The New Yorker has a long piece by Molly Fischer, entitled “Can the Golden Age of Costco Last?,” that looks at the membership club’s evolution and asks whether it is getting away from some of the cultural characteristics that made it different from almost every other retailer.
The argument in the deeply sourced, 6,000+ word piece essentially is that while Costco made its bones with an employees-and-customers first philosophy, probably most persistently and eloquently espoused by former CEO Jim Sinegal, that may not be the case anymore. Sinegal’s attitude was that if he took care of employees (with higher than average wages and benefits) and customers (with low margins on virtually every product sold), then Wall Street should hang in for the long haul; short term investors might not be able to make a quick buck, but long-term investors would see their faith and patience borne out.
But now, the story suggests, the commitment to that philosophy may be waning. The stores may look and feel and smell and sound the same, but some feel that there is a growing emphasis on shareholder return that may be eroding the culture in ways that may seem imperceptible at the moment, but could add up to something more impactful in the future.
Here’s one passage from the piece:
“Steven Seguin, who is thirty-five and lives in North Carolina with his wife and two children, has worked in four different Costcos around the country in the course of sixteen years. He remembered Sinegal, on a warehouse visit, thanking each employee by name. Several years in, Seguin showed a flair for handling baking equipment; he was subsequently enlisted to train fellow-workers on such machinery as the ‘pie gun,’ which dispatched vats of pumpkin-pie filling during the week of Thanksgiving. (‘You’re just blasting pie goo,’ he told me.) Seguin had previously worked at Walmart and was struck by the contrast with his old job. ‘It was so supportive,’ he recalled. ‘They wanted to groom you for success’.”
But things change:
“Seguin, the pie-gun master, said that he mourned the small practices that used to distinguish Costco – communal tables for break-room lunch, intensive buddy-system training. He told me that, after Sinegal stepped down, warehouse walk-throughs by executives began to feel less motivational than ‘disciplinary.’ On a subreddit where warehouse employees compare notes, recent threads include ‘Overall downturn of the company?!’ and ‘Has anyone else given up recently?'”
And then:
“Seguin gave his notice at Costco this past summer. ‘It is a great company to work for, on paper,’ he said. Still, he was startled by the corporate impersonality of his departure: no managerial farewell and no handshake, just a perfunctory online exit interview in a back room.”
You can read the entire piece here.
KC’s View:
Important to note two things right up front.
Fischer, the article’s author, is an enormous Costco fan – she grew up with the chain as a reassuring presence in her life. This is no hit piece.
Also, this is not an article predicting imminent doom for Costco. Rather, it is sort of a warning bell, ringing lightly – but persistently – in the winds of the kind of cultural change that affect many companies as their store counts grow, their managements change, and priorities shift, even if unconsciously.
That’s the thing about the changes that seem to be taking place at Costco. They represent an incremental slide that could end up having a profound impact on some of the elements that have differentiated Costco over the years. I’m sure that management would largely deny any shift – though they refused to talk to The New Yorker, so maybe we’ll never know. Or maybe they’d say that Jim Sinegal led the company in different times, and that the current economic climate calls for changed priorities.
I’m sure that most folks believed that Costco was one of those companies where such cultural shifts could not happen. Its beliefs and priorities were just too embedded in its DNA. But The New Yorker piece reminds us that companies and their leaders have to be vigilant about such things, nurturing core values with resolve and tenacity, despite outside pressures coming from people who have their own interests, not the company’s long-term best interests, in mind.
The post Worth Reading: Is Costco’s Future Diverging From Its Past? appeared first on MNB.
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