Pay Workers More than Competitors and Succeed?

Costco competes with Wal-Mart for the same customer, but with a vastly different business model.  Cashiers at Costco can earn up to 65% more than their Wal-Mart counterparts.  And Costco covers 85% of employee health costs while only 38% of non-supervisory workers have health insurance at Wal-Mart.  Wal-Mart’s employee turnover is three times than of Costco and its customers significantly less loyal.

Contrast these three negatives with competitor Costco’s payment of better wages which flow through the economy.  Granted, Wal-Mart is substantially larger than Costco and in many more locations.  But this story raises fundamental questions about the role and responsibilities of for-profit organizations in today’s global economy. 

To whom are companies responsible?  Who are the stakeholders?  Should a company adopt strategies that benefit local communities or our national economy such as higher wages?  Or should companies put shareholders first?  I believe that the two are compatible.  Higher wages at Costco benefit the company immensely.  With lower turnover, recruiting and training costs are lower.  Satisfied employees are happy employees who will work hard to insure that their employers prosper.  One clear example is superior customer service that insures profitable repeat business.

The human race is one of the most interdependent on the planet.  We should be pushing for corporations to adopt strategies that benefit their employees and their communities and not just push for lower wages on the grounds of completing in a global economy.

The article currently on msn.com, “Wal-Mart’s Giant Sucking Sound:  That’s what one hears as the giant retailer sops up the vitality from middle-class families, local communities, and the national economy” claims that Costco’s superior business model allows the company to pay its workers good wages AND deliver the financial results desired by Wall Street.  In contrast, Wal-Mart pays its workers so little that it also offers information on how to apply for government aid such as Medicaid available to low-income workers.  These workers do not have the purchasing power to drive the economy higher.  Wal-Mart is criticized for other business practices.  Wal-Marts sprawled on the edges of towns kill downtown businesses with lower prices.  In its search for low prices for its merchandise, the company is global and the majority of its vast purchasing power flows overseas.

Comments

[panasianbiz]

I honestly think that consumers are just getting sick and tired of all the bad publicity WalMart keeps attracting and that competitors such as Costco will becoming increasingly sought out by disillusioned WalMart customers who've come to the decision that fair employee treatment counts!