Winning at Retention – a case study to model

A close look at James Sinegal, Costco's co-founder and former CEO

When you run an international retail chain and your turnover is 12%, you’re doing something right.  In an industry with soaring turnover rates, James (Jim) Sinegal, Costco’s co-founder and former CEO, set a high bar for cultivating a work environment that people don’t want to leave.  If he can produce this kind of retention results in an industry that averages a more than 50% turnover rate, there is a lot we can all learn.

The High Cost of Turnover

Research shows that it costs an average of $3,328 to find, hire, and train a replacement for one minimum-wage employee. That adds up quickly and takes a huge cut from a business’s bottom line.  An emphasis on retaining your employees is clearly an emphasis on raising your profit margin.  So what did Jim Sinegal do to make Costco such an appealing place to work?

He was personable, unselfish, and generous.  When the person at the top of the organizational chart can be described with those character traits, it’s no wonder that the corporate culture is so attractive.  How did he live out these traits in a tangible way?

Personable Nature and Retention

The Character of the CEO Significantly Influences Retention

Jim Sinegal visited each store in the USA at least once a year.  That means he had to plan time away from the office to travel to each location.  It’s not something that happens on accident; it’s intentional.

Once on the ‘shop floor’ Jim took time to greet the employees. His genuine interest in Costco’s employees spoke volumes.  Employees wanted to meet him and say hi when he visited.  Not only does this boost morale but it also allows the CEO to connect with the people closest to the customer.  A leader can learn a lot from the people that interact with the customers. In the end, people want to work for someone who cares about them and that’s what Jim exhibited.

Unselfishness and Retention

One of the most shocking things about Jim Sinegal was his salary.  He voluntarily received an unheard of salary of only $350,000 for most of his career.  Despite Costco’s continued rise to the top warehouse-club retailer in the nation during his tenure, he insisted on drawing a comparatively meager salary.

This unselfish act was another beacon of character that shone to all his employees.  Knowing that the CEO was voluntarily curtailing his own financial benefits increased employees respect for him.  Why would employees want to leave an organization with such a thoughtful leader?

Generosity and Retention

Jim Senegal wanted to be sure his employees were well taken care of.  Eighty six percent (86%) of his employees got healthcare and benefits even though half of them were part-time.  Besides providing healthcare and benefits, Costco paid its employees well above average.  This was not always popular with stockholders, but it sure made the job harder to leave.

Jim described his generous philosophy like this:

“When you hire good people, and you provide good jobs and good wages and a career, good things are going to happen,” Sinegal says. “We try to give a message of quality in everything that we do, and we think that that starts with the people. It doesn’t do much good to have a quality image, whether it’s with the facility or whether it’s with the merchandise, if you don’t have real quality people taking care of your customers.”

Mr. Sinegal obviously did something right while he was in command at Costco.  His example is not a formula, but a way of life.  The key ingredient to all of his character traits above is the fact that he cared.

Caring for your employees as individuals is the single most important thing you can do to create a culture that retains employees.  It’s the foundation of our talent strategy practices at Centennial and the Talent Magnet Institute TM.  We’d love to help you create a culture based on care.  Give us a call:  888-366-3760.

Please note: We reserve the right to delete comments that are offensive or off-topic.