Business Books: Is your company smart?

At first glance, some readers may find it hard to believe Dallas Baptist University business professor Jim Underwood’s bold assertion that Costco Wholesale ”consistently gets better results” than its much larger competitor, Sam’s Wholesale Club.

By Cecil Johnson
Knight Ridder News Service

http://www.sltrib.com/business/ci_2424842

In his fascinating new book, What’s Your Corporate IQ? Underwood at first doesn’t even support the claim. But Underwood, who also wrote the best-selling More Than a Pink Cadillac, an in-depth look at Mary Kay, provides the whys and wherefores of that remark later in his conventional-wisdom-challenging book.

Calling Costco ”one of the 10 smartest companies in America,” Underwood cites an article, ”The Only Company Wal-Mart Fears,” in the Nov. 24, 2003, edition of Fortune that notes that Sam’s Club has 71 percent more locations than Costco, yet as of Aug. 31, 2003, 5 percent fewer sales and that the average Costco warehouse generates almost double the revenue of a Sam’s warehouse.

Underwood then lets Richard Galanti, chief financial officer of Costco, explain how the company achieves its stellar results: ”We take what some might think is a pretty radical approach. Corporate America has really developed a downsized, efficiency, and cost-cutting mind-set, particularly when it comes to controlling labor and benefits expenses. Some companies control these expenses by figuring out how little they must pay their employees and how much of the health care cost they can pass on to their employees. While we agree with the idea of cost efficiency, we believe the rest of that stuff is mostly about sacrificing the well-being of your employees in order to increase profits; we don’t buy that. We believe you can do both.”

Underwood writes that the nine other companies on his list of the 10 ”smartest companies” in America hold similar beliefs about the importance of taking care of employees.

”They have little interest in sacrificing the well-being of their employees for the sake of profit. In fact, they all believe that profits will be increased if a company goes out of its way to treat every member of the team with the ultimate in respect and care, including compensation,” he writes.

The other companies on his ”smartest” list: Dell Computer; Luxottica Retail, parent of Sunglass Hut, Watch Station and Lenscrafters Associates; Southwest Airlines; Agilent Technologies; Mary Kay; Microsoft; Kingston Technology; Fidelity Investments; and A.G. Edwards.