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Tuesday, April 13, 2004

Improve your bottom line?

TomPaine.com draws our attention to an article in Business Week that shows that "Paying your employees well is not only the right thing to do but it makes for good business."

They compare Costco to Wal-Mart's Sam's Club, the unit with which it directly competes. Costco, which has about a 20 percent unionization rate, pays workers 40 percent more than Sam's Club and gives them comparatively superior benefits (for example, health care and profit-sharing plans) to Sam's Club.

Costco, surprise, has a lower turnover rate and a far higher rate of productivity: it almost equaled Sam's Club's annual sales last year with one-third fewer employees. Only six percent of Costco's employees leave each year, compared to 21 percent at Sam's. And, by every financial measurement, the company does better. Its operating income was higher than Sam's Club, as was operating profit per hourly employees, sales per square foot and even its labor and overhead costs. Here's a quote to emblazon for corporate America:

Kind of makes you rethink the silly proposition that squeezing every cent out of your employees is the way to improve profits, doesn't it?