Costco Wholesale: Growing Leaders From Within

COSTCO, a 500-warehouse membership retail chain, faced a major challenge. The strategic plan called for opening 35-40 new warehouses per year over a 5-year period. To meet this plan they needed 5,000 additional leaders and they needed to grow them quickly from within.

They knew from experience that hiring outsiders did not work and took too long (13 years on average) to develop a Warehouse Manager.

Since their existing approach and leadership programs were not up to the task, they asked Eric Herzog and his Quest Consulting colleagues to create innovative ways to develop their new leaders.

The Plan: The strategy was simple…get the very best to teach us what they do and use an OD approach to build the necessary learning and development solutions based on this! Twenty exceptional Warehouse Managers from throughout the company helped us build a “performance model” for successful leaders and then identified the key elements for developing them. The key ingredients are the Warehouse Managers, who are responsible for their development, both on-the-job and in the classroom, and held accountable for the results.

Quest and the HR Department – with the help of this select group of Warehouse Managers – then built COSTCO University. Entirely leader-led, this program uses customized cases specific to COSTCO’s business. These cases address the vital issues of operating and managing the company. This learning method creates the comfort zone for COSTCO’s senior leaders to facilitate in-depth discussions of difficult business issues and how to apply “best practices” to address them in the workplace. As a result, the new leaders develop the requisite critical thinking and interpersonal skills.

The Results Exceed their Greatest Expectations: Leader-Led Leadership Development℠ (LLLD) employs today’s senior leaders to develop tomorrow’s leaders. It enables COSTCO to capture the knowledge and skills of exemplary leaders and use today’s leaders as learning facilitators.

As a result, Leader-Led Leadership Development℠ assures each new COSTCO warehouse is opened and managed just like the most successful of the chain’s existing warehouses. The success of LLLD directly impacts COSTCO’s financial bottom line. The University has enabled them to promote from within during the past six years of rapid growth in the U.S. and abroad and open each new warehouse successfully.

COSTCO’s leaders are creating a learning organization by extending the learning to all levels of management and to all areas of the business.