Costco Executive Team Changes

February 17th, 2010 · 4 Comments

I’m sure you have all heard the news by now (I figured I should mention it anyway): there is talk of succession planning at Costco.  Just over two weeks ago, on February 1, the Board of Directors for Costco announced that it was appointing Craig Jelinek as Chief Operating Officer and President.  Prior to this, Jelinek was the Executive Vice President in charge of merchandising; a position he had held since 2004.  Jelinek has been with Costco in a variety of management positions in warehouse operations for more than 20 years though, so he’s got plenty of Costco time under his belt.    Here’s what Jim Sinegal had to say about the announcement of Jelinek’s new position:

“We are excited about Craig’s elevation to his new role. He is a highly seasoned retail executive, with over twenty-five years’ experience at our Company and over thirty-five years’ experience in the industry. We look forward to his participation in a broader range of decisions as we move the Company forward.”

For now, Jim Sinegal will continue as CEO but there are some changes there too.  Sinegal, along with three others – Chairman of the Board Jeff Brotman, Senior Executive Vice President Dick DiCerchio, Craig Jelinek – will form the Office of the President.  In the future, the Office of the President team will work together to deal with major company issues.  And that definitely sounds like they are trying to prepare for the inevitable transition to a new CEO.

We all knew that Jim Sinegal couldn’t stick around forever as the Costco CEO, but hopefully they will handle the transition plan well enough that the new guy will be more than prepared for a seamless transition to CEO.  More importantly, I’m sure we all hope that the future change in CEO will not result in changes to all the things that make Costco so great; customer service, chief amongst them.

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4 Responses so far ↓

  1. 1 Jim Sinegal to Step Down as CEO in January | Addicted To Costco! // 2011.09.01 at 3:47 am

    […] will turn over leadership of Costco to Craig Jelinek on January 1, 2012.  In February 2010 I wrote a post to herald the coming changes to the top job at Costco, when Costco announced that Craig Jelinek would take on the role of Chief […]

  2. 2 Brian // 2010.05.08 at 1:47 am

    The ONLY thing I would like a new CEO to change is their return policy. They did tighten up on it in Feb 08 in limiting TV and computer returns to 90 days from date of purchase. The one weekness they did not change in their Consierge program is any one who purchased electronics befor the Feb 08 deadline were grandfathered in so the poor warehouse front staff on through finally to the liquidator still get to deal with televisions that are 6+ years old sometimes. Their over all return policy still allows the members that choose to, to abuse them royally in returning items that are completely worn out, broken and have become land fill fodder. Yet they still allow this abuse on the company. A few years ago a good friend of mine was loading a brand new grill into his van that he had just purchased from Home Depot when a stranger walked past him and commented, “you should have bought that at Costco, that’s what I do. I just return it at the end of summer then buy a new one from them in the spring. That way I get a new one every year and in a sense I never have to pay for it. I just borrow one every summer.” That’s a classic and that kind of thing is seen at the front end of every Costco as people return their worn out and broken stuff and get the money back. Then just walk back into the club and buy another one. Everyone pays for this as Costco will go to the vendor for credit, so the vendors anticipate this in their selling price to Costco and if Costco doesn’t get credit, they salvage it to their local liquidator to recover some money so they don’t take the whole hit. But it sitll hits the bottom line and I am pretty sure if the unspoken “freedom to abuse” clause in their return policy ends up costing you and me, the fair Costco member, right in the pocket book in and extra % here and and extra % there of added margin that Costco has to charge to compensate.

    And Costco never advertises in the traditional sense. They don’t need to, as word of mouth is free. Take this website as a perfect example. They, far, far more than Sam’s club, have been able to convince a very significant portion of the general public that it is a good thing to pay for the privilege to shop in their buildings. And their membership program is by far their most profitable portion of their business. What a great idea, “pay us to shop here or you can’t come in.” Amazing, isn’t it?

  3. 3 Robin // 2010.02.21 at 12:39 pm

    I also hope Jim Sinegal’s successors will continue the ideology that has helped made Costco a success. If you aren’t honorable with your employees, it’s a slippery slide to being dishonorable with your customers.

    I’ve never seen Costco advertise, and you are suppose to already be a member to be allowed in, so increase in membership must be word of mouth. Members need to feel they are well treated, for them to recommend other friends join.

  4. 4 Clue // 2010.02.18 at 12:35 pm

    I think that my fear all along has been that Jim Sinegal’s successors will cave to the demanding greedmeisters who want to grab profit by demanding that the company to jack prices and slash employee benefits. Their prices and their bennies are, in my opinion, the two biggest things which make Costco great. And Sinegal’s unwavering resistance to changing those things is what makes him a major role model among American CEO’s. He understands the vital importance of not trading long-term stability for short-term gain.

    In response to a question about analysts who complain about Sinegal’s position, he once replied in an interview:

    “You have to recognize — and I don’t mean this in an acrimonious sense — that the people in that business are trying to make money between now and next Thursday. We’re trying to build a company that’s going to be here 50 and 60 years from now. We owe that to the communities where we do business. We owe that to our employees, that they can count on us for security. We have 140,000 employees and their families; that’s a significant number of people who count on us. We owe it to our suppliers. Think about the people who produce products for us — you could probably multiply our family of employees by three or four times. And we owe it to our customers to continue to offer good prices. Our presence in a community makes pricing better throughout that community because when you have a tough competitor in the marketplace, prices come down.”

    Another amazing thing about Sinegal is his salary — $350,000 a year, a pittance compared to the millions most large corporate CEOs make.

    “I figured that if I was making something like 12 times more than the typical person working on the floor, that that was a fair salary,” he has repeatedly said.

    Of course, as a co-founder of the company, Sinegal owns a lot of Costco’s stock — more than $150 million worth. He’s rich, but only on paper. Will his successors follow suit in this regard as well?

    In other words, will the new regime at Costco be to Jim Sinegal what Walmart’s new regime was to Sam Walton? That is the real biggest fear. What could be worse? Let’s hope and pray that Sinegal has truly picked the right people to lead Costco into its future!

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