The Organizational Environment and Productivity

Motivation & Leadership

The objective of this work is to review the founder and CEO of Costco Wholesalers, whose name is Jeffrey H. Brotman. Costco is a Fortune 500 company. This work will review how Costco is run and will research different theories of leadership and whether those theories are actually good leadership theories.

The leadership of Sam Watson isn’t the top leadership in every business. Costco leads Wal-Mart in the wholesalers business according to AOL Money and Finance online. Stated is that: “The company operates about 470 membership warehouse stores serving 45 million cardholders in 37 U.S. states and Puerto Rico, Canada, Japan, Mexico, South Korea, Taiwan, and the UK, primarily under the Costco Wholesale name. Stores offer discount prices on, on average, 4,000 products (many in bulk packaging), ranging from alcoholic beverages and appliances to fresh food, pharmaceuticals, and tires. Certain club memberships also offer products and services such as car and home insurance, mortgage and real estate services, and travel packages.” Brotman is a philanthropic chair of UW Medicine’s campaign (and president of the UW Regents) who states that his time is spent thus because “UW Medicine not only saves lives…but it is also good business, with an economic impact to our state of more than $3 billion per year.” (AOL Money & Finance, 2005)

Brotman was both founder and Chairman of the Board of Costco “from its inception until October 1993. In October 1993 Mr. Brotman became the Vice Chairman of the Company, and has served as a Chairman since December, 1994. (Costco Wholesale Investor Relations, 2006) It is related in one article that: “Costco employs about 103,000 full- and part-time employees, and for fiscal year 2004, ended in August, the company’s store sales rose 13% to $47.1 billion. Costco’s closest competitor, Wal-Mart-owned Sam’s Club, has two hundred more stores than Costco, yet routinely earns more than $1 billion less in revenues each year.

As of 2005, Sinegal and Brotman act as Chief Executive Officer and President and Chairman, respectively.” (Costco Wikipedia, 2006) Related as well is the fact that: “The success of Costco is a result of its focus on selling products at low prices, often at very high volume. These goods are usually bulk-packaged and sold primarily to large families, small businesses and small business owners’ families. As a warehouse club, Costco is open to only members and their guests. Memberships must be purchased in advance; the cheapest membership costs $45 for one year.” (Ibid)

Costco does not rotate products often so customers know what to expect and as well: “Since Costco has such high sales volume and rapid inventory turnover it is able to receive cash from the sale of a large portion of its inventory before it has to pay back its suppliers. This use of float is a major advantage in its own right; Costco is essentially borrowing money from their suppliers with no interest.” (Ibid) Additionally stated is that: “Costco is noted for providing full benefits and comparatively generous compensation to its employees. For instance, a cashier with four years of experience can earn more than $40,000 with full benefits, including medical, dental, Rx, disability, and life, and is even entitled to participate in a 401k program and purchase stock options.” (Ibid)

Jeffery Brotman, CEO of Costco believes that: “Our priorities demand that we continue to delight our members every day. We want the shopping experience to be the best in terms of quality, value and service — and we want it to be fun.” (Costco -5th Largest Retailer in U.S. And 11th Largest in the World, 2006)

Costco utilizes the Internet and e-commerce in building the business and has 23.4 million member households. Stated in the work entitled: “Costco -5th Largest Retailer in U.S. And 11th Largest in the World” is that: “Costco understands the service strategy. They have mastered e-Service. This is speed, technology and price built around service. They are frugal, constantly looking for ways to cut costs and pass the savings on to the customer. They are exceptionally good at technology. Keep in mind that technology reduces costs and increases speed if done right.


According to Douglas McGregor in the work entitled: “Employee Motivation, the Organizational Environment and Productivity” the assumptions of ‘Theory X’ are that the “average human being has an inherent dislike of work and will avoid it if he can: (1) Because of their dislike for work, most people must be controlled and threatened before they will work hard enough; (2) The average human prefers to be directed, dislikes responsibility, is unambiguous, and desires security above everything; (3) These assumptions lie behind most organizational principles today, and give rise both to “tough” management with punishments and tight controls, and “soft” management which aims at harmony at work; (4) Both these are “wrong” because man needs more than financial rewards at work, he also needs some deeper higher order motivation – the opportunity to fulfill himself; (5) Theory X managers do not give their staff this opportunity so that the employees behave in the expected fashion.

The assumptions of ‘Theory Y’ are stated by McGregor to be: (1) The expenditure of physical and mental effort in work is as natural as play or rest; (2) Control and punishment are not the only ways to make people work, man will direct himself if he is committed to the aims of the organization; (3) If a job is satisfying, then the result will be commitment to the organization; (4) The average man learns, under proper conditions, not only to accept but to seek responsibility; (5) Imagination, creativity, and ingenuity can be used to solve work problems by a large number of employees; (6) Under the conditions of modern industrial life, the intellectual

In the work entitled “The Human Side of Enterprise” it is shown by McGregor how promotion and salary management is affected by Theory Y as well as in developing managers who are effective. Exercising authority while part of the job of the manager as well McGregor holds that obtaining the commitment of employees to the objectives set by the company is more effective.


In the work of Gawel it is stated that:

Herzberg (1959) constructed a two-dimensional paradigm of factors affecting people’s attitudes about work conditions, and salary are hygiene factors rather than motivators. According to the theory, the absence of hygiene factors can create job dissatisfaction, but their presence does not motivate or create satisfaction. In contrast, he determined from the data that the motivators were elements that enriched a person’s job; he found five factors in particular that were strong determiners of job satisfaction: achievement, recognition, the work itself, responsibility, and advancement. These motivators (satisfiers) were associated with long-term positive effects in job performance while the hygiene factors (dissatisfiers) consistently produced only short-term changes in job attitudes and performance, which quickly fell back to its previous level. In summary, satisfiers describe a person’s relationship with what she or he does, many related to the tasks being performed. Dissatisfiers, on the other hand, have to do with a person’ relationship to the context or environment in which she or he performs the job. The satisfiers relate to what a person does while the dissatisfiers relate to the situation in which the person does what he or she does.” (1999)


The work of Gawel entitled: “Herzberg’s Theory of Motivation and Maslow’s Hierarchy of Needs ” states that Maslow introduced his theory about “how people satisfy various personal needs in the context of their work.” He proposed that “based on his observation…there is a general pattern of needs recognition and satisfaction that people follow in generally the same sequence. He also theorized that a person could not recognize or pursue the next higher need in the hierarchy until her or his currently recognized need was substantially or completely satisfied, a concept called prepotency.” (1999)


The theory of Hershey and Blanchard was one called “Situation Theory.” The following four were held to be truths within this theoretical framework related to leadership: (1) high task, low relationship telling is every leader’s choice; (2) high task, high relationship requires selling; (3) low task, high relationship calls for participation; (4) low task and low relationship needs leader to be delegating (Sometimes the Situation Demands Your Leadership, nd)


In the transformational leadership style the leader develops ‘higher-order leadership traits as they mature.” (Homig & MacGregor, nd) At stage 2 the leadership is “explicityly transactional” while stage 3 leaders are transactional but yet “exhibit some of the qualities of transformation relationship with their follower…” using “relational ties to motivate followers to believe work is more than the performance of certain duties for certain concrete payoffs.” (Ibid) Stage 4 leaders do not have.”..competing loyalties” (Ibid)

Bernard Bass expresses four interrelated components which are a requirement in transformational leadership. Those four components are: (1) Idealized influence; (2) Inspirational motivation; (3) intellectual stimulation; (4) Individual consideration.” (Ibid)

Transformation leadership is ‘authentic’ leadership which “builds genuine trust between leaders and followers.” Furthermore transformational leadership “concentrates on terminal values such as integrity and fairness. They see the responsibility for their organization’s development and impact on society.” (Ibid)

Homig and MacGregor in the work entitled:” Transformational Leadership” state that the following ten ‘tenets’ are inclusive in the transformational leader’s style of leading:

1. Leaders have high moral and ethical values.

2. Leaders express genuine interest in followers.

3. Leaders have an inspirational vision.

4. Genuine trust exists between leaders and led.

5. Followers share leader’s values and vision.

6. Leaders and followers perform beyond self-interest.

7. Participatory decision-making is the rule.

8. Innovative thinking and action is expected.

9. Motivation is to do the right thing.

10. Leaders mentor. (nd)


While all of these theories were valid at some time or in relation to some factor of leadership, transformation leadership is the only style of leadership that leads by example and leads from a genuine base of trust and a shared vision. The transformational leader has the capacity to draw workers out into performance that reaches beyond themselves and in which innovation is welcome and the leader motivates the workers to do what is right. The leader that is a transformational leader is a mentor and allows participation of the workers in the decision-making process thereby assuring that the workers themselves ‘own’ the plans which are laid out or the objectives which are set within the organization.

The transformational leader is a leader who is able to inspire a common vision and set of goals within the organization. The scope of Herzberg’s Theory of Motivators and Satisfiers is very short-viewed of the capacity of individuals in their ability to become motivated and inspired toward a common goal. In fact all of the theories reviewed fall short of what the transformational leader offers to the organization as a whole and to those being led in terms of motivation and inspiration.


Creating Futures (nd) Online available at NewsletterFI NAL.pdf+Jeffrey+H.+Brotman,+Leadership&hl=en&gl=us&ct=clnk&cd=9

Costco Wholesale Investor Relations (2006) Online

Employee Motivation, the Organizational Environment and Productivity (2006) Section 2: Basic Approaches Used to Improve Productivity. Accel Team Online available at

Costco -5th Largest Retailer in U.S. And 11th Largest in the World (2006)

Costco Wikipedia (2006) Online available at

Gawel, Joseph E. (1999) Herzberg’s Theory of Motivation and Maslow’s Hierarchy of Needs. ERIC Digest

Herzberg, F., Mausner, B., & Snyderman, B.B. (1959). The Motivation to Work (2nd ed.). New York: John Wiley & Sons.

Maslow, A.H. (1970). Motivation and Personality (2nd ed.). New York: Harper and Row.

Homrig, Mark A. Colonel and Burns, James MacGregor (1999) Transformational Leadership. Online available at

Sometimes the Situation Demands Your Leadership (nd) Online available at

Motivation & Leadership

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