As employees are often referred to as the greatest asset of a business, human resources management is key to a company’s success. Every company employs a different strategy in terms of allocating its spending, and in Costco’s case, a lot of money goes into wages.

My fellow classmate, Carol has discussed the benefits that Costco reaped from such practice in her blog. In summary, by paying its employees almost twice the market rate, Costco created “true engagement among [its] employees,” which led to “increased productivity, better morale, and lower turnover rates.” She also pointed out the adverse effects of high turnover rates, stating that Costco has “established an incentive program where the return on investment has been worthwhile.”

I strongly agree with her on all of her points, except for the last one, in which she said that “companies wanting to improve their bottom line should look to incorporate sections from Costco’s business model.” There is no single formula for successful HR practices, and I believe that HR strategies are highly industry, or even firm, dependent. Paying high wages works well for Costco partially because they attract high-skilled workers who, of course, would rather work for a better pay. But what if the industry standard wage is not as clear as the one in retailing industry? Even within the same industry, different firms employs different positioning, marketing, and financial strategies. Not necessarily following Costco’s path, I think what the HR department needs to do is to find a strategy that works best with other practices that the firm is carrying out, whether it be increasing wages and benefits or spending more on training, etc.

Image taken from here.

Works Cited

Campeau, Melissa. “‘A Stick and a Carrot at the Same Time’: Why Costco Pays Twice the Market Rate.”Financial Post Business A Stick and a Carrot at the Same Time Why Costco Pays Twice the Marketrate Comments. 30 Oct. 2014. Web. 31 Oct. 2014. <http://business.financialpost.com/2014/10/30/a-stick-and-a-carrot-at-the-same-time-why-costco-pays-twice-the-market-rate/>.

Lee, Carolyn. “Carolyn Lee’s Blog.” Carolyn Lee’s Blog. Web. 12 Nov. 2014. <https://blogs.ubc.ca/carolynlee/>.

Slovacek, Randy. “Costco CEO Craig Jelinek on Paying a Living Wage.” The Randy Report. 11 July 2013. Web. 31 Oct. 2014. <http://randyreport.blogspot.ca/2013/07/costco-ceo-craig-jelinek-on-paying.html>.