Costco Case Study

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Costco Case Study

Leadership and Management II


In this paper you will read about how Costco uses effective leaders within its company to empower their employees and create a working environment that is enjoyable. This paper will aim to answer three questions: 1.) How does the flexible leadership theory apply to Costco’s operations? 2.) What is the CEO’s role in all of this? 3.) Can this work in your organization? If not, why?

After reading the Costco Case Study found in Gary Yulk’s book entitled Leadership in Organizations (7th Ed.), positive thoughts about how leadership has emerged and a feeling of confidence became eminent. Leaders really can be effective leaders and run a very productive company as shown by Jim Sinegal who is CEO of Costco. His outlook on the company is very inspiring and motivating for those reading the case study.

In looking for more information, another article by Gary Yukl came up in a search query entitled; how leaders influence organizational effectiveness, from the Leadership Quarterly magazine. In this article he really breaks down into separate sections what his flexible leadership theory is really all about. While reading this article and relating back to the Costco case study, one can see a correlation between the way Jim Sinegal manages/leads and how Yukl describes his flexible leadership theory.

In this article Gary Yukl (2008) outlines the flexible leadership theory as conceptualized primarily at the organizational level, and it includes four sets of variables: (1) organizational effectiveness, (2) performance determinants, (3) situational variables, and (4) leadership decisions and actions. He goes on in the article to explain the importance of each variable. He explains that effectiveness depends on three different primary performance determinants; (1) efficiency and process reliability, (2) human capital and (3) adaptation to the external environment (2008).

The above mentioned is very important in relation to the Costco case study. Jim Sinegal the CEO of Costco uses the set of variables above to create a company that people wanted to work for. The funny thing is he used this set of variables without even knowing he was using them. In the case study Yukl (2010) states, “He understands how important it is to have talented people working for a company, and he does many things to attract and retain them” (2010). In the set of variables one of the performance determinates is human capital. Sinegal knew this to be very important in the success of his company and it shows. Yukl (2010) states that Costco is a company that has one of the most loyal and productive workforces in the retailing industry (2010). This is because they hire people (human capital) with job skills, education and experience that can help progress the company even further.

The flexible leadership theory also states that leadership actions and decisions is important. Sinegal also seems to think this is true as he ensures that decisions involve the entire store. Jim looks to get ideas from him employees at early morning meetings before the store opens. The managers lead a conversation about what can be done better, how to better their customer service and also they encourage any ideas on how to improve the store. This all helps Jim and his managers create the best possible atmosphere they can for their employees.

In another article entitled Learn to Influence Others by Julie Britt (2010) she talks about how trust is a big factor in a leadership role. Julie Britt (2010) quotes Donna Dennis as to saying that trust arises from a leader’s credibility, his belief in those he leads and his openness. Establish expatiations for your team and show consistency in your actions (2010). This is evident with Sinegal and his practices. In the case study it states that he had to increase the amount of premium that his employees had to pay for health insurance Sinegal took it...
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