Costco Wholesale is one of the leading retailers globally. For years, the retailer has continued to record consistent growth and expansion. Headquartered at the foot of Issaquah Alps in Seattle, Washington, Costco Wholesale was founded in 1983, and as of January 2017, it had set operations in North America, Europe and Asia (Gabler, 2016). Costcos growth, expansion, and stability suggest of an able leadership at the helm.
The Rationale for Considering Costco Wholesale as a Creative Organization
Recent statistics indicate that Costco ranks second globally in terms sales in retail business after WalMart (Gabler, 2016).Despite stiff competition from e-commerce-oriented companies such as Amazon.com, Costco has remained focused on its core offers as a technique for achieving sustainability. Stated in another way, it has not shown a hurry to jump into the digital craze as a means of serving its customers better and delivering high-quality products and services (Daft & Marcic, 2017).Such feat may not be possible in an environment where creativity is not appreciated considering that the modern business environment has become so competitive that lack creativity can spell doom for the entire organization., As such, there is reasonable to ground to suggest that creativity forms an integral part of the organizations long-term strategy.
Why is Costco Wholesale a Beacon of Leadership and Creativity?
According to the prescriptions of Mastering Leadership, leaders who function out of the creative mindset generate great ideas which enhance the competitive advantage of their organizations. Creative leadership creates a vision and focuses on how the outcome of the vision would be realized. The environment does not govern creativity but the ability to discern the environment and identify the needs of the consumers in that environment and design specific strategies that not only seek to provide solutions to customer needs but also boost the organizations chances of generating more revenue (Anderson, Adams & Adams, 2015).One such creative measure is the Costcos auto program.
The auto program is an initiative developed to sell cars to its customers by partnering with dealers. As giant retailers rush for online technologies to boost their sales, Costco has created an ingenious way of increasing its revenue generation capacity by stocking cars. It is a creative initiative in the sense that the company noted that car buying is one of those activities that most customers do not prefer conducting online. The initiative allows its customers to buy vehicles at discounted prices. The company gets negotiated revenue from dealers in the form marketing fees in return for its role in connecting buyers and dealers. Besides, the company anticipates its exceptional customer service and lower prices would result in more referrals from the current customer base (Great Speculations, 2015). Since Costco pursues a warehouse club strategy which involves payment of a membership fee (Rich, Ewing, Koppitsch, & McGuire, 2017), the company explores this initiative with the expectation that more referrals would lead to more memberships. As a result, the 3% revenue that the company generates from membership fees (Gabler, 2016) can be expected to rise. As Anderson and Adams (2015) suggest in Mastering Leadership, organizational leaders must be adaptable, fluid, and creative for them to survive in todays complex business environment. This is precisely what Costco is doing.
Creativity is an essential element for organizations to trigger innovation initiatives. Mastering leadership requires that a leader create a purpose for the followers, and engenders commitment of employees towards the realization of organizational vision. In other words, leaders help distill the vision, while involving stakeholders to design innovative ways of sustaining the companys march towards its vision (Anderson & Adams, 2015).In this regard, Costco engages in a continuous improvement of its processes to offer quality products at the lowest possible prices. For instance, maintenance of relationships with suppliers is facilitated by a cutting-edge technology known as the Costco Collaboration Retail Exchange (CRX).The system enables vendors to access Costcos warehouses and view item-level data on a real-time basis. This access facilitates efficient replenishment of stock thereby enhancing the capabilities of the company in satisfying its customers. The innovation was a product of teamwork within the organization (Daft & Marcic, 2017).
Organizational Culture and Structure for Strategic Change
The corporate culture at Costco is emphasized by pursuing creative ways that result in low prices without compromising the quality of goods and services. The culture is premised on the idea that, if the organization continues to serve and excite its customers, then they would want to be part of the agenda of the organization in the long term (Gabler, 2016). To achieve this, creative ways are used include institution of stringent quality assurance arrangements with suppliers to ensure that customers are satisfied and any issues relating to dissatisfaction in shopping experiences are promptly handled (Rich et al., 2017; Gabler, 2016). Also, the company recognizes that without honesty, the customer experience can be compromised. A huge obligation is bestowed on all employees to do the right thing in the context of the interests of Costco Wholesale. The effect of doing the right thing is to benefit all; employees, customers, and shareholders. This is made possible through an able leadership that recognizes that the only way to greatness is to do the right thing. As espoused in Mastering Leadership by Anderson and Adams (2015), the courage of the leader to tell the truth cements organizational culture and enhances performance.
Another important aspect of culture at Costco is the value placed on employees. It is the organizations philosophy that employees are provided with the best environment for them to deliver quality customer service. Costco pays an average of $22 per hour compared to WalMarts $13.38.The company also offers premium health benefits for both full-time and part-time employees. Employees contribute 8% for health insurance coverage compared to the retail average of 25 %. Besides, 98% of employees are recruited from within (Daft & Marcic, 2017; Gabler, 2016). Such recruitment strategy fosters loyalty which enables the organization to adopt a customer-centered culture premised on doing the right thing.
Organizational structure also plays an important role in promoting Costcos culture. Employees are given responsibilities in order to uphold the organizations culture. This designation gives little emphasis to hierarchy. Indeed, a clerk can call the CEO by telephone and engage him on any issue relating to organizational culture; and parking spaces are provided based on seniority and not hierarchy. This structure is meant to create an unintimidating environment where employees are not afraid to make mistakes as provided that they learn from them (Gabler, 2016). Such freedom fosters behaviors that pursue the right thing in the best interest of the customers without fear of admonition.
An outstanding lesson that I have learned is that reactive minds cannot innovate. Innovation promotes the interests of customers and those of the organization. For employees to develop a total commitment to organizational vision, attractive packages such as competitive wages and medical covers are imperatives. And this can be done without affecting the profit margins of the organization. I admire this strategy because most organizations tend to increase their profits by reducing the remuneration packages of employees. The structure is also intriguing. I can contact anybody within the organization without feeling intimidated by authority.
Anderson, R. J., & Adams, W. A. (2015). Mastering leadership: An integrated framework for breakthrough performance and extraordinary business results. Hoboken: John Wiley & Sons.
Daft, R. L., & Marcic, D. (2017). Understanding management. Boston, MA: Cengage Learning.
Gabler, N. (2016, December 15). The magic in the warehouse. The Fortune.
Great Speculations. (2015, June 19). Costco's Auto Program: A unique approach to increase membership. Forbes.
Rich, G., Ewing, D., Koppitsch, S., & McGuire, R. (2017). The customer membership experience:Amazon Prime versus Costco Wholesale Club. Journal of Shopper Research, 14-29.
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