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How Starbucks Impassions Workers to Drive Growth

August 1, 1998
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Related Topics: Benefit Design and Communication, Work/Life Balance, Growth, Featured Article
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You can’t help but appreciate a company that routinely begins meetings with a coffee tasting. Or a corporate work setting where traditional conference rooms are replaced by parks resembling contemporary Euro-style cafes, where associates pour themselves a double tall latte, easy on the foam, and sit on a cozy couch alongside their “partners” and colleagues.

Welcome to the Starbucks Support Center, Starbucks Coffee Co.’s headquarters in Seattle. There’s an energy here -- not induced by a caffeine rush -- but from associates drinking up a robust blend of teamwork, sense of mission and challenge. As one of Fortune magazine’s 1997 “100 Best Companies to Work For in America,” not to mention one of the world’s fastest growing purveyors of indulgence, Starbucks has been giving its employees a daily lift since 1971.

Woven into the company’s Mission Statement is the objective to “Provide a great work environment and treat each other with respect and dignity.” But it takes more than company declarations to motivate and inspire people. So how does a young, developing company on an aggressive growth track motivate more than 27,000 people and inspire balance and camaraderie?

The answer is what Starbucks refers to as “a special blend of employee benefits” and a work/life program that focuses on the physical, mental, emotional and creative aspects of each person. This dynamic company developed an innovative work/life program to brew a committed coffee culture -- and a passionate partnership.

Everywhere you look, there’s Starbucks.
Since Starbucks arrived on the scene, coffee isn’t just a morning ritual. The ubiquitous Starbucks Coffee Co. brew has defined a fast-spreading trend from North America to Asia and beyond. Starbucks has met its goal of becoming a $1 billion company by the turn of the century. Its stock is up more than 800 percent since going public in 1992. And there’s no question the company is one of the more phenomenal success stories.

Indeed, the Starbucks philosophy and the loyalty of its people have built a company with more than 1,700 stores worldwide, including a recent unveiling in the United Kingdom. The Starbucks blend can be found in restaurants, hotels, offices and airlines. The company also operates a mail-order business worldwide. Its retail sales exceeded $966 million in the 1997 fiscal year.

In little more than a decade, Starbucks elevated a routine “cuppa-joe” to its current supreme status. It operates in nearly every major U.S. metropolitan area, serving more than 5 million coffee lovers each week. Starbucks opens virtually a store a day. Turn on the television and witness “Frazier,” “Seinfeld” and medics on “ER” sipping Starbucks in the course of their prime-time adventures.

A global player, the company plans to continue expanding at 35 to 40 percent in coming years -- an achievement possible only with committed, stake-holding associates. But Starbucks isn’t just about a great cup of coffee. It’s about people -- and a humanistic approach to doing business that produces bottom-line results.

Ask Joan Moffat, the Starbucks manager of partner relations and work/life. A member of the HR team, she’s responsible for the company’s work/life program, which includes on-site fitness services, referral and educational support for child-care and elder-care issues, an Info-line for convenient information and the “Partner Connection” -- a program that links employees with shared interests and hobbies.

Moffat, who worked in part with a benefits management organization, Portland-based Working Solutions Inc., says the investment pays for itself, and that many of the programs cost very little to implement. Starbucks has comparatively low health-care costs, reduced absenteeism and one of the strongest retention rates in the industry. “Our turnover rate is 60 percent, which is excellent as compared to the restaurant and retail industry,” says Moffat. Moreover, employees reap the benefits of the company’s ongoing success.

A shot of equity in every cup.
“Seize the day” is a perfect motto for Starbucks. The company empowers its employees -- or partners as they’re regarded -- to do just that. Starbucks is committed to providing an atmosphere that breeds respect and values the contribution people make each day, regardless of who they are or where they are within the company. All partners who work a minimum 20 hours a week receive full medical and dental coverage, vacation days and stock options as part of Starbucks BEAN STOCK program. The awarding of stock options to every level of the organization was unprecedented in the service industry a few years ago.

“We established BEAN STOCK in 1991 as a way of investing in our partners and creating ownership across the company,” explains Bradley Honeycutt, vice president of human resource services. “It’s been a key to retaining good people and building loyalty. Naturally, the level of our customer service is favorably impacted, as a result,” she adds.

For those involved early on, the rewards have been especially generous as the company has grown and the price of Starbucks stock jumped from $17 to $46. In the process, the term “partner” was introduced throughout the company.

Just as with the BEAN STOCK program, all employees who work 20 hours or more a week are eligible for a universal benefits program. It’s not just reserved for the corporate or managerial level. Eligible partners can choose health coverage from two managed care plans or a catastrophic plan. They also can select between two dental plans and a vision plan. Because of the young, healthy workforce, Starbucks has low health benefit costs. According to Annette King, HR benefits manager, the company’s health-care costs are approximately 20 percent lower than the national average.

The company also provides disability and life insurance, a discounted stock-purchase plan, and a retirement savings plan with company matching contributions. The benefits provide a powerful incentive to stay with the company, particularly among part-timers, thus reducing Starbucks recruiting and training costs. “We have historically had low turnover, most of which can be attributed to the culture and a sense of community,” says Moffat.

As anyone in the service industry realizes, finding and keeping good people is more difficult than ever before -- and more important. Much of the company’s ambiance -- what makes its coffee experience particularly special -- is its enthusiastic staff. Starbucks has discovered that when partners are actively involved in the company, the customer benefits and the bottom-line grows.

That’s why the statement “Bring ideas to the table” has real meaning at Starbucks. For example, the idea of a cold, coffee blended beverage, such as a Frappuccino(R) blended drink, was the collective brainchild of a few partners. And when one of the store managers began experimenting with customized in-store music tapes, the idea evolved into Starbucks-branded CDs, explains Moffat. That sense of contribution has translated into retention.

Some “baristas,” or espresso drink makers, have been with Starbucks seven or more years, which is particularly unusual for part-timers whose ranks annually turn over 300 percent at more conventional restaurants.

HR’s challenge into the next millennium.
Like many other U.S. companies, Starbucks is expanding in an era of corporate downsizing and economic belt-tightening. Its challenge is to meet customer expectations, while not diluting the company’s culture and the contribution of every person.

Human resources’ challenge is to ensure that the company’s partner-based values survive its ambitious expansion into the new millennium. Therefore, HR takes stock in being a democratic operation, inviting ideas and solutions, and sharing in the rewards. To nurture open communications and innovative thinking, several Partner Relations mechanisms exist:

  • Mission Review is a forum that encourages partners to tell the company how they’re feeling and ask any questions. “Promote a very open environment ... here’s what you’ve told us and here’s what we’ve done,” says Moffat. “We provide supportive action out of their comments.” Partners always receive a response to their inquiries within two weeks. The goal of such openness: a feeling of internal respect.
  • Open Forums are regularly held to examine performance, recognize achievements, plus look at the future. It’s also another opportunity for partners to freely question upper management.
  • The Warm Regards recognition program was developed to spotlight outstanding achievement that embodies the guiding principles, mission and goals of Starbucks. Specific awards include “The MUG (Moves of Uncommon Greatness) Award,” “BRAVO!,” which recognizes partner achievements and also “The Spirit of Starbucks,” which honors passion and action.
None of these initiatives, of course, could gain hold without support from the top. Heading the java empire since 1987 is chairman and CEO Howard Schultz. What Wall Street and stockholders view simply as business acumen, Schultz sees as building a solid business with heart and soul. “We’re profitable because of the value system of our company,” says Schultz. “American companies have failed to realize that there’s tremendous value in inspiring people to share a common purpose of self-esteem, self-respect and appreciation,” he says.

He draws on his own personal experiences growing up in a rough, blue-collar neighborhood of Brooklyn, New York. The title of Schultz’s best-selling book about the company, Pour Your Heart Into It, is no accident. It’s an article of faith at Starbucks: How people are treated motivates a unified and committed operation.

Work/life benefits are part of the blend.
Providing balance only makes sense to Schultz. To do so, the company must constantly evaluate employees’ needs and wants by using opinion surveys and maintaining an open ear to partners. Such diligence is an intrinsic part of the culture Starbucks seeks to create.

Three years ago, human resources began examining how it could become more attuned to its partners. For instance, some employees who started with the company when they were in college are now buying homes and managing the realities of child-care and elder-care issues. Starbucks has responded by providing flexible work schedules as part of the work/life program. “Our environment lends itself to meet multiple life demands. By virtue of our strong sales and accelerated growth, flex schedules have not hurt productivity in the least,” says Moffat. “Flexibility is particularly inherent in our stores because of our extended hours of operation and the diversity of our workforce -- from students to parents -- who need to work alternative hours.”

HR also has engaged Working Solutions to offer a range of integrated benefit services that address the modern climate and culture of corporations -- referred to as “non-traditional” benefits, or emerging needs. Working Solutions has trained life-event specialists who can help solve issues that require health, social, educational and counseling resources. In addition, Working Solutions offers online employee support anywhere in the world, 24-hours a day.

Recent studies have shown that 60 percent of American workers have child- or elder-care responsibilities. Starbucks recognized -- as many other companies have -- that partners less encumbered by personal stress and obligations are more innovative and productive. Working Solutions helped Starbucks implement several programs that specifically address the life stages and personal needs of its workforce. “Working Solutions’ style of caring and support complements our work/life program, and helps ensure the quality our partners deserve," says Moffat. "And, as a company, we see a high rate of return."

Help juggle life demands.
To help deal with the fast-paced and demanding environment at Starbucks, Working Solutions also provides referral services for partners and eligible dependents enrolled in the medical plan. It connects them with information that helps make extraordinary life issues more manageable. Moffat recently put the program to use when she needed elder-care advice for her grandmother. In another case, a partner needed emergency child care for his ill son. Working Solutions made prompt arrangements for a certified in-home caretaker, no work was missed, and Starbucks covered half of the cost.

Another example of Starbucks corporate caring: Three years ago, a Starbucks partner suggested a company-sponsored soccer team. The recommendation inspired Partner Connection, a program designed to link partners with similar interests, whether they be social, recreational, art and leisure, parenting or volunteerism. The Wonderful World of Food -- a group that shares a common interest in great food and dining out -- produced “The Partners Table,” a cookbook whose sale benefits Fare Start (formerly Common Meals), a non-profit program that provides skills training to the homeless. A surge of interest in baseball resulted in a Starbucks softball league. Now, there’s even a Starbucks choir. The New Parent Network, which offers such activities as CPR training for new parents, is especially active, given the significant number of Starbucks partners who are first-time parents.

As part of the New Parenting Network, Anne Rauh, Starbucks administrative assistant for Learning and Partner Development, feels a special kinship with other Starbucks partners. “It’s great to network on a consistent basis and share parenting issues with my colleagues,” says Rauh. “Parenting isn’t just something you do after 5 p.m., when you go home; you think about the things that are important to you -- like your family -- during the course of your workday. We’re parents 24-hours a day.”

The Partner Connection program, which requires little company cost, has flourished because the partners run it, and it stays responsive to their interests, company officials say. After partners were initially queried, it didn’t take long for the program to gain popularity -- almost immediately, 25 groups formed in Seattle. Similar partner programs operate throughout the company’s regions.

Encourage a passionate partnership.
As Starbucks pursues its coffee quest, the social and personal climate of the company continues to evolve. HR strives to stay abreast of its partners’ needs and life-stages by periodically conducting opinion surveys. Its mission is to respond accordingly with effective work/life solutions. Starbucks provides on-site services that motivate a healthy mentality and allow for management of daily and extraordinary life demands. The company invites creative and innovative thinking through open communications, as well as established criteria for awards and recognition.

These elements, combined with a comprehensive benefits package, make for a passionate partnership between the company and its most vital resource. Being at the forefront among U.S. company benefits is central to Moffat. “We have the best and the brightest, and our success in the marketplace is directly related to our people,” says Moffat. “We will ask our partners constantly what’s important to them and consider these things as we plan into the year 2000 and beyond.”

CEO Schultz had a mission since day one. “I wanted to establish the kind of company that gave people an opportunity for equity (ownership) and for comprehensive health insurance, among other things ... You can empower people with money and responsibility, but what about the person?” asks Schultz.

Starbucks answers that question.

Workforce, August 1998, Vol. 77, No. 8, pp. 60-64.

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