

The employees and worker of the Costco are very much connected to the store. They work in Costco as their own organization. It is a type of psychological connection that bounds the employees to work with the organization. This result in trust and loyalty for the organization and the rate of retention remain very less If an employee is emotionally connected to his or her job then they do not feel neglected and unsatisfied. The chance of turnover decreases if the employees are personally attached to their job. Costco always try to make their employees and worker comfortable in the organization.

To achieve this objective, they conduct certain activities in their organization so that the employees feel the same. In this way, the effective policies of employment, results in the success of Costco. The behavior of Costco employees is very stable and committed to the work. The performance of the employees is also effective. Costco uses the commitment of the employees towards the goals and objectives of Costco. Therefore, they work for their own as well as for the sake of the organizations. There are many types of commitment takes place in Costco like normative, affective, continuance, etc. such commitments depend on the nature and behavior of the employees and their commitment towards their work.

Decision Making

The decision making at Costco is takes place by using different types of model depending upon the situation. They use rational models, increment list model, Carnegie model, and garbage model, structured and unstructured models. Depending upon the needs, situations and issues, the decision making process takes place in Costco. It is noticed that Costco do not pay much attention to the stores and the regions. Hence the process of decision making is also done by the employers over there. The top management makes only the meticulous decisions that affect the market share of the company and the market conditions of the same. In order to deduct the risk of any harm on the business in the long term, there is a requirement of long term decision making (Dent, Higgins, & Wharff, 2005).

In order to achieve an effective planning and decision making in the organization, they have planned to make quick and meticulous decisions so that the management style and practices can be changed as per the requirement in the company. In this way, Costco manage the employees and workers of their organization. Costco also believe that the probability of employee commitment also relates to the connection of an employee towards his or her job. Such types of decisions require more time and attention of the top level of management (Gardner, et.al. (2011).

The top level of authority is responsible to structure the company and its core values in an effective manner. The company believes that the process of decision making should be very prominent that it would not harm the future of the company. The decision must be made in an appropriate time and strategic frame so that the risk can be covered and the company can enjoy the competitive advantage from the competitors. The aim of the company is to focus the need and wants of the customers. In order to achieve this goal, the decisions of the company are takes place in accordance of the same.

Strategic Management

Costco is the second largest retailer of the world due to its strategic management. Here we discuss the major strategic decision taken by the company. It has many types of team like operation steams, critical team, Hr team, etc. they have developed certain standards according to which the management takes place (Hitzhesen, 2016). The Costco operation successfully applied ten types of strategic decisions that are-

The design of goods and services of Costco is very unique. Though, they have different segments of their store but they manage all the work though effective management. They try to lower the cost and increase the quality. The management of the quality of goods and services provided by the Costco is also very relevant. The aim of this company is to provide the best quality for their customers. This can be achieved through strategic planning of all the decisions in an organization. The management can takes place through the policies made by the Hr and the operation team of the Costco (Neustadt, 1980).

To maximize the capacity of employees, Costco emphasizes of the speed and efficiency of the labor and workers. The main objective is to optimize the effectiveness of cost and the quality of products. The nest major management is of location. Costco tries to cover all the segment of the markets by providing all types of products irrespective of age, caste, etc. it can be achieved through effective decision making for the storage and warehouse of the company (Van, 2010).

The management of the employees in Costco is also very strong as the main motive of this company is to make the employees committed to the work not engaged in the work. The major difference is that the engaged employee’s only work for their own sake but the committed employees turns the work of the organization in their own wok (Geier, 2013). The other decisions related to the strategic management are related to the design of layout and strategies in the organization. They have a well-tested job designs and structure so that no chaos can be created in the employee management. The HR teams are very effective and efficient in terms of employee’s management. The supply chain management and inventory management of this company is the most effective in nature (Vitez, 2016).

Costco Can Provide Higher Compensation and Benefits to its Employees and Still be Competitive with the Competitors.

It has been assumed that now days the trend to increase the profits by cutting the salary and wages of the employees. Despite of this, companies are paying high wages and incentive to the employees and workers of their company so that the performance of them can be increased. It also provides other benefits to not only the company but also the workers working with them. it results in high motivation, increase in the capacity, high level of performance, retention, high skilled labor , etc. this strategy impact the working of the employees on a large extent. According to the Costco new strategies and employment policies, the employees must be offered better than an average wages. It will help to retain the employees by giving them chance of growth and career opportunities in the organization (Stippler, 2011).

The business model of Costco is one of the best-cost effective. The approaches used by Costco are low priced supplier approach and the mix that approach so that revenue can be created. They provide wonderful client services, core of conduct, values, treat the staff like the family, concern about the suppliers, satisfy the stakeholders and shareholders, robust the intelligence, etc. they enforce the time and cost saving methods in the operation, production and selling so that they can give discounts to the customers. The main focus of Costco is to increase the sales volume and turnover of the inventory by providing high salary to the employees (Van, & Hogg, 2004).

There is few strategy of Costco that helps it in effective management-

The ultra low cost strategies and policies

Effective and efficient employment policies

Revenue Generation Programs

Costco employment policies depicts that it provides more than average salary and wages to its employees to retain them in the organization. They also provide many types of incentives, benefits, opportunities to grow and development within an organization so that the rate of turnover can be deduct. It helps to maintain good relations with the employees and keep them loyal for the company. It was observed by the researchers that Costco does not send a singe penny in the process of recruitment and selection as they get employees without conducting any drive in their organization. It is one of the employers by choice. The process of theft and misbehave in Costco is also very low that is 0.02%. The managers of Costco believe that this is due to the good wages and incentives policies provided by the Costco to their employees (Cascio, 2006).

Costco find that the turnover in the organization is termed as an expensive waste as the company invests a huge amount in the training of new employees and teaching them in the first month of their jobs. The employees can be retented in the organization by merging the warehouse policies to the strong salary progressions for the workforce. Hey provide advancement opportunities to the employees that retented them in the organization for a longer period of time. The salary of a cashier is Costco is $43000 that is more than a twice than the salary of a store cashier. In this way, by providing good salary to the employees, they are enjoying the comparative advantage (Ross, 2016).

The leaders of the Costco believe that advancement opportunities for the entry level workers so the success of the company can be accelerated. The growth and development of the company is related to the employment policies in Costco so the senior manager stated that workers must be prepared for the positions of the managers and management positions so that the success can be guaranteed. They have better understanding for the business. The managers have made policies related to the warehouse, functions of store, improvement in the operations, and to provide best support to the staff of the company. The policy of Costco for the recruitment of new employees is very different. They believe that the existing employees have the caliber to be posted within the organization as they are aware about the working of the organization (Lutz, (2014).

The workers of the Costco receive a good salary and benefits as compared to the competitors like Wal-Mart. The employees of Costco earned $20.89 per hour that is double the $11.83 for an employee of Wal-Mart. The sales figure of the company is also double as comparison with the competitors. It provides Costco an advantage from the competitors. They do believe that workers must be well paid because of the fact that they have only expertise and skilled labor in their organization. They also want lower in the turnovers and better employees in their organization. They try to keep the satisfaction of the employees on the top by providing them higher wager as compared to the market wages. An economic decisions can be managed though such policies (Hoek, 2013).

A Leadership Theory to Analyze the Behavior of the CEO

Leadership plays an important role in the organizations whether they are small or big in nature. There are basically two concepts of business that are one is management and the other one is leadership. Leadership is something that helps the organizations to establish a clear vision, establish good relations, accomplishment of goals, resolution of conflicts, and much more (Heymann, & Barrera, 2016).

Jim Sinegal was an effective chief officer and leader of Costco Wholesale Corporation. He learned many thing from SOL that he applied in the organization like the “membership warehouse thought”. In the year 1983, he developed one o a strategic mission and believes that is “too frequently offer our members with the quality products and service at rock bottom costs possible”. He had an awesome talent to manage the structure of the organization at the highest level through his contingency theory of leadership. He was able to manage the worst stations in the healthiest way. The type of leadership adopted by Jim Sinegal was customer focused leadership.

His Influence on the Company

Jim Sinegal had a great and significant influence on Costco’s. He had created a culture in which there is no division between the staff and the leaders of the company. Jim Sinegal was an effective chief officer and leader of Costco Wholesale Corporation. Every member of an organization is on the same page when it related to the Costco’s customers and their satisfaction. Each and every employee knows that the major role of them is to create the right environment for the employees and employers. They pay fair and right wages to their employees that reflect that Costco knows the importance and value of their employees.

Jim Sinegal was an authentic leader who always supports authenticity in the organizations. Authentic leaders are the leaders who are real and focus on the authenticity in the leadership. It had created a huge impact on the Costco’s image in the market. They provide wonderful client services, core of conduct, values, treat the staff like the family, concern about the suppliers, satisfy the stakeholders and shareholders, robust the intelligence, etc. they enforce the time and cost saving methods in the operation, production and selling so that they can give discounts to the customers. The customers and other stake holders were very impressed and attracted towards the authenticity of the store. The goods and products that were available are good in quality, quantity and variety. In this way, Costco were become one of the famous warehouse and store of the world (Pallarito, 2012).

Mr. Sinegal was an authentic leader as he understood his role in the Costco is as similar as the other employees in the organization. He never put any employee below him. In his views each member of the company has an equal and relevant value in the organization. In this way, the employees of the Costco remained motivated and satisfied with the leadership style followed by him. He tried to maintain good relations with the employees by helping, guiding, teaching, coaching, and motivating them up to a great extent. He understood the need s and wants of customers and guides the entire employees to work according to the customer’s need. He established strong and honest relationship in the organization that will last forever (Courtemanche & Carden, 2011).

In his views, if the leader is able to create loyal workforce then it would be the best thing for each and every organization. He knows that his organization is paying more wages and salary to their employees but he was not at all upset by this point. They pay fair and right wages to their employees that reflect that Costco knows the importance and value of their employees. Jim Sinegal was an authentic leader who always supports authenticity in the organizations. As he knows that the employees deserved to be paid more than other organizations. He also knows that loyalty always paid off. He noticed that the turnover of the organization was very less, the satisfaction level of the employees was very high and the customers were also happy with the management of Costco (Cascio, 2006).

It was believed by Jim Sinegal that the company’s name was called by “on a first-name basis with everyone”. Evident related to the above statement are-

They adapt the law, rules and regulations so that the work can be done within a legal framework.

He members of the company have a trust that can be reflected by the performance done by them.

For the growth and development of the staff, it is relevant to give challenges and opportunities in which they analyze the type of caliber ad potential in them. Challenges also help in the growth of the organization.

The leadership style of Jim Sinegal was not only effective for the internal organization but also for the eternal members linked to it. like the business partners, stakeholders, suppliers, customers, etc. He believed in win-win situations.

They reward the shareholders and distribute the dividends on time.

According to him, if a company wants to achieve competitive advantage then the first requirement is to make the internal management happy. The internal management of the company reflects the employees and employers of the company. To make them happy, Costco and Jim Sinegal made a strategy related to the higher (Townsend, 2011).


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