Industrial Psychology: Costco - Research Paper Example

Industrial Psychology: Costco Culture at Costco An organization’s culture speaks a great deal about the satisfaction level of its employees. Satisfied employees are the key to satisfied customers. The corporate culture at Costco has always been exceptional. Costco, right from the beginning of its existence has emphasized on a culture of inclusion (Gerston). Costco believes that employees are its biggest ambassadors. The company focuses on word of mouth advertising from the employees by keeping them happy rather than spending a lot on major advertising campaigns. Costco does every bit on its part to provide the employees with highest level of satisfaction at work. This is done by providing better working conditions for employees, higher compensation packages as compared to competitors, bonuses, paid holidays, health insurances and other perks. The results of Costco speak for itself. From the time of opening its first store in 1983, Costco has now extended its arena to stores in 451 locations with employee strength of over 110,000. Costco, as of July 2009, is the third largest retailer in United States and the ninth largest retailer in the world. (Frank J. Landy) The employees at Costco are considered as the reasons for its success and are thus paid well and are cared for. Team working is encouraged a great deal and the rules are kept to a minimum (Michael R. Solomon).All this is done in order to give enough freedom or autonomy to the employees. This makes the employees feel at home even when they are working. Also, Costco makes sure that all the employees are able to have an adequate work life balance. The management organizes periodic events in which even the families of Costco employees are invited. Costco culture is more of an informal nature. Costco has never emphasized on the need for a detailed set of rules for the employees (Aamodt). Costco trusts its employees to work diligently even in the absence of detailed rules and procedures. Costco has become an employer of choice due to its outstanding approaches to employee involvement and care. Enhancing Leadership through Training & Development Costco is one of the retail giants in the US which is well known for making heavy investments for the training and development of its employees. Initially, the leadership development program at Costco aimed at sending managers to business schools for the development of their leadership skills (Walsh). But, this program did not give desired outcomes. As a result, the top management felt a need for developing a new leadership development program that was able to deliver results quickly, and could develop leaders which were aligned with Costco’s culture. Costco figured out that the best trainers for the budding leaders are the Costco’s senior managers. Costco believes that the mission of the company can best be delivered to the new trainees when the key leaders deliver it themselves personally. The developers of the best practices now also teach them to the trainees. The senior managers at Costco train the employee’s right from the values the company has to on-the job training wherein the employees have to face actual work situations. Any new situations faced by the company keep on accumulating into the program, so the programs are always up-to-date. This approach (also called Leader led Leadership Development Programme LLLD) has reaped huge benefits for Costco. With the help of LLLD, the time needed to prepare leaders has also reduced considerably. LLLD has been one of the most profitable investments Costco has made training and development of employees. Employee Motivation Costco believes in the culture of equality. This is clearly reflected in the working style of the top executives at Costco including Jim Sinegal who co-founded Costco. Sinegal even on holding the highest post in the company still wears a name tag, answers his calls himself, sends his fax himself and stays in direct contact with his employees and customers. Sinegal draws a salary of $550,000 which is only a fraction of what CEOs at other large companies make. Jim Sinegal makes sure that he registers his presence at every new store opening (Jones). This level of attention by the top management makes the employees feel that their good work is being noticed and appreciated and makes them feel more motivated. In Costco, the employees are given foremost importance. The top management knows that in order to reap great benefits, Costco needs to take good care of the employees for them to take good care of the customers. The work culture at Costco is not very bureaucratic. At Costco, employees are rewarded for taking initiatives. Costco believes in giving autonomy to its managers to experiment with their styles of working in their departments in order to get good results. The store managers are free to display the items in their store the way they think is appropriate. The managers are then rewarded based on their performance. This results in a motivated top management. Entrepreneurial thinking is encouraged a lot at Costco. The employees can earn up to 150 shares in Costco’s stock if they come up with useful money saving ideas (Susan E. Jackson). Also, Costco does not emphasize much on a formal dress code. The company believes that employees should be comfortable while working and are thus allowed to wear relaxed casuals. Thus, we see that at Costco, employees are motivated both extrinsically (in the form of higher pay packages) and intrinsically (better working conditions for employees). Pay Structure Costco cares about its employees and customers more than its shareholders. This is reflected in the salary the company offers to its employees. Other retail giants like Wal-Mart abandoned the approach Costco followed by suggesting that low price competitors are going to drive you out of the market if a major share of your earnings goes in paying hefty packages to the employees. But, Costco considers paying huge packages to the employees as an investment and not an expense. The employees are paid an average of $17 per hour. Ninety percent of the health insurance of both the full time and part time employees is also bore by the company (Louis E. Boone).Part time employees are guaranteed a work of at least 25 hours per week and they are also paid more or less the same benefits as the full time employees. Like the full time employees, even the part timers are eligible for COSTCO membership cards (Tom L. Beauchamp). Costco believes that the company owes it to its employees and also the community in which it is working for its success. The wages, perks and benefits offered by Costco to its employees are more than a y other retail giants in the US, like Target and Wal-Mart. This has resulted in a very low employee turnover for Costco and thus saves costs for recruitment and selection, induction, as well as training and development of new employees. The annual turnover for full and part time employees in case of Costco is only 6 percent as compared to the industry average of fifty nine percent (Roelien Theron). Communication Costco has a very open communication system. The company follows an open door policy. Costco has a democratic management style in which employees are allowed to make suggestions, not just follow the orders. This makes the employees feel more involved. The employees feel that even they have a hand in the growth of the company. They are also encouraged to vent out their grievances to the top management. Listening posts have been designed in the company who are responsible for listening to the employee grievances. (Myers).Company’s intranet is another medium of keeping the employees up-to-date with any of the present happenings in their company. One important aspect of communication is not only communicating with the employees, but also keeping in touch with their families. Sinegal has been very successful in implementing this approach. Sinegal is known to keep in constant touch not just with the employees, but their families too (Bruno Dyck). Works Cited Aamodt, Michael G. Industrial/Organizational Psychology. Los Angeles: Cengage Learning, 2009. Bruno Dyck, Mitchell Neubert. Management: Current Practices and New Directions. Detroit: Cengage Learning, 2008. Frank J. Landy, Jeffrey M. Conte. Work in the 21st Century: An Introduction to Industrial and Organizational Psychology. Houston: John Wiley and Sons, 2009. Gerston, Larry. The Costco Experience: An Unofficial Survivor's Guide. Chicago: E-reads/E-rights, 2003. Jones. Contemporary Management 5E. Houston: Tata McGraw-Hill, 2006. Louis E. Boone, David L. Kurtz. Contemporary Business 2009 Update. Chicago: Cengage Learning, 2008. Michael R. Solomon, Elnora W. Stuart. Marketing: real people, real choices. Houston: Prentice Hall, 2003. Myers, Charles s. Industrial Psychology. Los Angeles: Read Books, 2007. Roelien Theron, A. Moerdryk, A. Schlechter, P. Nel, A. Crafford, C. O'Neill. Industrial psychology: fresh perspectives. Detroit: Pearson, 2009. Susan E. Jackson, Randall S. Schuler, Steve Werner. Managing Human Resources. Chicago: Cengage Learning, 2008. Tom L. Beauchamp, Norman E. Bowie, Denis G. Arnold. Ethical Theory and Business. Michigan: Prentice Hall, 2008. Walsh, David J. Employment Law for Human Resource Practice. Philadelphia: Cengage Learning, 2009. Read More