The Law of Addition

Lesson 5 from The 21 Irrefutable Laws of Leadership

John C. Maxwell

• Publisher: HarperCollins Leadership
• Year: 2012
• eBook ISBN: 9781400275649
• Topic: Theology & Religion
• Subtopic: Operations

What kind of a Fortune 500 CEO works on a folding table, answers his own phone, visits hourly employees as often as possible, and is criticized by Wall Street for being too good to his employees? The kind of leader who understands the Law of Addition.

THE LAW OF ADDITION

Leaders Add Value by Serving Others

In a world where many political leaders enjoy their power and prestige and where CEOs of large corporations make astronomical incomes, work and live in luxury, and appear to be most concerned with what’s in it for them, Jim Sinegal is an oddity.

Sinegal is the cofounder and CEO of Costco, the fourth largest retailer in the United States and the ninth largest in the world. He doesn’t seem much interested in perks. He works in an unremarkable office comprised primarily of folding tables and chairs. If he invites someone to meet him at the corporate offices, he goes down to the lobby to meet his guest. He answers his own phone. And he takes a salary of only $350,000 a year, which puts him in the bottom 10 percent of CEOs of large corporations.

Sinegal’s path to corporate leadership wasn’t typical either. He didn’t attend an Ivy League school. He isn’t a lawyer or a CPA. As a teenager, he thought of becoming a doctor, but his high school grades were less than stellar. So he went off to community college and earned an associate’s degree. While he was attending San Diego State College (now University), he helped a friend unload mattresses at a new local retail store called Fed-Mart. That one day of work turned into a regular job. When he received a promotion, he discontinued his studies. He had found his career. In time, he had also found a mentor, Sol Price, Fed-Mart’s chairman. Under Price’s guidance, Sinegal rose to the post of executive vice president for merchandising. Sinegal later helped Price found Price Club and then went on to cofound Costco in 1983 with Jeffrey H. Brotman. The company’s growth was rapid. Costco purchased and merged with Price Club ten years later.

ADDING PROFITS BY ADDING VALUE

Retail experts give a lot of attention to Sinegal’s formula for success: offer a limited number of items, rely on high volume sales, keep costs as low as possible, and don’t spend money on advertising. But there is something that separates him from the competitors who employ similar strategies: the way he treats his employees. He believes in paying his employees well and offering them good benefit packages. Costco employees are paid an aver-age of 42 percent more than the company’s chief rival. And Costco employees pay a fraction of the national average for health care. Sinegal believes that if you pay people well, “You get good people and good productivity.”¹ You also get employee loyalty. Costco has by far the lowest employee turnover rate in all of retailing.

But Sinegal’s leadership style of adding value doesn’t end with employee compensation. He goes out of his way to show Costco workers that he cares about them. He maintains an open-door policy with everyone. He wears an employee name tag, is on a first-name basis with everyone, and makes sure to visit every single Costco store at least once a year.

“No manager and no staff in any business feels very good if the boss is not interested enough to come and see them,” says Sinegal. And when he shows up, his people are always glad to seem him. “The employees know that I want to say hello to them, because I like them.”²

Sinegal once flew from Texas ...

Table of contents

• COVER PAGE
• TITLE PAGE
• COPYRIGHT
• DEDICATION
• CONTENTS
• ACKNOWLEDGMENTS
• THE LAW OF ADDITION
• NOTES
• ABOUT THE AUTHOR