Costco: An Inside Look

I received this heartfelt and disturbing note from an obviously loyal but concerned Costco employee. To give you a bit of context, in The No Asshole Rule, I talk about how placing an over-emphasis on status differences among employees at different ranks is one of the root causes of asshole poisioning in organizations (see this post on how giving power turns people into jerks), and I talk about Costco CEO James Sinegal, founder and CEO of Costco who does things to reduce status differences between himself and other employees by doing things like taking a far smaller salary than most CEOs of big companies ($350,000.00 in 2003, which is only 10 times more than a top hourly employee and twice as much a store manager), how he visits hundreds of stores a year, and despite lots of negative feedback from stock analysts that he is "wasting money," Costco provides far better pay and benefits than other big box stores. Costco long-term financial performance has been impressive, and treating people well has some clear financial benefits (e.g., Costco shrinkage rate -- lost and stolen inventory -- is about 1/10th the industry average, a sign that employees are stealing a lot less and also preventing customers from stealing).

And this does seem to translate into how they treat customers. I've always found Costco employees to be remarkably helpful, for example, more helpful and emotionally engaged with customers than the employees at Draegers, my local high-end grocery store that sells many items at double the cost you can get them at Costco.

Nonetheless, despite these impressive efforts to treat people well and reduce status differences, maintaining an no asshole rule isn't easy in organizations that have even the best of intentions, especially when they face extreme profit and performance pressure. See the email I got below from a Costco employee who claims that asshole poisioning is spreading in the company, and one of the main causes is that known assholes keep getting promoting to managerial positions.

I would be curious to hear any reactions to this email. I wonder of this is similar to the experience of other Costco employees. What about those of you who are customers: Are you seeing any signs that the place is turning nastier? And, finally, I would love to hear from Costco senior management, as I understand that this is just one employee's view, and do admire what you've accomplished, especially given what happens at other big box stores.

Here is the note:

Mr. Sutton,

I just finished your book, The No Asshole Rule, and it's brilliant! My friends and I have had many discussions until late into the night about the very issues that you discuss. Thank you for writing this book! I have to admit that pages 76-78 initially made me cringe a bit, since I have been a Costco employee for over five years now. I'd like to explain further and I hope you'll indulge me.

First allow me to concede to the positive. We are paid very well at Costco and receive excellent benefits. We have a lot of great members and I have become friends with some of my clients! I also admire Jim Sinegal's vision of the company and the limitations he sets on his own salary is a wonderful example to set as a leader. Unfortunately, I believe that Mr. Sinegal has become too far removed from the "store level" to see what’s really happening on a daily basis. Yes, he has visited my location at least 8 times in recent years, but each time has been a quick "walk through" with almost no interaction.

The culture that I and my colleagues have experienced is one of micro-management by intimidation. I have worked with a couple of general managers and dozens of area managers and I have found that with regard to hourly employees’ behavior, they unanimously assume negative intent. Simply implementing #13 on your list of things you believe would alone make a marked difference in this environment. When instructions are given about completing a task, these instructions are always coupled with a criticism. Employees are often told to be team players but management doesn't exhibit a team attitude themselves. I have endless examples of this but I don't want to lose you now, if I haven't already. I know you must get endless emails.

So how might any of this affect the bottom line? I have noticed a trend over the years that I've been with Costco of employees demoting themselves. I have personally known of 6 individuals who have taken up to a 15,000/year pay cut to "step down." In some cases the other management at the store described this self demotion as a "personal failure on the part of the employee." I have not experienced these individuals to be failures and some of them are the most intelligent and productive workers that I have had the pleasure of working with, and they are also Nice! On the flip side of this, managers that have had numerous complaints made about their behavior are continuing to get promoted. One such individual had no less than 10 people about his unprofessional, condescending, and almost downright abusive behavior. Upper management's response was that they would speak to him, but that he will continue on in his current role.

Finally, it's important to note that I'm not basing this on only my experience or on the experiences at one location. I've networked with Costco employees in Seattle, Florida and Indiana to name a few and I have found similar environments and similar stories. So why am I still here? Why are some of my colleagues still here? The pay and the benefits no doubt play a part, but so has the idea that we can change things. I must admit to you Bob, for most of us, that idea is wearing thin.

vía Bob Sutton