We spend a lot of time talking about business performance…
Strategy.
Markets.
Execution.
All the things that are supposed to explain why one place outperforms another.
And sometimes… they do.
But if you’ve been around long enough, you’ve seen situations that don’t quite line up that cleanly.
Two teams.
Doing essentially the same thing.
Same goals.
Same resources.
Same expectations.
And they produce very different outcomes.
Something Doesn’t Add Up
That gap is easy to see… harder to explain.
On the surface, everything looks aligned.
And yet…
one consistently performs.
The other keeps working harder than it should just to stay even.
Most explanations stay on the surface.
Execution.
Talent.
Momentum.
They describe what’s happening.
They don’t explain why.
Follow It Far Enough
Years ago, a piece in the Harvard Business Review compared Costco and Sam's Club.
Two businesses that, on paper, look almost identical.
Membership warehouse retail.
Bulk goods.
Same customer base.
Often sitting within miles of each other.
If you were modeling it out, you’d expect similar outcomes.
They didn’t get them.
Back in 2006, Costco was paying employees an average of roughly $17 an hour.
Sam’s Club was closer to $9.86.
Nearly two decades later, that gap still existed.
Costco moved its minimum wage to around $19.50.
Sam’s Club was closer to $16.
That’s not a moment in time.
That’s a sustained decision.
What That Decision Actually Did
It changed who stayed.
Costco built a workforce that remained.
People learned the business.
Got better at it.
Understood how things actually worked.
Sam’s Club operated with far higher turnover.
At its worst, around 60%… right in line with the broader retail average.
Which means something very real operationally:
One company compounds experience.
The other keeps replacing it.
The Power of Stability
A stable workforce catches things earlier.
They know where problems show up.
They move with confidence.
They take ownership without being asked.
A high-turnover workforce lives in a different cycle.
Training never really ends.
Execution varies by shift.
The same mistakes come back… again and again.
That difference doesn’t sit quietly.
It shows up everywhere.
Inventory accuracy.
Customer experience.
Speed.
Consistency.
Impossible to Ignore
The numbers follow.
Research published in the Harvard Business Review estimated annual turnover costs at roughly:
$612 million for Sam’s Club
$244 million for Costco
A gap of about $368 million.
That’s before productivity.
Before missed sales.
Before errors.
Before everything else that builds on top of it.
And then this…
Across multiple analyses, a Costco employee generates roughly 2x the operating profit of a comparable Sam’s Club employee.
Same general role.
Same general business.
Different output.
So Predictable
It’s easy to call this culture.
Or engagement.
Or retention.
That keeps it at the edge of the conversation.
This sits at the center.
I always say… “Show me your leader…
and I’ll show you your culture.”
Because none of this started in the numbers.
It started in decisions.
How people are valued.
How work is structured.
What gets reinforced.
What gets ignored.
Those decisions created the conditions.
The conditions shaped behavior.
Behavior drove execution.
Execution produced the outcome.
When Someone Decides to See It
This didn’t stay static.
In February of 2017, John Furner was appointed President and CEO of Sam’s Club.
He didn’t look at turnover as a standalone issue.
He saw a system.
And he made a decision that many leaders don’t make.
He decided it was worth investing in.
Investing in understanding it.
He brought in MIT Sloan Good Jobs Institute to diagnose what was actually happening.
What they found wasn’t one problem.
It was an interconnected system.
Wages.
Structure.
Scheduling.
How the work actually got done.
The Courage To Change
He decided to change the entire system.
Higher wages.
Simplified roles.
More cross-training.
A different operating structure.
The kind of changes that only happen when someone has the courage to see the full picture.
The Response Was Predictable.
Productivity increased by more than 15%.
Turnover dropped materially across hourly employees and managers.
Time to fill management roles was cut nearly in half.
The system began to stabilize.
What Actually Happened
None of this needed a study to be visible.
You could see it in how the work was getting done.
You could see it in how often the system had to reset itself.
You could see it in what people were dealing with every day.
That’s the part that stays with me.
The gap wasn’t hidden.
It just wasn’t acted on… until it was.
Until a leader was willing to see the system for what it is…
and take responsibility for changing it.
You see:
The business model didn’t change.
The customer didn’t change.
The market didn’t change.
The results did.
Because leadership did.
It really is quite simple when you think about it…
· Leadership creates the conditions.
· The conditions shape behavior.
· Behavior drives execution.
· Execution produces results.
That’s Leadership Risk.
P.S. My first book, Leadership at the Dinner Table, arrives later this year — lived experience woven into a story you'll see yourself in. Jump on the waitlist.
With Absolute Sincerity,
Ed Clementi
Founder & CEO of Inspired Fire, LLC
Make an Impact and Feel an Impact!
