stockholder meeting september 10, 2006
DESCRIPTION
Stockholder Meeting September 10, 2006. Grow managers. Coach. Passion. Do something you enjoy. Lead & grow the business. Running the business right & respect motivates people. Stay involved. Mentors. Open-door policy. Lead by example. Teaching is 90%. Rotate positions. - PowerPoint PPT PresentationTRANSCRIPT
Do something you enjoy
Rotate positions
The people running the businessare the leaders & they makethings happen
Lead & grow the business
Success is imperative
Running thebusiness right &respect motivatespeople
Lead by exampleStay involved
MentorsTeaching is 90%
Hands-on
Grow managers
Open-door policy
Passion
Work as a team
Coach
Who We Are
Joya HorvathExecutive Vice
President
Shona KoehnVice President of Finance
Cleta SmedleyDirector of Operations
Roy Nelson Vice President of Marketing
Corey Carolina Vice President of Operations
What we will cover today
• The history of our company & CEO
• Theoretical foundation for why we are successful
• How theory affects practice
• What it means for you, the stockholder
• Question and answer
History of Costco
• Founded in 1982
• Seattle, WA 1983
• 487 warehouses – 8/25/06
• 130,000 employees worldwide
• 47 million cardholders
• Sales $58.9 billion
To continually provide our members with quality
goods and services at the lowest possible prices.
Mission
1. Obey the law
2. Take care of our members
3. Take care of our employees
4. Respect our suppliers
5. Reward our shareholders
Code of Ethics
Jim Sinegal - CEO
• Co-founder and CEO• Protégé of Sol Price• Benevolent style of management• Open-door policy• Coach• Only rich on paper• Time Magazine’s 2006 list of The 100 most
influential people
Jim Sinegal - CEO
"Our attitude is that if you hire good people and pay them a fair wage, then
good things will happen for the company."
Trait Theory
• The great man theory
• Oldest approach
• Qualities and characteristics which only great men possess
• Physical characteristics, personality, and aptitudes
Studies of Leadership Traits & Characteristics
Northouse, P. G. (2004). Leadership. Theory and Practice. 3nd Edition. Thousand Oaks, CA: Sage.
The Style Approach
• Focuses on what leaders do rather than who leaders are.
• Blake & McCanse, 1991; Blake and Mouton, 1964, 1978, 1984 managerial leadership grid.
• Jim’s style is Team Management
Transformational Leader Bass (1985) provided a more expanded and
refined version of transformational leaders that was based on, but not fully consistent with, the prior works of Burns (1978) and House (1976)
Bass’ work gave more attention to the followers’ rather than leaders’ needs
Describes transactional and transformational leaders as a single continuum
Jim Is Transformational
• Concerned with values, ethics, standards, and long-term goals
• Focused on satisfying needs of employees
• Employees trust him
• Engages creativity and innovation
• Employees are confident in achieving goals
Principles of Ethical Leadership
Northouse, P. G. (2004). Leadership. Theory and Practice. 3nd Edition. Thousand Oaks, CA: Sage.
The Path-Goal Theory • Evans (1970), House (1971), House and Dessler
(1974) and House and Mitchell (1974)
• How leaders motivate subordinates to accomplish goals
• Emphasizes the relationship between the leader’s style and the characteristics of the subordinates and the work setting
• For the leader the challenge is to use the correct leadership style that best meets the subordinates motivational needs
The Path-Goal Theory
Path-Goal Leadership• Defines goals• Clarifies path• Removes obstacles• Provides support
Subordinates Goal(s) / Productivity
Path Motivation
Leader Behavior- Directive- “provides guidance”- Supportive- “provides nurturance”- Participative- “provides involvement”- Achievement oriented- “provides challenges”
Obstacles
Northouse, P. G. (2004). Leadership. Theory and Practice. 3nd Edition. Thousand Oaks, CA: Sage.
Leader-Member Exchange Theory
Roles
Influences
Exchanges
Interests
Scripted
One-Way
Low quality
Self
Tested
Mixed
Medium Quality
Self/other
Negotiated
Reciprocal
High Quality
Group
Stranger Acquaintance Partner
Northouse, P. G. (2004). Leadership. Theory and Practice. 3nd Edition. Thousand Oaks, CA: Sage.
Leader-Member Exchange Theory
Leadership Making• Graen & Uhl-Bien (1991)
• A prescriptive approach to leadership that emphasizes that a leader should develop high quality exchange with all subordinates
• Suggest that leaders should create networks of partnerships throughout the organization
Higher Pay = Lower Turnover• Average Costco Wages:
$35,360 per year ($17/hour)
Cascio, W. (2006). Decency Means More than "Always Low Prices": A Comparison of Costco to Wal-Mart's Sam's Club. Academy of Management Perspectives, 20(3), 26-37.
• Average Sam’s Club Wages: $21,028 per year ($10.11/hour)
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
Dol
lars
1
CostcoSam's Club
Higher Pay = Lower Turnover
Costco Employees & Turnover
67,600
11,492
Cascio, W. (2006). Decency Means More than "Always Low Prices": A Comparison of Costco to Wal-Mart's Sam's Club. Academy of Management Perspectives, 20(3), 26-37.
•Costco Turnover:17%/year
•Sam’s Club Turnover:44%/year
Sam's Club Employees & Turnover
110,200
48,488
Lower Turnover = Lower Cost
• Estimated Costco Turnover Costs: $21,216 x 11,492 employees = $243.81
million
• Estimated Sam’s Club Turnover Costs: $12,617 x 48,488 employees = $611.77
millionCascio, W. (2006). Decency Means More than "Always Low Prices": A Comparison of Costco to Wal-Mart's Sam's Club. Academy of Management Perspectives, 20(3), 26-37.
Higher Pay = More Productive Employees
$0 $100 $200 $300 $400 $500 $600 $700 $800 $900
Dollars
Sales per Employee per Square Foot
Sam's Club
Costco
Cascio, W. (2006). Decency Means More than "Always Low Prices": A Comparison of Costco to Wal-Mart's Sam's Club. Academy of Management Perspectives, 20(3), 26-37.
More Productive Employees = Higher Net Sales
Data taken from each company’s 2006 monthly sales reports
6-Month Sales Comparisons
$0.000
$1.000
$2.000
$3.000
$4.000
$5.000
$6.000
$7.000
March April May June July August
Month
Do
llar
s (i
n b
illi
on
s)
Costco Sam's Club
What You Really Want to Know
Cascio, W. (2006). Decency Means More than "Always Low Prices": A Comparison of Costco to Wal-Mart's Sam's Club. Academy of Management Perspectives, 20(3), 26-37.
Conclusion
• Innovative company built on values
• Jim Sinegal the Dynamic Leader
• Killing the competition with Kindness
• Stock is ripe for the picking