Treat your employees well, and they in kind will treat you well. But shareholders think they’re the be-all and end-all of everything and expect held firms to treat their workers like shit, pay them squat, and be as stingy as possible with benefits if indeed any are even offered; at least, that’s what the Pigopolists in the WSJ article are whining about in return for a bigger bonus so they can finally buy that fourth vacation house somewhere fabulous where there isn’t a Mal-Wart and any of those pesky working poor.
The playing field in the world of retailing is increasing sloped over to big box stores, like Circuit City or Best Buy, or the warehouse shopping experience of a Wal-Mart, or a BJ's Wholesale Club. One of the hallmarks of the these super-sized monuments to commercialism is that the consumer gets stuff cheaper. One of the ways these operations manage to offer stuff at lower prices is by compensating the hired help at a lower rate. Wal-Mart is a company that everyone, even presidential candidates, love to criticize for mistreating their workforce by underpaying them or stiffing them out of health insurance or engaging in predatory business practices. There is an an almost diametrically opposed business model being offered by Costco Wholesale Corp. stores. They maintain a philosophy which balances turning a profit with concern for the health and welfare of their workforce. You would think that such an operation would be the darling of Wall Street. You would be mistaken, however.
By any measure, if you were an employee, you would prefer to work for Costco rather than Wal-Mart. A store clerk starting at Costco can expect a starting salary of about (US)$10 an hour and the annual salary can easily climb to about (US)$40K per year within three years of employment. Wal-Mart doesn't disclose its salary arrangements, however it was reported that clerks at the Las Vegas Superstore were starting at (US)$7.65 an hour. There are no statistics on how much that starting clerk would be earning in three years if, in fact, they were still working for Wal-Mart in three years. That's because the annual turnover rate for Wal-Mart workers is 50%, compared to Costco's rate of about 24%. Another area where Costco shows up being a better employer is in providing health insurance coverage for the workforce. According to company records, 82% of the Costco workforce is covered by health insurance compared to 48% of Wal-Mart's. Costco fronts 92% of the costs of the insurance they offer while Wal-Mart only covers two thirds. There are also shorter waiting periods to qualify for insurance coverage at Costco over Wal-Mart. All in all, these factors may explain the disparity in the turnover rate between the companies.
But Costco's benevolence towards its workforce is apparently going unloved by Wall Street. Bill Dreher, an analyst for a Wall Street investment bank was quite up front on how investors feel about things: "From the perspective of investors, Costco's benefits are overly generous. Public companies need to care for shareholders first. Costco runs its business like it is a private company." So, it's the old dilemma again, who's more critical to the success of the operation, the investor who has bought equity in the company in hopes of realizing some return from the profits, or the person in the store, who is the company's "face to the consumer"? In the eyes of Jim Sinegal, Costco's president, the answer is apparent, "I happen to believe that in order to reward the shareholder in the long term, you have to please your customers and workers." But, it's hard to convince investors in Mr. Sinegal's approach. Investor preference for Wal-Mart over Costco is apparent by one measure, the company stock for Wal-Mart currently trades at 24 times the projected per-share earnings while Costco's ratio is around 20 to one. Despite its refusal to publicly state its salary structure (they claim because they operate all over the place and rates fluctuate dependent upon region) Wal-Mart contends that its employee benefit package rivals Costco in just about every category. And Costco points to the reduced amount of employee turnover as being a cost reducer in that it doesn't have to constantly hire and train new employees. But, Wall Street doesn't really buy reduced turnover as that attractive an aspect to Costco. Not when the increased pay rates and better insurance coverage puts a ding in the company's profitability. "Their benefits are amazing, but shareholders get frustrated from a stock perspective," says Emme Kozloff, a retail analyst at Sanford C. Bernstein LLC.
Now, Costco rocks. I shop there at least once a month. I went to a Sam’s club with a co-worker once and it was basically the same as the last Wal-Mart store I was in, only it was dirty, sullen, and full of screaming crotchfruit on a much larger scale. and I really don’t give a shit if the same basic item at Costco is 5% more expensive, if that, than at Sam’s Club. I can afford that for decent service.
This goes for any store, service business, or financial provider. It’s the employees, stupid. They can make or break you at a certain point. If I’m spending money in your business you’d better make sure I’m appreciated and not treated as an annoyance to be dismissed, because my business will be gone so fast if you screw me over (unless you’re Comcast Cable, which treats me like crap but they’ve got the GOP-blessed monopoly here, so I’m screwed).
