iStock.com/jetcityimage
Costco Apologizes in Response to Union Victory
In a tactic that surprised many, Costco’s management issued an apology to its employees rather than defend its work practices in response to one of its U.S. stores unionizing for the first time in two decades.
Last month, workers at a Costco store in Norfolk, Virginia, unionized with Teamsters in a 111-to-92 vote.
“To be honest, we’re disappointed by the result in Norfolk. We’re not disappointed in our employees; we’re disappointed in ourselves as managers and leaders,” wrote Costco CEO Craig Jelinek and President Ron Vachris in an email to employees. “The fact that a majority of Norfolk employees felt that they wanted or needed a union constitutes a failure on our part.”
The two executives added that Costco is “not anti-union, but our core value of ‘taking care of our employees’ has never been the result of any union. It’s been part of Costco’s Mission Statement and the foundation of our Employee Agreement from the very beginnings of Costco’s business.” They urged employees who have any doubts or questions about that commitment to reach out in order to continue to build Costco’s “culture of trust, respect and reliance upon each other.”
The admission of fault runs contrary to assertive moves by Apple, Amazon, Starbucks, Trader Joe’s, and REI, including accusations of threatening union supporters.
Starbucks came out squarely against labor movements under previous CEO Howard Schultz, who spoke out against what he called “the threat of unionization.” The National Labor Relations Board has issued more than 100 complaints encompassing hundreds of accusations of Starbucks’ illegal behavior, including illegally closing 23 stores to suppress organizing activity.
Apple’s managers emphasized that employees could receive fewer promotions and less flexible hours if they unionized, meanwhile circulating a video of its head of retail questioning the wisdom of putting “another organization in the middle of our relationship.”
REI has been accused of exploiting its diversity initiatives by claiming that unionization may “impact our ability to communicate and work directly with our employees,” according to CEO Eric Artz. REI is therefore “leaning on the DEI infrastructure of the company as a substitute for a union,” according to MSNBC.
In a statement, the Teamsters cited improving job safety, securing a stronger voice in the workplace, and obtaining a fairer grievance procedure as factors driving Costco’s Norfolk workers to form a union. Unionized workers, which made up about 5% of Costco’s U.S. workforce last year, ratified their first-ever collective bargaining agreement at the warehouse club in October 2022.
Costco has a reputation for being an employer with high workplace morale and low turnover because it offers above-average wages and benefits and works to promote internally. Many other chains facing unionization pressures are also often lauded for favorable pay and benefits.
A Reddit thread, “Congratulations Norfolk Virginia,” that included Costco’s internal email ran predominantly pro-union, with many respondents skeptical of Costco’s response in the employee email. One comment read, “This screams ‘Please don’t also unionize! Remember how ‘good’ we treat you!’”
However, many labor experts on a LinkedIn thread and several business articles praised the statement. Michael VanDervort from the consultancy Labor Relations Institute told Inc., “I think the letter they sent is a good example of how a double-breasted company (some union, some non-union) should be communicating with their employees. The letter states what happened, shows accountability, and expresses and upholds their values.”
Discussion Questions
Do you applaud or find fault in Costco’s admission of shortcomings in response to its Norfolk store workers’ move to unionize? What lessons, if any, should Costco’s letter offer into how retailers should respond to unionization campaigns?
Poll
Loading …BrainTrust
Gary Sankary
Retail Industry Strategy, Esri
Zach Zalowitz
Founder, Salient Commerce Consulting
I think Costco’s response is appropriate. On one hand they don’t condemn the vote and on the other hand, they acknowledge that they believe they treat their employees well. However, the first thing I noticed, is that the vote was split, almost down the middle. Almost half of the employees voted to stay non-union. Regardless, I think the response was very diplomatic and appropriate.
This is a very delicate issue, and I applaud Costco leadership for how they are responding to it. Unlike other firms mentioned that have taken a harder line about the perils of unionization, Costco addressed it simply and directly. I think the key lesson learned from the unionization efforts that we have been seeing over the last year or more is that it’s never helpful for management to take an aggressively negative tone about unionization. Doing so only fuels the unionization drive. The majority of employees don’t unionize for the sake of it, they do it because they’re sending a message to leadership that something isn’t working. By Costco taking the position that the unionization effort represents a shortcoming of management, they are acknowledging that there is an issue that needs to be resolved. I think this is the right approach, but it does need to be followed-up with a meaningful examination of why workers in this store voted to unionize.
Costco’s statement is balanced and reasonable. While they make it clear they don’t favor unionization, they nothing to alienate those who voted for it. Their letter also shows they understand the sensitivities of the issues and the concerns of their employees. All in all, I think Costco has been very constructive and this will pay dividends in the long run.
Let’s just call it “making the best of a suboptimal situation”: I believe it’s the kind of statement Miss Manners would approve of – if she’ll forgive me putting words in her mouth – and that’s good enough for me.
Transparency and authenticity go a long way, and I see both in Costco’s response. I also see nothing wrong with the (perhaps) anti-union positioning/selling done earlier in this incident.
With all of the Unionizing in the news lately, it is my belief that companies need to go on the information offensive. Look no further than Detroit, or maybe getting something done in heavily unionized NYC….Unions typically lead to uncompetitive practices. Having “a seat at the table” sounds great however in practice it rarely works out that way.
Wow, That’s the kind of self-awareness that senior executives rarely express. I’m impressed.
Taking accountability is an important step, but it has to be followed up by actually making changes. Are they going to replace the management team there? Are they going to implement new policies or training that addresses worker concerns? Are they going to do that everywhere else that may be an issue, even if there is no immediate threat of unionization at a location?
Costco’s accountability messaging was a masterclass in how to lead an organization and also double-down on core values.
I am a union supporter. I believe the power balance between employees and management in the U.S. is unfair. Look ant the increase in average wages of workers versus management in the last three decades.
Having said that, I bristle a bit when union insurrectionists take on companies that employees are actually happy with, with good pay and above-market benefits. There is a risk that the union, inadvertently, will cause companies to be less generous.
In various surveys, Costco has been one of the best companies to work for, year in and year out. Obviously, management cares about happy employees. Their statement reflects that attitude. Nice job!
This may be the best response to a union effort I’ve seen. Costco has accepted the result, and not alienated their team members in the process. Will this slow down union success at other locations? Remains to be seen. Strategically, animosity between management and workers, especially in businesses where customer service is important, doesn’t serve anyone.
This surprises me, as Costco has a reputation for being a fair, employee-focused employer. With that said, the company responded appropriately: Not discouraging, disparaging, or threatening unions, but rather transparency about the state of current affairs. It’s this transparency and willingness to receive feedback that will continue Costco’s positive reputation in the digital age.
Costco’s response shows humility and accountability for the company’s part in its strained relationship with some employees.
This refreshingly open, non-defensive approach can help Costco deepen trust by listening to workers rather than blame or fight them.
I just have a one word response. AWESOME.
Costco is one of the best retail companies to work for, period. Every visit to the store validates that statement. The company leadership did a marvelous job of mea culpa. They did not deflect and accuse or blame others with pointed fingers. That is how you address the unionization issue; you dig deep into what we can learn from this, what we can improve, how we can improve the working conditions, and involve our employees in those decisions.
My takeaway is that if some workers at a well-run and loved company like Costco are compelled to unionize, then we ought to expect a wave of unionization in retail that no one is ready for, especially if the hoped-for economic soft landing turns into a crash.
One of Costco’s goals is to be an employee-focused company. From what I read, they have done an effective job. The letter Costco wrote is diplomatic and, at the same time, heartfelt. I applaud Costco for the way they handled this and look forward to observing and learning from this great retailer.
As a former competitor of Costco for much of my career, I could not have more respect for their handling of this issue.
Unions become necessary when employers don’t have the relationship with their employees that they should. Treating people well, paying them fairly, and providing them with opportunities for growth makes a union unnecessary. Treating people as the auto companies have in recent times gets you a different outcome.
Taking responsibility is a rare occurrence in recent times by leaders in business or government. It’s refreshing to see that Costco remains the responsible and respectable leader that they have always been, and they continue to try to improve their company every day.
Given Costco’s reputation of treating its employees well, it is probably the best response it’s management can give. Especially given how close the vote is, the “we can do better” is probably not what the union organizer expected, pushing back on the usual “union busting” message that is in the standard playbook for organizing.
I was surprised at this initial union movement in Costco because a clear majority of workers I’ve spoken to over 20 years love their jobs, love the culture, the opportunities, the benefits. And so maybe the feeling of frustration is more isolated to a few areas, or Virginia?
Regardless of outcome, hats off to leadership in owning up to any lack of connection, communication and cultural misses with the Virginia team members. In the long-run, leadership needs to make sure they do all they can to get everyone on board with their values and the direction of the company. It’ll be better to have everyone going in the same direction rather than some locations as union, others not.
I would applaud Costco’s admission of shortcomings in response to the Norfolk store workers’ unionization. It reflects humility and a commitment to self-improvement, setting an example for retailers to emphasize on accountability and values. Acknowledging employee concerns fosters a culture of trust and openness; a lesson for retailers to prioritize dialogue over resistance in handling unionization, and promote healthier employer-employee relationships.