Employees first
Customers second, investors third. Seriously, it can work!
It’s one of the biggest modern debates in business. And yet it took a highly successful, mostly retired 89-year-old billionaire founder who first got his in 1955 to come up with one of the pithiest, smartest, most memorable takes you’ll ever hear.
That would be James Sinegal, co-founder and former CEO of Costco, who sat down for an interview and needed about 22 seconds to explain one of the keys to success that frankly, a lot of entrepreneurs know but wind up forgetting.
Here’s the quote upfront, and then we’ll discuss:
You can’t say people are our most important product and hang signs all over the place that say people are our most important product and then treat them like shit.
Excuse me.
If you don’t mean it, it’s reflected very quickly.
The same thing is true about the quality of the products you’re selling. Your customers or your suppliers are going to see that you don’t really mean it when you let them down on the quality.
I love everything about this sentiment. Up front so I don’t forget, let’s include the fact that Sinegal caught himself using a curse word and then apologized.
But in this interview with The Wall Street Journal, Sinegal jumped right to the heart of something that almost every big business seems to be struggling with publicly right now — maybe more than usual.
For whose benefit does a business exist?
Is it purely for the investors who put up the capital to keep it going?
Or does it (also?) exist for the benefit of other key stakeholders: employees, customers — and maybe others like suppliers, your community, or even your country at large, and more?
People have debated this for a long time. In fact, in a capitalist democracy or republic, it’s one of the basic societal questions we’re called to answer.
But I think the current iteration started around 2019, when the Business Roundtable, which is an organization of nearly 200 CEOs of some of the biggest American companies, changed their formal statement on the purpose of a corporation.
Old version: “In the Business Roundtable’s view, the paramount duty of management and of boards of directors is to the corporation’s stockholders; the interests of other stakeholders are relevant as a derivative of the duty to stockholders.”
New version: “While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders.”
See the difference? Once upon a time, it was “stockholders” (or investors; basically the same thing). Now, it’s “all of our stakeholders.”
Sinegal was CEO of Costco from 1983 until his retirement in 2011, and he was known for being a very hands-on boss whose philosophy was basically that if you treated your employees very well, your employees would treat customers well.
Then, customers would have a great experience, frequent your store, tell their friends, and buy your products.
And all of that would please your investors.
Sinegal was talking about the development and success of Costco’s private label brand, Kirkland Signature, when all of this came up.
It’s what led him to go into the notion of maintaining quality, and it’s also one of Costco’s big advantages, according to Sinegal’s estimation.
“We do everything. I mean, my shoes are Kirkland Signature, my socks are Kirkland, my underwear, my shirt, my glasses, Kirkland Signature,” he said, adding: “It’s played a very important role. Is it the most significant thing? I’d certainly say it’s up there with the top three or four.”
Treat employees the way they'd want to be treated, give your customers quality that’s above and beyond what they expect.
It's an investment that just might pay off.
7 other things worth knowing today
How's this for a gift -- perhaps the most valuable one ever extended to the United States from a foreign government; The Trump administration is preparing to accept a $400 million super luxury Boeing 747-8 jumbo jet from the royal family of Qatar -- to be used as Air Force One until shortly before President Trump leaves office, at which time it will be transferred to Trump's presidential library foundation. Trump toured the plane, which is so opulently configured it is known as "a flying palace," in February. (ABC News)
Pope Leo XIV laid out the vision of his papacy Saturday, identifying artificial intelligence as one of the most critical matters facing humanity and vowing to continue with some of the core priorities of Pope Francis. But in a sign he was making the papacy very much his own, Leo made his first outing since his election, traveling to a sanctuary south of Rome that is dedicated to the Madonna and is of particular significance to his Augustinian order and his namesake, Pope Leo XIII. (AP)
In a bid for survival, businesses are labeling tariff costs on receipts to explain price hikes and retain customer trust: "I have no problem labeling where this tax is coming from on my products. People need to know that so I have a fighting chance on my end." (Business Insider)
Microsoft is working on adding a new Teams feature that will prevent users from capturing screenshots of sensitive information shared during meetings. Those joining from unsupported platforms will be automatically placed in audio-only mode to protect shared content. The company plans to start rolling out this new Teams feature to Android, desktop, iOS, and web users worldwide in July 2025. (Bleeping Computer)
The Southern accent, which has many variations, is fading in some areas of the South as people migrate to the region from other parts of the U.S. and around the world, according to a series of research papers published in December. (AP)
Why ‘k’ is the most hated text message, according to science. A study reveals that the one-letter reply “K” is more damaging than being ‘left on read.’ (Fast Company)
Americans still dream about factory jobs. Can they be brought back? (NPR)
Thanks for reading. Photo by Quino Al on Unsplash. I wrote about some of this before at Inc.com. See you in the comments.
Re: first item in 7 Other Things about Trump accepting a $400m luxury Boeing 747-8 jumbo jet. This comes at a time when Hamas was told to give Trump a gift (last remaining American Israeli hostage) in order to get a bigger gift back. Return the hostage without any of conditions insisted upon by Netanyahu. When the president is transactional it leaves open who pays the ultimate price and whether allies can trust him. What will be the true price of the luxury jet?
ALL IN: How Great Leaders Build Unstoppable Teams by Mike Michalowicz is an under-the-radar book that breaks down the winning model for being successful with “Employees First.”
Hint: The real HR Magic comes in making great 5-Star employee hires and not settling for “just maybe okay” for the role.
If you want to be a 5-Star Company delivering 5-Star Service, it will never happen with 3-Star Employees who were never the right fit for the role to begin with.
5-Star Employee Hires ramp up quickly to meet their key responsibilities and hit their success metrics. (Having 90-Day Probationary Periods is a gigantic waste of time and payroll dollars….when you go ALL IN on your hiring you hire 5-Star Fits with a 90%+ retention rate of greater than 18 months.)