The November issue of Fast Company features an interview with Costco CEO and Co-founder, Jim Sinegal. You can read the full article here but there's a great moment where Jim is asked about Costco's Wall Street relations that I feel is worthy of special notice...
(The only background to know is that Wall Street has historically been quite hard on the company because of their generous employee pay and health benefits--vs. Costco's industry peers.)
Anyway, I love what Jim said about Wall Street and think it's extremely thought-provoking given the state of things today...
Fast Company: You recently announced that August same-store sales were up 9%, yet Wall Street analysts were unhappy because you hadn't met their expectations.
Jim: You know, that has nothing to do with reality. Analysts put their own numbers on things, and we can't help them there. We think that 9% in the state of this economy is pretty good.
Fast Company: Some of those analysts have argued that Costco's generosity to its workers hurts the company and its shareholders.
Jim: You have to recognize--and I don't mean this in an acrimonious sense--that the people in that business are trying to make money between now and next Thursday. We're trying to build a company that's going to be here 50 and 60 years from now. We owe that to the communities where we do business. We owe that to our employees, that they can count on us for security. We have 140,000 employees and their families; that's a significant number of people who count on us. We owe it to our suppliers. Think about the people who produce products for us--you could probably multiply our family of employees by three or four times. And we owe it to our customers to continue to offer good prices. Our presence in a community makes pricing better throughout that community because when you have a tough competitor in the marketplace, prices come down.
Interesting... after reading this it makes me want to invest in the company more now.
that disconnect between making money between now and thursday, and building a brand or company focused on longevity, was really apparent to me at live nation. live nation is a publicly traded company, so how sales are doing every quarter matters, but their "product" -- i.e. bands and music acts -- doesn't respond to quarters, it's built on the span of artists' careers. couldn't be more incompatible.
Posted by: jenka | November 06, 2008 at 01:08 PM
I love Costco! Every time I go in their stores I always have an excellent experience. You can't tell me that isn't a reflection of how they treat their employees. I've had multiple friends that have worked for Costco as well and they've all told me that they were treated excellent. Many other companies should be taking notes. Happy employees=happy customers=more business. Pretty simple math.
Posted by: Dylan | November 06, 2008 at 02:04 PM
live nation is a good example of this... i think the key to balancing wall street is a strong-willed CEO who is in the post for the long-term.
when this happens the job holds a higher purpose. people like jim sinegal and steve jobs appear to have this... to these folks it seems like the key decisions are made with true value to the consumer in mind. a higher calling for the longer and greater good, if you will. this obviously makes good business sense too.
embodying this probably gives them courage to dig in their heels when they feel they need to.
thanks for the comment jenka!
Posted by: John Drake | November 06, 2008 at 06:21 PM
totally agree dylan. thanks for comment man...
when you love where you work you work harder for that company because it's personal.
i once heard that in the casual dining industry, people try a new restaurant because of the food, but they return because of the service. the service part HAD to be there or no return guest.
so: great food/bad service no repeat business. good food/good service repeat business.
Posted by: John Drake | November 06, 2008 at 06:28 PM