Costco’s Recruitment and Retention Strategies

Introduction

Costco Wholesale Corporation is a members-only retail and warehouse company whose main offices are in the United States. The company is the second largest retail chain in the USA and the third largest in the globe. The warehouse club sells a wide range of commodities in its over 671 outlets that are spread in different parts of the world. Opened in 1976, the retail chain has expanded across the world.

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Currently, it has establishments in Mexico, the United Kingdom, Japan, Spain, the United States, Canada, Australia, Taiwan, and South Korea. With approximately 72 million members, the company has a labor force of over 174,000 people and revenues of over US$170billion as of 2013 estimates. According to Weberg, the company works in the retail industry, which has received a lot of attention on matters relating to employee recruitment and retention because of the labor demanding nature of the industry.6 Further, attention to the recruitment and retention strategies that are employed in the industry has been heightened

. The situation follows the blatant violation of employee rights and exposure to poor working conditions, as well as pitiable working terms of major players such as Wal-Mart. Many studies have used Costco Wholesale Corporation as a case study for employee recruitment and retention strategies in the retail industry and for good reasons. Costco Wholesale Corporation is known for its best recruitment and employee retention strategies that have put it ahead of the rest in the industry.

Indeed, the company has minimal employee turnover cases. This observation is uncharacteristic of the retail industry. This paper discusses the employee recruitment and retention strategies that are used at Costco Wholesale Corporation. Further, the paper will offer recommendations on ways through which the company can improve its employee relations as a way of enhancing satisfaction and retention.

Statement of the Issue

According to Codier, Kamikawa, Kooker, and Shoultz, the business world is more competitive than any other time.3 This situation has been fueled by technology and the emergence of many players in the retail industry. For instance, based on its nature of selling a wide variety of merchandise, the retail industry is one of the most competitive sectors, firstly, due to the easy nature of new entrants, lack of differentiated products, and other factors that make it difficult to have dominance in the sector.

Indeed, much of the differentiation of services revolves around superior customer care, better client experiences, faster service delivery, among other factors that rely on human resources of the organization. Therefore, it is crucial for companies in this industry to ensure that they have better ways of guaranteeing excellent service delivery as Deery confirms.4 The plan ensures that customers are satisfied and are willing to make repeated visits.

While technology has been a very important competition factor, it has grown into a leveling factor where organizations can easily acquire and employ such technologies to be at the same level with their competitors. This case means that technology has opened doors for eliminating unnecessary production costs and other expenses that are incurred due to delayed service delivery. However, technology is no longer the factor that differentiates one company from another since such technologies can be acquired. The quality of services and superiority of customer care are the main factors that differentiate a company from another.

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In this case, the human resource plays an important role in ensuring competitive advantage for companies in the retail industry. For this reason, it is important for an organization to recognize the significant role of its human resource management approaches since the human resource plays an important role in enhancing the competitiveness of an organization in the 21st century.

However, it is not easy to achieve a highly efficient labor force that can guarantee consistency of service delivery and customer satisfaction. Therefore, it is important for organizations to adopt strategies that will uphold recruitment of the best talent and further to guarantee that such talent is retained for the business to receive good returns from its workforce. An effective workforce in the retail industry is the channel through which an organization can achieve its customer expectations and consequently attain the organization’s goals of remaining profitable.

The role of human resource management in an organization goes beyond the traditional responsibility of recruiting and firing employees. As Breaugh asserts, in the contemporary world, the role of human resources focuses on ensuring that the labor force is aligned with the goals of the organization.2 The HR has to confirm that employees meet customer expectations.

The main issue of discussion on this paper is the importance of recruitment and retention strategies in terms of ensuring that Costco’s labor force delivers the best services for more profitability, better customer loyalty, and less employee turnover to be attained. The study will analyze the current recruitment and retention strategies that the company deploys with a viewing of understanding its human resource management strategies that are in place and later make recommendations accordingly. Further, the study will highlight industry-unique challenges, as well as company-unique issues that Costco Wholesale Corporation faces. The goal is to set a good background upon which the study can build good recommendations that can be adopted by the company to retain or improve its competitiveness in the industry.

Current Employee Recruitment and Retention Strategies at Costco

Based on the current state of affairs at Costco, it is easy to realize that the company has performed exemplarily in terms of its human resource management strategies that it has adopted as compared to its competitors. As other competitors such as Wal-Mart receive criticisms for their barefaced contravention of employee rights, high employee turnover, low wages, and other ills, Costco has received much applause and recommendations for its human resource management strategies.

Aityan and Gupta confirm how these strategies have ensured that the company has high employee retention rates, satisfaction, better customer loyalty, and better wages among other factors that place it above the rest in the industry.1 Costco pays its employees an average of $20. This figure is one of the highest in the retail industry since the national average for the retail industry is $11.39. A player such as Wal-Mart pays its employees an average wage of $8.88 per hour. In addition, the Costco has a lower employee turnover of between 5%-24% compared to Wal-Mart’s 37.5% and industry’s average of 44%.

The company has also put in place measures to ensure that workforce welfare is well taken care of. For instance, in addition to having some of the best employee hourly wages, the company also offers a myriad of benefits, both financial and non-financial, that make it a favorite for its workers. For instance, over 88% of its employees are covered by health insurance, which is higher than many other retail stores in the industry.

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Other benefits that are offered to employees include paid holidays and free membership to Costco among many other benefits that focus on ensuring high employee satisfaction and retention, which are more beneficial to the organization in the end. The human resource management approach at Costco has allowed the company to be highly competitive and with high-profit margins, despite its fewer locations and higher employee wages as compared to its competitors. The main reason for the focus on better employee relations for the company is to ensure that it can retain the top talent to achieve a high worker confidence, high employee engagement, excellent service delivery, and most importantly, superior customer relations and loyalty.

However, despite these strategies, there is always a room for improvement since employee turnover is still high at 24%. It can be improved even higher. This goal can be achieved by continuously reviewing its recruitment and retention strategies to ensure that they remain relevant in the retail industry that has become more competitive as other companies seek to adopt better approaches that will ensure that they win competition.

The retail industry is full of its unique constraints and opportunities that relate to organization’s ability to remain competitive by adopting better human resource management strategies that can give the company competitive advantage. Firstly, the company works in different jurisdictions. The implication is that it has to implement its human resource management strategies under different regulations that may hinder its capacity streamline its concepts throughout its locations.

Secondly, there is competition in the industry, especially from Wal-Mart, which has more presence in almost all locations that Costco is available. This situation means that such recruitment and retention strategies may be taking a large chunk of the company’s revenues, which may hinder its ability to compete effectively with other companies that have more profits.

Of the many challenges that the company faces towards the implementation of better human resource strategies is the ability to remain competitive while ensuring that its retains good profits from its stakeholders. The retail industry is very competitive. It has lower profit margins as compared to other industries. Hence, to ensure profitability, it is important for the organization to choose wisely where and what projects it spends its money on.

Further, the human resource management in this labor-intensive industry is one of the most costly segments for companies in this sector. The reason why many efforts are dedicated to this segment must be well considered in terms of whether they can ensure better returns on investment for the company. These are just some of the constraints that a company such as Costco may face in its quest to adopt better employee recruitment and retention strategies.

Despite these constraints, more focus on better employee recruitment and retention strategies offers greater opportunities for the company. Ensuring that the company has better employee recruitment and retention strategies will make the company achieve better outcomes from its workforce.

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By adopting better recruitment and retention strategies, the company’s workforce will be highly satisfied, motivated, and able to stay in the organization for long while offering the best services to clients. The move will lead to better customer relation and loyalty. Further, with many organizations in the industry being unable to improve the welfare of their employees, it is an opportunity for Costco to create a brand name as a good organization that offers superior services to its customers.

Recruitment and Retention Strategies that Costco can Adopt

The current human resource management strategies at Costco Wholesale Corporation show a company that understands its market well. It depicts a business that is out to differentiate itself from the rest in the sector. The first strategy that an organization must emphasize when seeking better human resource management is its recruitment strategies. Costco offers superior employee relations. This plan means that not everyone can work for the organization. In this case, it is important for the recruitment strategies to ensure that only the best talented and highly qualified individuals are hired. How can Costco achieve this goal?

Firstly, the company can focus on a more decentralized approach to recruitment where each region is empowered to recruit its employees unlike in the current state where the organization recruits employees from the highest organization’s centralized human resource department. In this way, the strategy will give more power to branches and regional HRM managers to recruit employees who are best suited to handle the requirements of the local Costco outlets and customers.

To ensure success for the new concept of human resource management, the organization will have to employ and train more HRM officials who can serve in the respective regions. As Dessler, Chhinzer, and Cole confirm, in the current recruitment approach, the company can experience a disconnection between the recruited people and the needs of the respective locations where the employees are sent to work from.5

Secondly, the current approaches to recruitment have allowed the company to ensure that it recruits the best employees. For instance, the company has adopted an approach where the activities from job descriptions, short listing, and interviews are structured in a way that allows only the best candidates.

For instance, the company’s HRM department ensures the availability of different human resource personnel for interviewing potential candidates for different positions. In addition, the company has also ensured that all job requirements and expectations are well laid out and/or matched with their respective skill requirements to guarantee that only those who fit the skills can be considered for employment. Through this keen approach to recruitment, the company has had a highly talented, skilled, and motivated workforce delivers maximally to the organization.

Retention strategies that the company has adopted have allowed it to become one of the best employers in the USA. Employees have expressed high levels of engagement and job satisfaction, contrary to the situation in the retail industry. The retention processes at Costco begins from the time an employee is recruited into the organization. The first step involves a thorough training program that ensures that the employee is aware of what is expected of him or her in the organization.

In addition, the training program ensures that the employee is aware of the ‘dos and don’ts’ of the organization, the policies, and any other information that pertains to his or her work at the organization. The other approach that the company uses to ensure that it has high employee retention is through its concern for the employees’ welfare (4). For instance, unlike many of its counterparts in the industry, the company has provided more than 88% of its employee with health insurance covers.

Such an approach has made employees have trust on the company’s support for their welfare. In addition, unlike Wal-Mart, 100% of employees at Costco are unionized. The company makes it clear that its employees have an option to champion for their rights in the event that they feel that the organization has treated them unfairly. In addition, the company has also put in place elaborate training and employee development programs to ensure that employee skills remain relevant in the industry, and most importantly, to ensure that they achieve personal and professional growth.

The company maintains training and development of its employees through its well-established development curriculum, as well as through its well-established roadmap for organizational expansion. The company offers financial assistance to those who seek to advance their education. It also provides fully paid in-house trainings, education leaves, and incentives for furthering employee studies.

In addition, its benefits, which also include higher wages that average up to $21 per hour, are highly attractive to the employees and hence the reason for the company’s high employee retention rate. In addition, through its 401K program, the company’s employees are assured a better retirement through their contribution, as well as the organization’s involvement towards pension. This approach is one of the best for the company since it differentiates it from other companies in the industry.

The other most important aspect that is unique to the organization is its feedback system and the concern that it has on its employees. In this case, the organization has a good appraisal system that ensures that it can track the performance of each employee. In addition, the organization has a well-established process through which employees can give feedback to the organization regarding different issues that concern them or the organization. This way, Costco understands and implements processes that ensure that employees’ welfare is taken care of and that anything, which can be adjusted to ensure their satisfaction, is done.

The organization has also invested heavily in ensuring enough support services and resources for employees to work effectively without any hindrance. A good organization provides employees with the necessary resources that allow them to deliver their work without any hindrances. In addition, the organization also offers other support services, including counseling, fitness, and health to ensure that they are well mentally and physically. Resources are readily available to handle their work effectively without any limitation. These approaches have allowed employees to be highly satisfied and engaged in their work. The situation offers a competitive advantage to the organization.

Lastly, the company offers a good working environment that is ideal for employees to maximize their potential in their respective roles. For instance, the company promotes transparency and the sharing of information among all employees. Hence, employees are aware of the decisions in the organization and justifications for such choices. In addition, the company offers open communication channels that allow workers to contribute to the organization while at the same time communicating with each other and with the management. The situation allows a better working environment for all human resources.

Recommendations

Costco has accomplished what many organizations in the retail sector have been unable to achieve, namely high employee satisfaction and retention. It is evidently a model organization. The measures that the organization has put in place have ensured that it is ahead of the rest. However, the company needs to concentrate its efforts more on the employee learning aspect. To support learning, the Costco needs to generate a learning-friendly setting where employees are sure of progressing while in their respective work positions.

It should persuade attachment to proficient associations, guarantee the accessibility of personal education schemes, devote its resources to professional planning, and establish mentoring schemes. It should also offer enticements for learning among other proposals. By implementing such procedures, Costco will not only have well-experienced human resources but also an exceedingly aggravated labor force that will remain in the company without any turnover plans.

For the company to remain at its level or even better, it is important to consider the following:

  • Adopting better technologies as they arise
  • Periodical review of its employee recruitment strategies
  • Regular review of employee retention strategies

The above measures will ensure that the company remains in a competitive position in its industry. Hence, it will be more prosperous.

Conclusion

The analysis has clearly shown why Costco Wholesale Corporation is a unique organization in its industry. It is evident that its employee recruitment and retention strategies have helped it to have a high talent, highly satisfied labor force, and elevated levels of employee retention. Its current recruitment and retention plans are very effective. Apart from the few recommendations, the company remains one of the best retail chains in the industry. The company’s superior position in terms of employee benefits and retention is a clear indication that a good satisfied workforce is an important factor in ensuring competitiveness in this industry.

References

Aityan K, Gupta, P. Challenges of employee loyalty in corporate America. Business and Economics Journal 2012; 3(1): 1-13.

Breaugh A. Employee recruitment: Current knowledge and important areas for future research. Human Resource Management Review 2008; 18(3): 103-118.

Codier E, Kamikawa C, Kooker M, Shoultz J. Emotional intelligence, performance, and retention in clinical staff nurses. Nursing administration quarterly 2009; 33(4): 310-316.

Deery M. Talent management, work-life balance and retention strategies. International Journal of Contemporary Hospitality Management 2008; 20(7): 792-806.

Dessler G, Chhinzer N, Cole N. Human Resources Management in Canada. New York: Pearson Education Canada; 2013.

Weberg D. Transformational leadership and staff retention: an evidence review with implications for healthcare systems. Nursing Administration Quarterly 2010; 34(3): 246-258.

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