Costco Connection - August 2008

A culture of wisdom

Sharon Lobel, a professor in Seattle University’s Executive Leadership program, which emphasizes ethics and social responsibility—two Costco driving principles—has seen more than 30 Costco executives graduate from the program since 1999.

“Everyone quotes [Costco CEO] Jim Sinegal,” observes Lobel, “saying ‘80 percent of management’s job is to teach, teach, teach.’ That impressed me, because ‘teach’ is important enough to repeat three times.”

When warehouse managers from all over the Costco world were polled as to what topics they wanted addressed at the annual managers meeting, teaching was key. “As a warehouse manager,” Lobel notes, “you’re responsible for growing the future of Costco.”

Professor Lobel notes that many businesses support employees in continuing education, offering tuition assistance or allowing time off for course work to enhance an employee’s skills. “But it’s another thing,” she says, “to say, ‘Teach, teach, teach.’ That’s unique!”

Passing it down

Those making the buying decisions—vice presidents (VPs), general merchandise managers (GMMs) and buyers—bear considerable responsibility for the knowledge necessary to offer quality and value to members.

Parameters may change from department to department, but as Jeff Lyons, Costco’s senior vice president of fresh foods, sums up, “it’s mandatory that buyers and assistant buyers learn what impacts the market.”

Costco’s buyers immerse themselves in their products, researching their markets, visiting trade shows and suppliers, sharing information, achieving a high level of expertise. They often have to be prognosticators, understanding market factors well enough to be able to predict where prices might be six months down the road.

“Buyers need to continually study The Wall Street Journal, the Internet, their individual industry and have a complete understanding of supply-side economics,” Jeff says.

From lecture to lab

Costco buyers are constantly on the move. Nancy Griese, VP/GMM of corporate food and sundries, recently returned from a nine-day wine-tasting trip to Argentina and Chile. “Every couple of years, we’ll go somewhere in the world,” she says. “We’ve been to Bordeaux in France, Tuscany in Italy, Australia.

“You can’t learn about different regions sitting at a table. You have to go out and experience to understand why the wines are the way they are, coming out of the Old World or the New. Once you have a better understanding, you can make better choices.

“In addition to sampling hundreds of wines, we learned how to prune vines after

harvest,” Nancy adds. “We’ve worked in the vineyards and wineries, learning firsthand how the wines are made, learning about the soil and the climate.” Buyers have climbed into tanks, shoveling out pomace (grape skins), and performed other tasks.

In addition, buyers take numerous trips to domestic regional wineries and trade shows throughout the year. Liquor buyers also study

IMAGEZOO

“Everybody quotes

Jim Sinegal saying

‘80 percent of man-

agement’s job is to

teach, teach, teach.’ ”

—Sharon Lobel

with the Wine and Spirits Education Trust.

Hands-on education extends to other disciplines as well. For instance, sundries buyers attend a “laundry college,” working with laundry manufacturers to understand the science behind what makes a better laundry detergent. They spend time in the labs and touring the production facility. All buyers make trips to suppliers, from time to time, to learn firsthand how the products are made.

Costco’s philosophy, says Judith Logan, a Costco assistant GMM, strives, ultimately, “to have buyers who are better educated in their products than the suppliers who sell them, to see through the marketing speak and offer the best value possible.”

Creating the curriculum

Industry safety and quality standards are often exceeded by Costco, and employees must be trained accordingly. Among those standards is food safety. “Costco is used as a bellwether for other companies,” says Craig Wilson, assistant vice president of food safety. “We take the most difficult standards and add to them. Our standards are much higher than federal standards.

“Employees working in any food area are required to go through Costco food safety training. Over the years we’ve developed a Costco-dedicated program, meeting and exceeding all local, state and federal regulations. It’s a very significant course, and all employees have to prove proficiency through a nationally recognized test to be truly certified.” Costco training is approved by the American National Standards Institute.

When it comes to food safety, just training employees is not enough. Craig adds, “Costco also works with suppliers to educate them on Costco requirements and ensure they meet Costco specifications.” This theme was consistently echoed by others interviewed for this story.

Costco University

To make training easier and accessible for all employees, an online learning center called Costco University was developed, featuring virtual classrooms, e-learning courses, certifications and training manuals. Each department develops its own curriculum by utilizing internal subject matter experts or outside consultants.

Eileen Brown, manager of e-learning development, and Craig Crandall, business analyst, see more online training as a trend.

“Studies show,” they explain, “that students who take traditional classroom courses are lucky to retain 30 percent of what they’re taught. But with multi-sensory e-learning courses, retention rates exceed 70 percent.”

Certifications and licensing

Some areas of Costco require external certification and licensing. Here’s a look.

Gas stations. Gas station regulations greatly vary state by state and may require certifications for factors such as air pollution control, underground storage, safety, etc. “Costco has its own certification test that every employee who works in a Costco gas station has to pass,” says Tim Hurlocker, director of gas stations. “In some places we have specific in-house training, or they’re sent to outside sources for the necessary education. Where most companies call in third parties to deal with regulated issues, Costco puts every gas station supervisor through training and certification for the state in which they work so we can have the expertise available on-site when needed.”

Hearing Centers. A nationwide shortage of licensed hearing professionals has led Costco to establish its own program to train from within. “Our goal is to have Hearing Aid Centers in every warehouse,” says Tammy Clark, Costco’s director of training for the Hearing Centers. “We can’t do that unless we have qualified personnel to staff them.”