Costco Case Study

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Case Study on Leadership Strategies

by Lee Del Valle

Post University

Leadership & Management II
Professor Andrew E. Honeycutt
Unit 5 Writing Assignment 2
February 10, 2012

Abstract

Flexible Leadership (FLT) is a theory that falls under the umbrella of strategic leadership, emphasizing the need for leaders to be flexible in their actions when influencing of the key determinants of financial performance. Flexible leaders are those who build on creating a cohesive environment through self-awareness by creating a set of guiding principles applied to their daily life as a leader (Kaiser 2008). Key themes in implementing FLT include the need to find appropriate balance for tradeoffs when adapting to changing situations in the company and finding value in the input of others along the way.(Reference missing)

FLT practitioners are ethical leaders who are guided by a strong core ideology (Yukl & Lepsinger 2002). This paper serves to define Flexible Leadership Theory, it’s main components and how it applies to Costco’ operations. Also provided is an overview of the role Costco’s CEO played in implementing FLT within the organization. Further provided is an analysis regarding the possibility of implementing FLT at Horizons’ and whether this theory is aplicable for usage by this company.

Flexible leadership theory (FLT) is based on core ideas taken from a variety of disciplines which include; leadership, human resource management, and strategic management. FLT has also encompasses ideology found prevalent in organization theory and organizational change management. Falling under the umbrella of strategic leadership; FLT emphasizes the need for influence over key determinants of financial performance such as efficiency, innovation, adaptation, and the need to properly manage human capital (Yukl & Lepsinger, 2004). Leaders who effectively employ FLT are able to influence their organization by improving areas such as task relations, and initiate changes through their behavior. Leaders who embark on FLT implementation find that it helps to guide their managerial and leadership decisions relating to company strategy. This in turn helps root the flexible leader’s style throughout the organizational structure from the top down ensuring its success. Flexible leaders develop sensitivity for behaviors and programs that are mutually compatible and likely to create synergy rather than having adverse side effects (Yukl & Lepsinger, 2005).

Costco CEO Jim Sinegal is a practitioner of FLT who answers his own phone, sends his own faxes, and speaks directly with customers/employees (Chu, 2008). Sinegal’s down to earth leadership style places the needs of employees/customers first, and his own self-interests last. As CEO, he oversees the operation of 500 stores, in 37 states within 8 countries. Costco’s major competitors consist of Sam’s Club and BJ’s, which both function using a different operational model (Yukl, 2010). Although Costco stores do not offer as extensive of a variety of products as their competitors, they are known to be of higher quality. Their customer base is known to travel twice the distance, as compared to their competitors, in order to obtain the luxury goods they offer at unmatched prices. As a flexible leader Costco provides better benefits to their employees including pay, health insurance benefits and a retirement program, that is better as compared to their competitors and more costly. As a result their turnover rate is over 7 times lower than the industry average. Despite these additional costs, the company remains profitable despite criticism from industry analysts.

Sinegal is known for his high level of motivation and encourages feedback from both customers and employees. He seeks input on ways to improve the stores he manages, as well as product offerings. He actively seeks input by...
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