Happy Employees Create Enterprise Value

Costco Equals HappinessMy weekends often include stops to two adjacent retailers: Costco and Home Depot. Life in the suburbs. 🙂

While these two retailers are located near one another, the experiences are drastically different. You could argue they are incomparable because they specialize in different things: Costco is a membership-only warehouse club with a wide variety of goods from groceries to caskets, while the other sells home improvement and construction products. But if the goods being sold were equal, there would remain one stark contrast:

Costco employees are unusually happy.

When I walk into Costco on busy weekends with my kids, I get a genuine smile from the man who checks everyone’s membership card. And when checking out (always through fast-moving lines), the man who reviews our receipt not only delivers a big smile, but draws a happy face on the back before handing it to my kids.

Compare that to Home Depot, where the employee who greets customers at the entrance is often trying to sell people home-improvement services they don’t want or need. I feel bad for him, because it’s an awkward experience with lots of rejection; regulars often look away and proceed as quickly as possible. Then there’s the checkout line, which is painfully slow most of the time (though not as slow as the dreaded returns line).

This is not a judgment of the people who work at these two retailers; they’re all good people. This is only an unavoidable observation: the two retail experiences are categorically different. You might say one is in the business of retail, which is notorious for employee dissatisfaction, and the other in the business of service and making people happy.

Employers control the happiness of their employees.

That’s right. Costco is doing something remarkably different that creates a total experience that is categorically different from most other retailers: It treats its customers well. It pays them far above average, a living wage. It provides health insurance and good retirement benefits. It provides flexibility and a liberal vacation policy. It believes that happy, loyal employees will create extraordinarily more enterprise value.

Even though it is bare-bones and somewhat industrial, this is one of the primary reasons I enjoy shopping  at Costco. It simply feels good to be around happy people. It’s a place my entire family actually enjoys frequenting together. (Though I like other things like good prices on a variety of high quality products, tasty samples, clean shopping carts with seats for two kids, good munchies at the food stand near the checkout, ample parking and more.)

Anyway, this was a long preamble to a magnificent, in-depth story on Costco in Bloomberg Businessweek. Check it out here.

P.S. Thanks to the many friends who sent me the Bloomberg Businessweek story. You knew I’d like it, and so should everyone else.

Published by Max Kalehoff

Father, sailor and marketing executive.