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Saturday, June 8, 2013

High wages=successful? Nope.

A recent article on Costco’s success implied that high employee wages caused a happy and effective workforce leading to a profitable company. That’s like saying that good health motivates people to exercise.

High benefits don’t cause success, as California cities like Stockton and San Bernardino attest. Good leadership leads to happy followers, which leads to successful operations. Successful operation leads to higher wages.

Missed the important hints

The article noted that that Costco’s costs are well-controlled. In fact, the executive suite described is austere. But the article didn't address leadership.

Consider a U.S. Army combat unit. Members train to face pain and death by practicing skills and tactics in uncomfortable and exhausting routines – over and over. Their wages are low; a commander of a unit with personnel strength of around 800 and a multimillion dollar equipment inventory earns about the same base pay as a police officer, firefighter, or a mid-level administrative worker in Costa Mesa.

Starting point is leadership 

Instead of wages, we should consider leadership as a determiner of employee morale. Military officers are trained in leadership at every stage of their career, and are graded on their effectiveness as leaders. Two rules they learn are: Leaders set the example and Leaders keep their followers informed.

A quick look around your local Costco will reveal a list of the top performers and how many checkouts they perform each hour. These employees are informed.

Ask a supervisor a question and she will accompany you to what you are seeking, even if she was involved in a task when you interrupted. She sets the example. Her subordinates will generally demonstrate the same helpfulness and enthusiasm – even if the shoppers interrupt their paperwork.

Compared effects and implied they're causes

The article compared Costco wages and “employee happiness” to those factors in competing Wal-Mart. Wal-Mart has lower wages. It also exhibits less extreme cost control and a different leadership model.

Employees in the local Wal-Mart seem to fall into two categories; happy and helpful, and glum and evasive; it’s unlikely that their wages differ. It is likely that their different immediate supervisors are setting different examples for them

High wages don’t cause success, they follow success

Leaders aren't just those in management; leaders include all who influence the people who do the work.

Costa Mesa’s employee’s association is continuing its lawsuit although the reason for the suit has gone; it’s trying to bleed its opponent. Association pundits attack council members personally.

That’s setting an example of self-centered, pugnacious opposition. It shows pride in increasing the cost and decreasing the efficiency of operations. Gullible followers mimic the behavior.

Good leadership thrives, poor leadership flounders

Good leadership leads to efficient operations, which leads to increased wages (and benefits). Setting humble, even selfless examples helps followers develop devotion to excellence, which leads to long term success.

Poor leadership does the opposite, in the business, military, and government worlds.

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