Starbucks Is Pleasing Employees And Pouring Profits

Starbucks Is Pleasing Employees And Pouring Profitsoctober 3 2003mary

Starbucks is Pleasing Employees and Pouring Profits October 3, 2003 Maryann Hammers There’s something comforting and classy about Starbucks. It’s not just the enticing aromas and blues tunes wafting through the air, the handsome surroundings or the likelihood of running into a friend or neighbor. It’s more the way the baristas (never called “counter help”) greet people, perhaps offering a blueberry scone sample, or remembering a customer’s preference for nonfat soy latte with extra foam. Starbucks attracts a near-cult following, serving 25 million drinks a week at nearly 7,000 locations worldwide. In a four-week period ending in August, the company–which is growing by three to four stores a day–reported net revenues of $335 million, an increase of 26 percent over the same period last year.

The Seattle-based coffee empire was among the top 10 on Fortune’s most recent “America’s Most Admired Companies” list. The magazine also rated it the most admired food-services company in 2001 and 2002. Business Week named founder Howard Schultz one of the country’s top 25 managers in 2001. Since Starbucks began with a single store in 1971, its overriding philosophy has been this: “Leave no one behind.” With that in mind, new employees get 24 hours of in-store training, steeping themselves in information about coffee and how to meet, greet and serve customers. Full health-care benefits (medical, dental, vision and alternative services) are offered to all employees, including part-timers who work at least 240 hours per calendar quarter.

The EAP is available to all employees. Employees share in the company’s growth via “Bean Stock” (stock options) of up to 14 percent of their gross pay, and a stock-investment plan allows them to buy shares of Starbucks common stock at a discount (85 percent of fair market value) through payroll deductions. The company also matches employees’ contributions to their “Future Roast” 401(k) plans, adding from 25 to 150 percent of the first 4 percent of pay, depending on length of service. As a result of such measures, Starbucks employees have an 82 percent job-satisfaction rate, according to a Hewitt Associates Starbucks Partner View Survey. This compares to a 50 percent satisfaction rate for all employers and 74 percent for Hewitt’s “Best Place to Work” employers.

Though the company won’t release specific numbers, it also claims that its turnover is lower than that of most fast-food establishments. But it’s not just the benefits that attract employees. Another company survey found that the top two reasons why people work for Starbucks are “the opportunity to work with an enthusiastic team” and “to work in a place where I feel I have value.” Omollo Gaya, who grew up on a coffee farm in Kenya and immigrated to San Diego to attend college, was drawn inside a Starbucks store seven years ago by the heady aroma. He bought a pound of coffee, struck up a conversation with the employee behind the counter, and was impressed by the barista’s knowledge. As he sipped his brew, “something clicked,” Gaya says.

After researching Starbucks, he applied for a job and spent the next four years in a San Diego store before being promoted to his current position as one of eight coffee tasters at company headquarters. After six years, Gaya exercised his Bean Stock options, which netted about $25,000 after payment of the exercise price, to build a new four-bedroom house for his widowed mother on 15 acres in her home village. “The health benefits, the 401(k) and the stock options really surprised me, and confirmed what this company is all about,” Gaya says. “From my first day on the job, I got a lot of satisfaction when I offered a cup of coffee to customers and saw the smile on their faces, when I answered their questions about coffee, and when I saw their enthusiasm when they returned with a friend or colleague.

My love for coffee started when I was 5 years old, but I never thought it would come to mean so much to me. Buying a home for my mother is the highlight of my being with Starbucks.” Maintaining that kind of feel-good atmosphere in a small mom-and-pop company is one thing. The question is how Starbucks manages to keep the spirit flowing with 11,000 full-time and 60,000 part-time employees in North America and an additional 7,400 workers globally. “Staying ‘small’ while we grow is one of our biggest challenges,” says Dave Pace, executive vice president of partner resources (the company’s term for human resources). “It sounds clichéd, but we do it by taking our mission statement seriously.

Almost all companies have a mission, but at Starbucks, we use it as our guiding principle and hold it up as a filter for decision-making,” Pace explains. Providing a great work environment and treating employees with respect is number one on Starbucks’ six-point mission statement. The list also includes a commitment to diversity; excellence in purchasing, roasting and delivering coffee; keeping customers satisfied; contributing to communities and the environment; and, of course, achieving profitability. The company also encourages community involvement by donating $10 for each hour that an employee volunteers to a nonprofit or charitable organization. Profits from sales of the company’s logo-emblazoned “coffee gear” are channeled into clubs and services for employees, which include everything from running groups and bowling leagues to quilting and book clubs.

Employees can donate an amount of their choice to a voluntary “CUP (Caring Unites Partners) fund,” which is used to provide grants to fellow employees who fall on hard times. And every year, as part of its Earthwatch program, the company selects a few employees to travel to coffee-producing parts of the world, where they learn firsthand about environmental and conservation issues from the growers. Last year two were selected; this year five are going. “People come to Starbucks to socialize and interact, so our partners do much more than just make coffee,” Pace says. “They are the ones who create that environment in our stores and make this a place that people feel good about.

Paper For Above instruction

The case study on Starbucks’ internal human resource development (HRD) interventions reveals a strategic approach that emphasizes employee well-being, motivation, and engagement to foster both organizational growth and a positive work culture. Central to Starbucks’ HRD intervention is its comprehensive onboarding and training program, which includes 24 hours of in-store training focused on coffee knowledge and customer service skills. This initial training ensures that employees, regardless of their prior experience, develop a shared understanding of brand values, service standards, and product knowledge, which in turn promotes consistency and high service quality (Kaufman, 2019).

Beyond initial training, Starbucks implements ongoing development initiatives such as the “Partner” program, emphasizing respect, diversity, and inclusion, aligning with the company’s mission statement. The intervention extends to benefits like health care, stock options (Bean Stock), and a 401(k) matching plan, which are designed to enhance employee financial security and investment in the company’s success. Such incentives serve as extrinsic motivators, reinforcing employee loyalty and reducing turnover, which is crucial for maintaining service quality and organizational stability (Lloyd et al., 2020).

Moreover, Starbucks’ HRD interventions incorporate social and community-building activities, including clubs, volunteer programs, and environmental learning experiences through Earthwatch. These initiatives foster a sense of belonging and purpose among employees, aligning personal values with company mission and enhancing intrinsic motivation (Deci & Ryan, 2017). The voluntary “CUP” fund further exemplifies the company’s commitment to social responsibility, providing support to employees facing hardships, thereby strengthening organizational commitment and employee morale.

Factors that keep Starbucks employees motivated encompass a blend of intrinsic and extrinsic motivators. The intrinsic motivators include recognition, meaningful work, and alignment with the company's ethical values, which foster a positive emotional connection to the organization. The extrinsic motivators comprise financial benefits like health insurance, stock options, and retirement plans, all of which address employees’ economic security needs (Herzberg, 1966). The opportunity to work in a culturally diverse environment, along with participating in corporate social responsibility initiatives, also bolsters motivation by fulfilling social and esteem needs (Maslow, 1943).

Applying Herzberg’s Two-Factor Theory offers insights into Starbucks’ motivation strategy. This theory dichotomizes job factors into hygiene factors and motivators. Hygiene factors such as health benefits, job security, and fair wages prevent dissatisfaction but do not necessarily enhance motivation. Conversely, motivators like recognition, achievement, and opportunities for growth directly promote job satisfaction (Herzberg, 1966). Starbucks effectively manages hygiene factors via comprehensive benefits, creating a baseline of satisfaction, while the motivators—such as recognition programs, career advancement, and involvement in community initiatives—drive higher motivation and engagement among employees. This balanced approach results in the reported high job satisfaction rate of 82% and lower turnover rates.

In conclusion, Starbucks’ HRD interventions serve as a model of integrating strategic training, benefits, and social responsibility to motivate employees effectively. The application of motivation theories like Herzberg’s enhances understanding of how intrinsic and extrinsic factors interplay to sustain a committed, satisfied, and high-performing workforce. As Starbucks continues to grow, maintaining these HR practices will remain vital to preserving its organizational culture and ensuring ongoing success and profitability.

References

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