Jim Sinegal Retiring as Costco CEO
It’s fair to say that many of Jim Sinegal’s CEO counterparts in retailing don’t fully get him, although most would be quite happy to achieve anywhere near the type of results he has at Costco.
Mr. Sinegal’s Costco has been criticized over the years for caring more about its employees and customers than shareholders. The company pays wages substantially higher than many big box competitors and extends health insurance coverage to both part- and full-time workers.
In a 2008 interview with Fast Company, Mr. Sinegal said, "You have to recognize — and I don’t mean this in an acrimonious sense — that the people in that business are trying to make money between now and next Thursday. We’re trying to build a company that’s going to be here 50 and 60 years from now."
Now comes word that the man synonymous with Costco has decided to retire on January 1. Mr. Sinegal, who will stay on as a member of the company’s board and as an advisor, will be succeeded by Costco president and chief operating officer Craig Jelinek.
"It’ll be an upgrade," Mr. Sinegal told The Seattle Times. "He is well-liked and smart and energetic and all the things that I used to be."
"Not a lot’s going to change," Mr. Jelinek told the paper. "We’re both good with people, and we have the same values in terms of running the business."
Brian Sozzi, an analyst for Wall Street Strategies, told Bloomberg News that Mr. Jelinek "has seriously big, big shoes to fill. … This (Sinegal) is a man who pioneered how we consume goods and services on a daily basis, bringing an entirely new retail model to life."
- Costco Wholesale Corporation Reports August Sales Results; And Planned Management Change – Costco Wholesale Corporation/MarketWire
- Costco’s colorful CEO Jim Sinegal to retire – The Seattle Times
- Costco’s Jelinek to Take Over as CEO From Sinegal in January – Bloomberg News/San Francisco Chronicle
- CEO Interview: Costco’s Jim Sinegal – Fast Company
Discussion Questions
Discussion Questions: Why aren’t there more Jim Sinegals in retailing? What do you think were his greatest accomplishments at Costco?
To me, Mr. Sinegal’s greatest accomplishments relate to what is touched on in this piece: his ability to focus on the long term, his willingness to stare down Wall Street analysts looking for short term bumps in stock price at the cost of long term business health and his ability to ignore off-strategy opportunities (e.g. don’t get into data modeling and loyalty programs because it fights with the Costco pricing and costing model). Few people have the confidence to believe in their vision such that they can remain focused on it in the face of naysayers and armchair quarterbacks. His focus, dedication and faith are legendary for a reason–I wish him well.
I think the first few sentences sum it up. Favoring your workforce (which is the division that actually can affect the bottom line) is usually unpopular with shareholders. Mix in the fact that Costco is such a good performer, and shareholders must be fuming with all those points going to things like wages and healthcare.
Two factors stand out. First is the creation and execution of the Treasure Hunt merchandising. Many consumers are addicted to this, making them very loyal consumers. Second is his commitment to the employees. Their employee turnover is low. Wages may be a little higher, but their productivity is even higher still.
You ask, “Why aren’t there more (CEOs like) Jim Sinegal in retailing?” And I ask, “Why aren’t there more like him in all other aspects of life?” People cannot be good leaders and remain good leaders unless good is expected of them … and that begins with the person themselves. Sinegal expects much good of himself and the business he has led.
Today’s news features many other CEOs who are making millions more personally than their companies pay in corporate income tax. That’s doesn’t ring “Jim Singegal.” Then there are many of our elected folks in Washington.
Sinegal’s two greatest accomplishments at Costco, in my evaluation, were 1) he was true to his associates and assisting their quality of life, and 2) he showed Sam Walton how to successfully operate club stores.
Jim Sinegal did more than anyone since Dave Nichols to show US retailers what building a proprietary brand (versus a private label) is all about. At least in this writer’s opinion, Kirkland Signature has replaced Nichols’ beloved President’s Choice as the premier proprietary brand in North America.
Maybe we can get him to run for President???
The article addresses Mr. Sinegal’s spotlight accomplishments well. His commitment to his customers and employees will long be remembered.
There were certainly others who might be remembered in the same light. Possibly the elder Mr. Stein, the founder of Stein Mart could be looked at with the same creditable qualities. The founders of The Container Store certainly can apply for membership in this select group.
Sinegal showed that it is possible to treat employees well, focus on the long-term, and still be growth-oriented and profitable. That took enormous compassion, stamina and courage. These qualities, to the degree that Sinegal embodied them, are extremely rare. Generally, people with these qualities are called naive or are shunted aside. It’s wonderful that such a class act of a human being was given the opportunity to show what is possible.
Jim Sinegal is smart, people focused, and puts his consumers and employees first. This has proven to be a winning combination that is rare in today’s environment. As one of the largest retailers in the world, everyone should stop and take notice anytime Jim does something. Congratulations Jim!
I was hoping this story would end with Mr. S mooning Wall Street types on his way out of a press conference, but it seems we don’t always get what we want. This story, of course calls to mind the OTHER recently departed visionary/CEO and while the reasons for the departure are — I hope — completely different, the questions raised are the same: why aren’t there more of them, and can the company do as well without them? Jobs seems to walk on water, so perhaps Sinegal is the more useful example: humility without spinelessness — I think it’s called “independence” — and the ability to execute a simple strategy very well. I wish him — and Costco — well in their future endeavors.
Caring about your customers and your associates is not mutually exclusive of caring for your shareholders. In fact, and in large part, it is caring about your shareholders.
It sure seems to me that wanting your stakeholders to be a part of a long-term continuing concern is equally as valuable (and in conjunction with) receiving a fair return on your investment. I am quite sure that those that held General Motors stock hoped for the same thing.
Mr. Sinegal’s accomplishments are more significant than he’ll likely ever being given credit for in the end. One thing, already mentioned is that he’s shown the Walmart folks how to be successful in running a warehouse/club store.
In addition to to that, he’s proven that a value proposition is far more important to success than just price alone. He’s proven that the entire experience that is Costco matters more — much more.
Costco isn’t simply a place to run in, purchase staples at a warehouse price and run out. It is that, but its also a place to browse, shop, experience, and enjoy. It is not the lowest price store. It’s not promoted as the lowest price retailer. The thing is, you think it is a very good priced retailer and appreciate the experience. Thus, the price factor, while important is not the most important factor.
It is the the only store that I have ever gone into that I haven’t been able to walk out without making a purchase. That in itself says a lot! Not only am I not able to walk out with out a purchase, but I am unable to walk out without a larger purchase than I had planned.
One item already mentioned is the Kirkland brand. I have come to prefer their dress shirts at 1/3 the cost of a comparable shirt at retailers like JoS. A. Bank and a higher quality. Enough can’t be said about their brand, its quality, and its success.
Perhaps the most significant accomplishment is to be producing 25% of the sales volume of Walmart out of only 10% of the number of locations as Walmart. I consider that astonishing.