Costco may be the happiest company on Earth

The retailer is generous with its rank-and-file employees and frugal with executives. Is this why no one leaves?

By Kim Peterson Jun 6, 2013 2:15PM
A Costco employee cooks chicken at Costco in Mountain View, Calif. on March 2, 2010 (© Paul Sakuma/AP Photo)Bloomberg Businessweek has a feature out Thursday calling Costco (COST) the cheapest, happiest company in the world.

Reporter Brad Stone makes a pretty good case, too. Here are the reasons he gives to back up his claim:

1. Employees have great perks. One 59-year-old worker who has been there for 26 years makes $52,700 a year, gets five weeks of vacation and has a nice 401k that Costco fills in with matching funds. About 88% of employees have health insurance from the company, and the medical plans offer great coverage.

"I just think people need to make a living wage with health benefits," the company's CEO, Craig Jelinek, told Stone. "It also puts more money back into the economy and creates a healthier country. It's really that simple."

2. Employees are paid well. Hourly workers make an average of $20.89 an hour. Compare that with Wal-Mart (WMT), which pays an average of $12.67 an hour, Stone reports.

3. Sales keep soaring. They have grown by 39% since 2009, even while other retailers have struggled in the economic downturn.

4. Costco is extremely frugal. It's generous with employees, but the executive offices in Washington have faded blue carpet, faux-wood tables and cheap art prints on the walls, Stone reports. The previous CEO made only $325,000 a year, though the current one makes more than twice as much. Still, other retail bosses make millions.

5. It doesn't hire business school graduates. Instead, it promotes employees from below and even pays for workers to attend graduate school. As a result, 70% of its warehouse managers started at the bottom, Stone reports.

6. No one leaves. Certainly the low employee turnover says something is going right. The turnover rate is only 5% for employees who have been there for more than a year, Stone reports. Among executives, the rate falls to less than 1%.

7. The stock price is on fire, soaring nearly 40% over the past two years. For any employee holding stock or options, that share price run-up is one more reason to stay with the job.

More on moneyNOW



110Comments
Jun 6, 2013 2:29PM
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THE WAY IT SHOULD BE ! Not multi million dollar CEO's , waste, and greed, makes everyone better off and keeps people off entitlement rolls. Isn't that what everyone is crying about.
Jun 6, 2013 2:50PM
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CEO's take heed! A company does succeed if it treats its employees with respect and dignity!!
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Wouldn't it be great if every company followed this model? They've realized what the Wal-Marts of the world will never understand. It's the people in the trenches that make or break your company, not some CEO sitting in an office with no clue what his workers do on a daily basis. Too many of these clowns seem to think THEY'RE the company. Well, you're not. It's the cashiers, sales floor people, and stockers that make the difference. Treat them well, and they'll run through walls for you. Treat them like peons, and you'll get little or nothing.
Jun 6, 2013 2:55PM
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This guy Stone must be stoned if he figures WalMart pays an average of 12.67 an hour.  The average is less than 9 dollars an hour, reported by MSN money on Monday.... Sheesh!
Jun 6, 2013 3:13PM
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CEO'S need a good old Fashioned **** whooping ! They are killing this country with their GREED !
Jun 6, 2013 3:12PM
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Nobody leaves is right.  Try getting a job at that place, it's impossible!  Well done Costco.  Love, love that store.  Some people don't want to shop there because they think they're going to have to buy unmanageable amounts of things, but that's not the case at all.  For example the chicken comes in packages of about 12 chicken breasts, packed in separate baggies with about 2 breasts in each bag.  You can use what you'll use and freeze the rest.  Then there are things like paper towels for example where you do have to buy a package with 12 rolls...sure that's a lot but you also save a lot and guess what, you don't have to worry about buying that again for a while.  Their store brand (Kirkland) has amazing products too.  We have switched from name brands to the Costco brand in many things like diapers, toilet paper, tea, napkins, several cosmetics, and so on.  On top of that the membership costs us nothing because we have the rewards program and we always get enough money back to cover for the membership cost plus a little more.
Jun 6, 2013 3:17PM
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Costco leads by example. But no one follows. It's a shame our country is going the the drain, just like the value of our money and the average wage earned.
Jun 6, 2013 3:20PM
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I love, love, love Costco...now I love them even more!!!
Jun 6, 2013 3:22PM
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Great article.  I hope CEO's around the world read this and learn from it.  Treat your workforce fairly and pay them a living wage they will be loyal to you, profits rise, productivity rises, turn over is lower.   If I were a Walmart employee reading this article I would be fuming.   Walmart has the resources to do this same thing that Costco is doing for its employees, but the management won't.  They want to keep their posh offices, perks, bonuses pay raises and so on... This is one reason Walmart will topple.


Jun 6, 2013 3:08PM
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"I just think people need to make a living wage with health benefits," the company's CEO, Craig Jelinek, told Stone. "It also puts more money back into the economy and creates a healthier country. It's really that simple."

Surely this guy can't be a Republican!
Jun 6, 2013 3:26PM
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What a shame that more companies in the U.S. (and the world) can't learn to value their employees, and reign in the greed of their upper management the way Costco apparently has. I can picture how many booming businesses would be flourishing if more companies' management and stockholders cared for more than their own pocket.

Kinda makes me think of the way businesses seemed to work in the 1940's - 1970's before greedy upper management and stockholders began sucking the life out of companies and the people.

Jun 6, 2013 3:34PM
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Kudos to Costco for putting its employees first.  I wish other corporations would follow.  To show appreciation to your employees through  fair wages and benefits is the way to go. 
Jun 6, 2013 3:44PM
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Yes, it flies in the face of statements like "we need to pay million dollar bonuses otherwise all of our talent will leave." This said as their stock prices plummet. Let's hear it for lies and greed. And an actual high five and heartfelt good job high 5 to Costco.
Jun 6, 2013 3:37PM
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This is not quantifiable, and maybe even a little weird, but we are members at both Costco and Sam's Club. We rarely shop at Sam's, even though they have a few things I like that Costco does not carry. They are reasonably close to one another as well. The difference comes in "atmosphere."

I swear that I can "feel" a difference when I shop at Costco versus Sam's. Sam's just feels like a souped-up Walmart, which is just... well... depressing. That aura seems to pervade Sam's as well. Costco feels more airy (even though it's smaller) and less "synthetic." 

It's probably just me.
Jun 6, 2013 3:25PM
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Why don't other companies and CEOs listen to this success story and the formula behind that success, learn a thing or two, and DO something about it instead of promoting the status quo?
Jun 6, 2013 3:42PM
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Why can't other CEO's understand that they are responsible for killing the economy.  When someone is being paid millions they don't have a need to spend.  If the rest of were making more money we'd be spending more, creating a better living for everyone, instead of just a few excessively greedly people who tend to run companies into the ground anyway.
Jun 6, 2013 3:09PM
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Texarkana Texas needs a Costco, Wal-mart and Sams sucks . Prices here suck. Wages suck too.
Jun 6, 2013 3:43PM
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That is the reason I have been shopping at Costco since the 80's.
Jun 6, 2013 4:00PM
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Let's see:

The stockholders are happy because their shares are going up.
The CEO makes over $700,000 per year.  They're rich and happy.
The workers make money and benefits to put them solidly into the middle class.  They're happy.

Wonder what's stopping other companies from trying to model?

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