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The Self-Made Man: James Sinegal

The Costco members in TSB’s readership are going to like this week’s Self Made Men column, I think. We’re going to look at the career of former Costco CEO James Sinegal, whose concern for the well-being of his employees turned Costco into more than just a place to buy bulk-sized vats of Mott’s applesauce and surprisingly cheap prescriptions. Thanks to Sinegal, Costco has become an unlikely champion of fair wages and overall worker satisfaction. It’s like the anti-Walmart.

Sinegal was born in Pittsburgh, and grew up Catholic and working-class. His career began in the mid-1950s, when he was a bagger at FedMart. Excited by the opportunities of the retail business, which was booming in post-war America because everyone had money all of a sudden, Sinegal applied himself and worked his way up to an executive position, overseeing merchandising and operations.

From there, he bounced around between Builders Emporium, the Price Company and Sinegal/Chamberlain and Associates, working in merchandising and sales, and founded Costco with Jeff Brotman in the early 1980s.

Sinegal took a lot of Costco’s business model from Sol Price, who more or less invented the “warehouse store” concept of selling bulk items at wholesale prices to customers who pay a membership fee. Sinegal did make a few modern adjustments to that model, however; Costco was the first store of its kind to offer fresh food, pharmacies, and gas stations to its customers.

Sinegal also added a benevolence that’s rare in most industries, let alone retail. He felt that employees who were treated well would work harder and provide better service to customers, so Costco’s wages and benefits have always been above retail industry norms.

To give one example of this, about 90% of Costco’s employees, and I don’t just mean management, qualify for employee-sponsored health care. That’s well above the average in retail, and considerably better than Sam’s Club (to say nothing of stores like Walmart). Sinegal took some slack from market analysts, specifically Deutsche Bank, for this, but he rejected the idea that retailers have to screw over their employees to make money. He pointed to Costco’s extremely low turnover rate as proof that his model worked, and said that he cared more about “build[ing] a company that will still be here 50 and 60 years from now” than what investors thought about his profit margin.

Sinegal also made it a point to visit each Costco location and inspect them himself, and usually made the effort of meeting each store’s employees while he was there. Readers may recall that Levi Strauss, another one of TSB’s Self Made Men, did the same thing.

James Sinegal isn’t Costco’s CEO anymore—despite what the Internet told you, he stepped down last year—but he’s still involved with the company in other capacities, and he still has a lot to teach younger entrepreneurs about socially responsible leadership, as well as hard work. Here he is addressing the 2012 Democratic National Convention.

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About Dave Kiefaber Dave Kiefaber is a Baltimore-based writer who regularly contributes to Adfreak and the Gettysburg Times. His personal website is at www.beeohdee.blogspot.com.

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