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Want Engagement in Bulk? Look at How They Do It at Costco

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May 28, 2014

Glassdoor recently published their annual Top 25 Companies for Compensation and Benefits list, and once again Costco has taken a high spot, landing second place behind Google.

That means the compensation and benefits provided to Costco employees rival those of tech giants like Facebook, Adobe, and Microsoft.

Costco manages to achieve high levels of employee engagement, healthy profit margins, and lower-than-average turnover rates while starting every employee at $11.50/hour, providing company-sponsored health insurance, and having no advertising or public relations staff to speak of.

Costco’s “simple” talent strategy

In the era of the Great Recession when most big retailers fight against minimum wage hikes for fear of losing profits, Costco consistently proves the doubters wrong.

“I just think people need to make a living wage with health benefits,” Costco CEO and President Craig Jelinek has said about the company’s compensation policy. “It also puts money back into the economy and creates a healthier country. It’s really that simple.”

If it’s really that simple, why doesn’t everyone do it then? The reason is it’s really not as simple as it sounds, since the explanation for Costco’s success goes beyond compensation and benefits.

How to build engagement and goodwill

CEO Craig Jelinek is aware of this, and employs other engagement strategies to win the loyalty and goodwill of his staff:

  • He hires internally – More than 70 percent of Costco warehouse managers began their careers as a cashier or floor worker. When employees know that there is equitable upward mobility at their company, they are more engaged and willing to give their best.
  • He is an advocate for equality – Understanding that today’s workforce is diverse and multigenerational; Jelinek makes sure the company’s policies on equality and inclusion are always front-of-mind, providing full health benefits for same-sex couples and supporting diversity initiatives.
  • He doesn’t make anyone work on Thanksgiving – While Wal-Mart and other retailers keep grueling schedules over Thanksgiving to prepare for the holiday shopping season, Jelinek doesn’t see the need, and closes up shop on Thanksgiving unconditionally. It sends a strong message to employees that their time spent with family and friends is just as important as the time spent in the workplace.

The right combination

These small gestures of appreciation have little to do with actual compensation, but end up enhancing the employee experience at Costco by bolstering high wages with high confidence in the organization.

True engagement —  ergo true success — only occurs when both the material (paycheck; benefits) and psychological (praise from peers; work culture) needs of employees are met. Only then do you have the recipe for a winning culture.

This was originally published on the Michael C. Fina blog.

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