Leadership By Example

Good Leadership is not Guaranteed by Business Ownership

By David Cox, SPHR, SHRM-SCP | November 10, 2016

Jim Sinegal is the CEO of Costco and he believes in leadership by example. Over the past five years, Costco’s stock has doubled and revenues continue to grow at an impressive rate.

His name tag plainly says “Jim,” he answers his own phone, and his unassuming office at the company headquarters doesn’t even have walls.

While other CEO’s are spending tens of thousands of dollars just decorating their offices, Sinegal pays himself an annual salary of $350,000. Most CEOs of companies the size of Costco are paid in the millions. So how did he come up with his salary amount? Sinegal asserts, “I shouldn’t be paid more than 12 people working on the floor.” His simple contract is only a page long, and even includes a section that outlines how he can be terminated for not doing his work.

Costco’s employee turnover rate is among the lowest in the retail industry, over five times less than rival Wal-Mart. In an age where CEOs are paid in the millions and would never be seen in the “trenches,” Jim Sinegal is unique among his peers and his employees love him for it.

Owning a business does not guarantee that leadership based on your habits, familiar routines or personal preferences will be effective. We need to move to a more objective standard where we identify what good leadership looks like and then lead by example in the workplace. Perhaps we could evaluate leadership based on a scale that considers things such as quality of hires, employee retention, individual improvement, and overall business performance.

We’re often hesitant to define good leadership based on objective standards. Likewise, we resist identifying poor leadership. Perhaps this is because we might discover that poor leadership is too prevalent in our own organization. It’s like admitting that you haven’t been doing your best job. We need to set clear expectations for how we want people in our businesses and organizations to lead, and then commit to model these expectations ourselves.

Even the most successful businesses face numerous challenges, but there are employers in every industry, both large and small, that thrive during the tough times because of good leadership practices. Good leadership enables businesses to manage difficult circumstances and perform far better over time than many of their competitors.

When employers take the time to define good leadership and then lead by example, they can have greater confidence that employees will mirror an effective leadership style as the business continues to grow.

Developing and utilizing a specific plan for leadership evaluation and training will help make good businesses even better.

David Cox

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