Costco shows how enlightened employee development could lead to superior chain performance.
Is it irony that Costco and Whole Foods Market perform so well, despite paying employees more than their stingier competitors? Or is better compensation simply part of a workforce management style that’s more effective at developing and keeping great workers on hand?
So much industry noise about the Affordable Care Act and its potential costs to employers hasn’t moved these two stellar operators off their philosophy of taking care of workers so they can take care of customers. Think back to last summer when Papa John’s CEO John Schnatter threatened to raise pizza prices about 1% because of health reform costs. And when Darden Restaurants and various Wendy’s and Taco Bell franchise cut some employee hours to keep them part-time, and therefore under the penalty threshold of ACA.
In light of Wendy’s recent disclosure that ACA costs beginning in 2014 would run about $5,000 per restaurant—well under the $25,000 initially estimated—The Lempert Report expects to see more retractions from foodservice and food store operators alike who fought the legislation.
If health reform costs are less than anticipated, where could the money go? Directly to shareholders or to the bottom line—or first to workers who become stronger assets for the enterprise and conceivably sell and produce more?
Costco has an idea. Raise the minimum wage. “Instead of minimizing wages, we know it’s a lot more profitable in the long term to minimize employee turnover and maximize employee productivity, commitment and loyalty,” Costo president and CEO Craig Jelinek said in a prepared statement. His proof: Costco stock has more than tripled over the past decade to about $106 per common share today.
Walgreens is another leader in workforce treatment and development. Its latest example—the new Walgreens University in the headquarters city of Deerfield, IL, houses 300 trainers who deploy online classes and regional training sessions for employees at all levels. The Chicago Sun-Times reports it is “one of the few corporate training programs to offer college credit for certain classes,” such as management and retail fundamentals.
The Lempert Report believes enlightened approaches like these are right for these times. Boomers looking for encore professions might choose retail if treated with dignity and a chance to learn. Millennials who struggle to launch their careers might take a second look at retail, if employers give them reasons to believe in their future.