Organizational Culture and Company Performance

Introduction

            According to Arthur & Thompson (2009), organizational culture refers to the joint behaviour of individuals who constitute the organization, and the meanings that they attach to their actions. Culture comprises of the organizational values, norms, visions, working language, symbols, habits, beliefs, and systems. Some scholars have also affirmed that it is the pattern of this joint behaviours and presumptions that are taught to new organizational member as a way of perceiving and thinking. The culture of an organization significantly affects the manner in which groups and people within the organization interact with each other, with stakeholders and with clients. Berman (2011) pointed out that the culture of an organization is a collection of shared mental presumption guiding the interpretation and action in the organizations. As such, the culture defines an appropriate behaviour for different situations. Though an organization might have its own unique culture, there seems to be a diverse, and sometimes, contradictory cultures that coexists, especially in large organizations. Brooks (2006) stated that this is because of the various characteristics of management body.

Organizational culture can be viewed to be equivalent to two things: as part of the organization, or the same as the organization. When an individual views organizational culture as variable, he or she might take on the view that culture is something possessed by the organization. Burke & Cooper (2008) cited that culture is an entity that supplements to organization as a whole. Organization culture can be modified and manipulated based on the members and the leadership of the organization. In relation to viewing organizational culture to be similar to the organization, Burke & Cooper (2008) claimed that culture, as a root metaphor, sees the company or business as its culture. From the second perspective, culture is created via communication or competing metaphors. It is obvious that organizational culture is a wide and sophisticated area that might result in either the success or failure of business. Companies that have established effiecinet organizational culture use it to their advantage in order to ensure the success of their businesses. One such company is Costco Wholesale Corporation. This paper will analyze the organizational culture of Costco Wholesale Corporation and how it contributes to the effectiveness of the organization.

Company Background

Costco Wholesale Corporation is one of the membership-only warehouse clubs providing a wide variety of merchandise (Costco-IR, 2013). It is the world’s largest warehouse club chain. It is headquartered in Issaquah Washington. With regard to retailers, the corporation is ranked as the second largest retailer in the US, and the seventh largest retailer in the world. James Sinegal and Jeffrey Brotman founded the company in September 1983, and opened the first warehouse in a Seattle Washington. Sinegal had initially commenced working in wholesale distribution by working for Sol Price at both Price Club and Fedmart. Brotman was a lawyer from an old retailing family in Seattle. He also had a working experience from retail distribution from an early age. The founder of Walmart, Sam Walton, had intentions to merge Sam’s Club with Price Club. Nevertheless, in 1993, Costco amalgamated with Price Club (Costco-IR, 2013). The business model of Costco and size were the as those of Price Club that was Sol and Robert Price founded in 1976. Therefore, amalgamated company was effectively double the size of each of its parent. PriceCostco had 206 locations immediately after the merger. This resulted in 16 billion dollars in sales every year. Executives from the two companies initially managed PriceCostco, though Sol together with his son established Price Enterprise (Costco-IR, 2013). They left Costco in the late 1994. In the previous year, when the increasing competition threatened both Costco Wholesale and Price Club, they entered into a one-sided merger after the earnings of Price declined by about 50 percent. According to Costco-IR (2013), PriceCostco concentrated heavily on global expansion by opening store in South Korea, Mexico and England. Regardless of the attempts to recover from losses, sales continued declining. The disagreement concerning the direction of the organization between the two executive leaders, James Sinegal and Robert Price, left the merger in a worse condition. The two companies officially broke up in 1994. Sinegal continued managing PriceCostco. PriceCostco’s name was changed to Costco Wholesale in 1997.

Organizational Culture

            In trying to attain its mission statement, Costco Wholesale Corporation has been deploying its code of ethics. The company deploys a divisional organizations structure. The nationwide operations are divided into three divisions that include Southwest, Northern/Midwest and Eastern. Every division has its own Executive Vice President. These divisions are further split to give way regions led by Senior Vice President (Burke & Cooper, 2008). The regions are also divided to district that are staffed numerous assistant managers and general managers, and other subordinate staff members. The organizational structure of Costco Wholesale Corporation observes four business ethics that comprise its organizational culture. The four business ethics include obeying the law, respecting employees, taking care of employees, and taking care of its members. According to Burke & Cooper (2008), there is an idea that if each of this ethics is observed, then the ultimate goal of the company of rewarding their shareholders with be attained. According to Arthur & Thompson (2009), there are direct buying rapports with the producers of public brand name merchandize. It is noteworthy to mention that the buying from alternative sources does not damage the operations of the company (Arthur & Thompson, 2009). All employees are arranged in self-managing teams in which all of them are made to feel that they are members of a helpful community.

Costco’s Code of Ethics

            Costco’s code of ethics defines its organizational culture. The first code of ethics is obeying the law (Burke & Cooper, 2008). The organizational culture of the company recognizes that the law is unquestionable. As such, the company has channelled its efforts towards conducting its business in total adherence to the laws of every community where it does business. This code of ethics requires the company to do certain things (Buhler, 2002). In compliance with this code of conduct, the organizational culture requires the company to comply with all legal requirements and other laws. The company also respects every public official and his or her position. Costco attempts to exceed the ecological standards required i each community where it conducts businesses. According to (Berman, 2011), Costco also complies with every applicable hour and wage laws, besides complying with the anti-trust laws. Outside the US, the company conducts its businesses in a way that is proper and legal as stated by the foreign policies. Under this code of ethic, the company and its staff shall not offer, give, ask for, or receive any form of kickback or bribe (Arthur & Thompson, 2009). Besides, the company’s culture requires the staff and Costco as a whole not to pay to expedite government actions or otherwise act in infringement of foreign corrupt practices act. According to Burke & Cooper (2008), the company’s organizational culture promotes fair, timely, accurate, and comprehensible disclosure in reports filed with the Securities and Exchange Commission and in other public communications by the organization.

The second code of conduct that characterizes the organizational culture of the company is taking care of employees. According to Arthur & Thompson (2009), the membership of Costco is open to owners of business, as well as persons. The members of the company are the major reason why the company experiences success. In other words, members are crucial to the success of the company. The company and its staffs understand that little can make a difference if the company fails to impress or make the members happy. According to Arthur & Thompson (2009), there are adequate shopping alternatives for members of company. In fact, it is evident that the company cannot survive if its members fail to show up. The members have shown their trust to the company by virtue of paying a fee to shop with the organization. The company executives acknowledge that the company will only succeed if it does not infringe the trust members have extended to the company (Brooks, 2006). The company as a whole understands that trust extends to each area or field of the business of the company. In order to earn the trust of members, the company must pledge to perform certain things. The first one is providing products of high quality at affordable prices in the market the company serves. According to Burke & Cooper (2008), the company also offers safe, high quality and wholesome food products. The company achieves this by necessitating that both employees and vendors are adhering to highest standards of food safety in the industry. Another thing the company does in providing members with a 100 per cent satisfaction guaranteed warranty on each service and product purchased, including the fee for membership. Arthur & Thompson (2009) also pointed out that the company assures its members that each product sold to them is genuine in both make and representation of performance. Under this code of ethic, the organization has a culture of making the shopping environment a pleasant experience. It achieves this by ensuring that members feel welcome and viewing members as guests. Costco also has an organizational culture of providing its members with products that are ecologically sensitive. According to Arthur & Thompson (2009) the customer service provided by Costco is an exceptional one and contributes significantly to their organizational culture. Giving back to the communities via employee volunteerism and employee corporate contributions to Children’s Hospitals contributes to the organizational culture of the Costco.

The third code of ethics of Costco Wholesale Corporation is taking care of employees. According to Burke & Cooper (2008), employees are the most important asset of organizations, and Costco understands the importance of employees. The company believes that it has the best employees in the warehouse club industry. As such, Costco is committed to offering the employees with rewarding challenges, as well as many opportunities, for both career and personal growth (Burke & Cooper, 2008). The company pledges its employees with: great benefits, competitive wages, a healthy and safe working environment, challenging and fun work, career opportunities, harassment-free atmosphere, open door policy, and opportunities to give back to the communities via fundraising and volunteerism. The open door policy allows the organization access to the ascending levels of management in order to resolve issues. Under this code of ethics, the company offers various career opportunities that promote and improves its organizational culture. The company is dedicated to promoting from within itself. Majority of the present team of management, such as Merchandise, Warehouse, Administrative front end and receiving managers, are from within the company. The growth plans of the company remain to be extremely aggressive. In addition, according to Berman (2011), the company’s need for qualified, experienced employees to fill management and supervisory positions remains great. For instance, the company currently has Vice Presidents and Warehouse Managers who were formerly stockers and callers, or who began in clerical positions. The company believes that its future executive officers are presently working in its warehouses, buying offices, depots, as well as Home Office (Arthur & Thompson, 2009).

The fourth code of ethics is respect for suppliers. The suppliers of Costco are its partners in business. For the company to succeed, it must prosper with its suppliers. As such, the company tends to strive to treat every supplier and his or her representative as it would expect to be treated when visiting their business premises. The company also strives to honor all commitments as part of adhering to this code of ethics. According to Burke & Cooper (2008), Costco tries hard to protect all the property of suppliers assigned to them as if it were their own. The company also tries not to accept any form of gratuities from suppliers. In addition, Costco’s organizational culture seems to foster the avoidance of apparent or actual conflicts of interest. For instance, employees cannot start a business that competes with the company. Employees or other staff cannot work for or on behalf of another employer who is competing with Costco (Arthur & Thompson, 2009). These guidelines followed in adhering to this code of ethics are exactly some popular sense rules for the conduct of the business. At the center of the company’s philosophy is the inherent understanding of everyone in the company. The management and employees alike must conduct themselves in an ethical and honest way each day. Indeed, the company does not tolerate dishonest conduct. In agreement with this, Buhler (2002) points out that doing any less would be unjust to the overwhelming majority of the employees who respect and support the company’s commitment to ethical conduct of business. The company requires employees to do what is right whenever they are in doubt when taking on a business matter that is open to varying interpretations of ethics.

The Effect of Organizational Culture on Performance

            According to Arthur & Thompson (2009), the organizational culture controls the manner in which employees interact in both external and internal environments. With regard to the fact that employees, suppliers and members have a healthy organizational culture, the company encourages all the stakeholders to stay motivated and loyal towards the management team. This motivation improves the efficiency level of employees that results in an increased productivity, improved overall efficiency, and reduced costs of operations. Given that Costco’s culture protects employees and promotes internal competition among them, employees develop their career, and individually. The employees of the company work to their best in order to perform better than their colleagues and earn appreciation. Arthur & Thompson (2009) pointed out that a healthy working environment, similar to the one fostered by the Costco’s organizational culture, encourages employees to perform.

The organizational guidelines of the company enable employees to work cordially. According to Burke & Cooper (2008), these guidelines provide employees with a sense of direction within the organization. Every employee at Costco is sure concerning his roles or responsibilities within the company. in addition, clear definition of roles and responsibilities drives employees to achieve the designated task in the desired time frame as stipulated by the guidelines.

According to Burke & Cooper (2008) organizational culture is responsible for the brand image of Costco. This is because it provides the company with a unique identity that portrays it as sensitive to both customers and employees. The organizational culture of Costco brings all the employees and stakeholders to a common work platform. No one is neglected or sidelined at the company’s workplace because employees are treated equally with respect. As a result, all stakeholders work in unison towards attaining similar goals. This also improves the overall productivity of the workforce. The organizational culture of the company fosters teamwork that is directly associated with its high performance in the extremely dynamic and harsh warehousing club industry.

Studies have also revealed that organizational culture unites individuals with various backgrounds such as families, race, religion, attitudes and education. The organizational culture of Costco seems require every employee to report to work irrespective of designations, race or religion. Such an organizational culture seems to encourage all employees to be punctual. This eventually benefits the entire organization. Healthy interaction among Costco’s employees eradicates confusions and significantly minimizes stress factors. Brooks (2006) cited that it is the organizational culture, which makes employees to be successful professionally. Additionally, there are lesser hurdles in adopting policies if a company has a strong organizational culture. The new employees will try to understand the present culture. Therefore, this makes the company a a better place to work. According to Burke & Cooper (2008), such an environment would have fewer conflicts that frequently arise because of ambiguous roles and responsibilities, and job descriptions.

Arthur & Thompson (2009) argued that organizational culture extracts what is best out the employee. The organizational culture of Costco defines each particular reporting system or chain of command. According to Arthur & Thompson (2009), this requires employees to work extremely hard. Unambiguous lines of communication results in minimal employee supervision. The organizational culture of Costco plants a habit among employees that encourages them to successfully work under pressure with minimal supervision.

The open door policy, as described in the company’s code of ethics, fosters effective communication between the management and subordinate staff (Berman, 2011). The employees of Costco feel they are part of the company. This is because of the support they usually receive during the cases of crisis or conflicts. Timely resolution of crisis is critical in facilitating the general performance of the organization. The open door policy adopted by Costco highlights that the management offices are accessible for employees. This might also imply that employees are at liberty to inquire from their superiors and discuss issues affecting performance on open forum.

Conclusion

            Costco Wholesale Corporation is one of the membership-only warehouse clubs providing a wide variety of merchandise. It is the world’s largest warehouse club chain. Organizational culture refers to the joint behaviour of individuals who constitute the organization, and the meanings that they attach to their actions. Culture comprises of the organizational values, norms, visions, working language, symbols, habits, beliefs, and systems. Some scholars have also affirmed that it is the pattern of this joint behaviours and presumptions that are taught to new organizational member as a way of perceiving and thinking. Organizational culture can be viewed to be equivalent to two things: as part of the organization, or the same as the organization. Costco’s code of ethics defines its organizational culture. The first code of ethics is obeying the law. The second code of conduct that characterizes the organizational culture of the company is taking care of employees. The members of the company are the major reason why the company experiences success. The third code of ethics of Costco Wholesale Corporation is taking care of employees. Employees are the most important asset of organizations, and Costco understands the importance of employees. The suppliers of Costco are its partners in business. For the company to succeed, it must prosper with its suppliers. The organizational culture controls the manner in which employees interact in both external and internal environments.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

References

Arthur, A., & Thompson, J. (2009). Costco Strategy Wareshousing. Retrieved May 4, 2013, from Engineering for Industry: https://cours.etsmtl.ca/gol470/Lectures/3.costco strategy wareshousing.pdf

Berman, B. (2011). Competing in tough times : business lessons from l.l. bean, trader joe’s, costco, and other world-class retailers. Upper Saddle River, New Jersey: FT Press.

Brooks, I. (2006). Organizational behavior: individuals, groups and organization. Essex: Pearson Education Limited.

Buhler, P. (2002). Human resources management. Avon, Mass: Adams Media.

Burke, R. J., & Cooper, C. L. (2008). Building more effective organizations : HR management and performance in practice. Cambridge, UK: Cambridge University Press.

Costco-IR. (2013). Company profile. Retrieved May 4, 2013, from Costco Inverstor Relations: http://phx.corporate-ir.net/phoenix.zhtml?c=83830&p=irol-homeprofile

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