Costco’s Best Weapon
The retail world will lose one of its most colorful and respected CEOs when Costco Wholesale Club co-founder and chief executive Jim Sinegal steps down on January 1, 2012 (see related story). Among retailers, Sinegal stands out for offering proof positive that a business could be good to its employees and customers and still make a hefty profit.
Speaking of his replacement, Costco president and COO Craig Jelinek, Sinegal joked in The Seattle Times: "He is well-liked and smart and energetic and all the things that I used to be." The line was typical Sinegal, an executive so unassuming he often answered his own phone. ("This is Jim Sinegal, and here’s the beep.).
For more on Sinegal and his decision to retire, go to seattletimes.nwsource.com/html/businesstechnology/2016072309_costco01.html
Click here for More C Suites.
Starbuck’s Schultz: Start Hiring
Starbucks CEO Howard Schultz has never shied away from supporting causes he believes in. But he has really gone on the offensive with his latest passions: political gridlock and the jobs crisis.
On Aug. 15, in a widely-publicized letter sent to the CEOs of companies listed on the New York Stock Exchange and NASDAQ, Schultz deplored the partisan gridlock in Washington, and urged his fellow business leaders to join with him and sign a pledge to halt all political donations to the President and members of Congress until they strike a “fair, bipartisan deal” that puts the nation on “stronger long-term fiscal footing.”
To date, the heads of over 100 companies have signed the pledge. Some of the executives on board include J. Crew Group’s Millard “Mickey” Drexler, Gilt Group’s Kevin Ryan, J.C. Penney’s Myron Ullman, and Pinkberry’s Ron Graves, according to CNNMoney.
Schultz is not without his critics — many complained that his initiative did not go far enough in that it addressed only individual donations, not corporate donations. They argued that his quest would have a wider impact — and be far more effective — had he addressed members of corporate boards of directors. I’ll let campaign financing pundits pass judgment on that one.
But Schultz’s letter wasn’t just about fighting partisan acrimony. He also painted a chilling picture of an economy where fear and uncertainty have made businesses unwilling to invest and afraid to hire. And he was dead on in his assessment.
“Record levels of cash are piling up in corporate treasuries, idling,” Schultz wrote. “That cash is not being used to expand operations, train new workers, underwrite new ventures, or spark innovation.”
Schultz asked business leaders to take a second pledge: to start hiring and accelerate job creation. He urged employers to grow their companies and not wait for government to create a incentive program or a stimulus, or for economic indicators to improve.
“The only way to get the country’s economic circulatory system flowing again is to start pumping lifeblood through it,” he wrote. “Confidence is contagious. The best thing we can do now is to spread it.”
Schultz has put his money where his pen is. From January through August of this year, Starbucks has hired some 36,000 new employees in the United States and Canada, 15% more than in the same period a year ago.
Do you agree with Starbucks’ Howard Schultz that companies should start using their cash now to accelerate job creation? Click here to take our poll.
Click here for past As I See It entries.
An untapped opportunity at Sam’s Club
The leadership transition Costco announced this week was hardly unexpected considering outgoing CEO Jim Sinegal is 75, but it does underscore what arguably has been one of the greatest distinctions between Costco and Sam’s clubs for the past 25 years, namely the stability of senior leadership.
Sinegal founded Costco along with company chairman Jeffrey Brotman in 1983 and the pair have been running the show ever since. Conversely, Sam’s Club has been led by approximately 10 different senior executive during approximately the same time although they didn’t always carry the title of CEO. Beginning with Ron Loveless, leadership transitioned for brief periods of time to Nick White, Al Johnson, Dean Sanders, Joe Hardin, Mark Hansen, Tom Grimm, Kevin Turner and Doug McMillon. Current president and CEO Brian Cornell joined Sam’s Club about two and a half years ago after Doug McMillon was named president and CEO of Walmart’s international division.
The changes in leadership caused varying degrees of turmoil as each successive executive brought new ideas to the organization, their own philosophy about warehouse club retailing and thoughts on how to growth the business by appealing to different member segments and managing expenses. Brian Cornell and EVP merchandising Linda Hefner are no different. They are leaving their mark with the eValues program, an emphasis on fresh food and health and wellness businesses and an aggressive push to encourage upgrades to the $100 Plus membership level. And they are getting results with same-store sales growth accelerating for the past six quarters and further gains expected.
Despite Sam’s current success, how likely is it that either Cornell or Heffner will be in their current roles even three or four years from now? Walmart’s practice of shuffling senior executives every few years, as an intentional strategy and corporate necessity, virtually assures that Sam’s club will be operating under new leadership within a few years.
Conversely, Costco appointed as its CEO Craig Jelinek, a guy who joined the company the year after it was founded 1983. He began as a club manager and held a variety of operations roles over the years. Costco telegraphed its succession plans back in February 2010 when Jelinek, 58, was elevated to the role of president and COO and given a board seat after serving the previous six years as EVP merchandising. Even though Jelinek and Sinegal worked closely over the years, the company isn’t taking any chances on a greenhorn who only has 28 years at the company. Sinegal is sticking around in an advisory capacity until January 2013 and he will in all likelihood continue to serve on the company’s board even though he is up for re-election at the company’s January 2012 shareholders’ meeting.
It is hard to find two companies more diametrically opposed in their approach to leadership than Sam’s Club and Costco. Yet for all of the self-inflicted management turmoil Sam’s Club has endured over the years and the stability that Costco has enjoyed, it is surprising the performance gap between the two isn’t wider. Just think where Sam’s could be 10 years from now if Cornell, Heffner and company were to continue driving business results and stick around longer than some of their predecessors.