Starbucks Is Pleasing Employees And Pouring Profits October

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 Employee Assistance Program (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, compared to 50 percent 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, including running groups, bowling leagues, 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. So they feel empowered and know they are making a contribution. This is a company where we look out for each other and look out for the community.”

Paper For Above instruction

The case study of Starbucks highlights the company's strategic focus on employee motivation, development, and creating a positive work environment as central elements of its success. The human resource development (HRD) intervention presented in this case is primarily embedded in comprehensive employee engagement strategies that include extensive training, benefit packages, stock options, community involvement, and a corporate culture that emphasizes respect, diversity, and shared values. These initiatives align with broader HRD interventions such as training and development, motivation, employee retention, and corporate social responsibility.

Starbucks’ approach to HRD demonstrates a holistic intervention aimed at fostering employee satisfaction and loyalty. Initial training of new employees ensures they are well-equipped with knowledge about coffee, customer service, and company values, which establishes a strong foundation for their engagement. The provision of full health care benefits, stock options, 401(k) matching, and profit-sharing plans serve as motivators rooted in Maslow's hierarchy of needs, addressing physiological, safety, and self-actualization needs. Moreover, the company’s focus on creating a sense of community and involvement through charitable activities, volunteer programs, and employee clubs enhances intrinsic motivation by making employees feel valued and part of a larger mission.

Several factors keep Starbucks employees motivated at the workplace. First, the company’s culture prioritizes respect and recognition, making employees feel appreciated and valued. The opportunities for personal growth—such as promotion pathways, stock options, and participation in environmental and community projects—serve as strong extrinsic and intrinsic motivators. Second, Starbucks’ values of diversity, inclusion, and social responsibility resonate with employees’ personal beliefs, fostering a sense of purpose and commitment. Third, the social environment within the stores, characterized by enthusiastic teamwork and customer interaction, enhances job satisfaction. The sense of belonging and contribution to the community are powerful factors motivating employees to perform well and stay committed to the organization.

Applying motivation theories can provide further insights into employee behavior at Starbucks. One applicable theory is Herzberg’s two-factor theory, which distinguishes between hygiene factors and motivators. Hygiene factors, such as salaries, benefits, and working conditions, prevent dissatisfaction but do not necessarily enhance motivation. Motivators, like recognition, achievement, and personal growth opportunities, drive higher engagement and satisfaction. Considering Starbucks’ comprehensive benefits package and focus on employee development, Herzberg’s theory suggests that by ensuring hygiene factors are met, the company can minimize dissatisfaction. Simultaneously, emphasizing motivators—through recognition programs, career advancement, and involvement in meaningful activities—can significantly increase motivation and productivity. This alignment with Herzberg’s theory explains Starbucks’ success in maintaining high employee morale and low turnover, as the organization effectively addresses both hygiene and motivator needs.

Overall, Starbucks’ HRD interventions exemplify how strategic human resource management, combined with a strong company culture rooted in shared values and employee development, contributes not only to employee satisfaction but also to profitability and growth. Its model underscores the importance of considering both extrinsic and intrinsic factors in designing HR initiatives that genuinely motivate and retain employees in a competitive service industry.

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