Embracing AND like COSTCO

Written By Matthew Powell

This is note #5 of 6 doing a deeper dive into a framework we are building toward.

Let’s talk Embracing "AND"

There is a fragile balance between profits and conscience. I think the idea of embracing both usually leads to eye rolls because most companies are not world-class at both. The companies who exemplify profit maximizing are soulless OR the companies nailing the conscience aren't necessarily an enterprise to celebrate for their economics.

As a leader, I think our job is to strike that balance. Embrace the "AND." Strive for it.

Fortunately, there are companies out there who have and are doing it.

A great example is COSTCO. They nail the profit AND conscience.

They live into their Code of Ethics:

  • “Obey the law” - compliance is good.

  • "Take Care of our members" - COSTCO caps their mark-up for products to 15% because they "take care" of members. They pass along the savings because they are building trust.

  • "Take care of our employees" - COSTCO pays $26/hour while Walmart pays $19/hour. COSTCO retention is over 94%. The retention is evident that they "take care" of their employees.

  • "Respect our suppliers" - COSTCO is very sophisticated in their purchasing because they are looking to pass along savings to their members. I'm fascinated by the choice of words "respect" suppliers. Anecdotally, I’m always impressed by the offerings in the store and the shelves are always full to it appears to be a great partnership between COSTCO and suppliers.

Striking the balance of profit AND conscience requires a long-term view. Jim Senegal, CEO of COSTCO, nails it. COSTCO is continuing to build momentum and making it more difficult for competitors to catch up. COSTCO is noble and a profit machine.

Yes, they have 9-11% gross margins… but I think 27BN gross profit is pretty good.

To really make a difference in this world we got to nail the economics (Profit) AND be able to operate with nobility (Conscience).

Next week is the last of my series and I believe the most important: Core Purpose. (Why we exist?)

 

Onward,

Matt

Matthew Powell
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