Betting on benefits: generosity strategy pays off

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Betting on benefits generosity strategy pays off

• By Doug Desjardins
• DSN Retailing Today
• December 19, 2005
• Presented by Jonathan Weaver

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Summary

• Costcos salaries and compensation for their
  employees
• Cashiers earning up to 40K plus health benefits
• CEO Jim Sinegal says doing the right thing is
  good business
• Yet, receive criticism because it drains on
  earnings

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Summary Cont.

• "providing good wages and benefits creates a
  better work relationship and people respond
  better when they're treated fairly. John
  Matthews, senior vice president of Costco
• Base salary 10 per hour
• Low turnover rate of 5 percent
• Insist that training new employees is costly
• Part-time employees eligible for insurance

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Summary Cont.

• No problem with labor Unions
• 13,500 employees in unions around U.S
• The unions are against opening Wal-Mart
  supercenters and for the expansion of Costco
• This approach has helped in California a lot
• Generous health and 401K benefits
• In the long run, it has provided a stable and
  content work force

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Discussion Questions

• Will this HR tactic of generous compensation
  work for every business?
• Which businesses or sectors would this tactic not
  be successful?
• Is pay the only thing that motivates employees?
• Are extrinsic motivators more powerful than
  intrinsic motivators?