The Case Study of Starbucks

    Chen Haiqing

    59120134

    International class at Beihang University

The Case Study of Starbucks

一、 The Background and Overview of Starbucks

    Starbucks is one of the well-known and fastest growing companies in the world. Set up in 1971, in Seattle, the company grew slowly initially, but expanded rapidly in the late 1980s and the 1990s. By the early 2000s, there were nearly 9,000 Starbucks outlets across the world and the company's eventual retail target was to open 30,000 outlets. It was widely believed that the company's success and rapid growth could be attributed largely to its committed and motivated workforce.

    Particularly, in January 2005, when Starbucks Coffee Company (Starbucks) was placed second among large companies in the Fortune "Best Companies to Work For" survey, it was no surprise to those familiar with the company's human resources management policies and work culture. However, in that moment, the retail industry is notorious for its indifferent attitude towards employees because of a high rate of employee turnover (In the early 2000s, employee turnover in the retail industry was around 200 percent).

    Starbucks stood out for its employee-friendly policies and supportive work culture. The company was especially noted for the extension of its benefits program to part-time workers - something that not many other companies offered. As a result, Starbucks employees were among the most productive in the industry and the company had a relatively low employee turnover.

    Starbucks relied on its baristas and other frontline staff to a great extent in

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    creating the 'Starbucks Experience' which differentiated it from competitors. Therefore the company paid considerable attention to the kind of people it recruited. Starbucks' recruitment motto was "To have the right people hiring the right people.

    Starbucks hired people for qualities like adaptability, dependability and the ability to work in a team. The company often stated the qualities that it looked for in employees upfront in its job postings, which allowed prospective employees to self-select themselves to a certain extent.

    Having selected the right kind of people, Starbucks invested in training them in the skills they would require to perform their jobs efficiently. Starbucks was one of the few retail companies to invest considerably in employee training and provide comprehensive training to all classes of employees, including part-timers. 二、 The Human Resource Management of Starbucks

    Howard Schultz, the CEO of Starbucks once said: “Many companies do not attach importance to employees, but we attach importance to employees and give them enough respect. A result, employees have become a major event and the Starbucks brand marketers, who take the initiative to tell customers what Starbucks is a company. This is the best advertising. The relationship between employees and customers how good, how can the success of Starbucks.”

    If we want to study the human resource of Starbucks, it should be focused on sever aspects.

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1) The culture and value of Starbucks

    Schulz once said: "I want to give people the company created to bring a sense of ownership, and provide comprehensive medical insurance. Most importantly, work to give them dignity. It is generally believed that the company respect its workers’

    contributions, no matter how well educated employees place of work where. "

    "Employee first" of Starbucks is : to provide staff training in basic skills and management knowledge; for staff participation in management; encourage employee innovation, and actively work; to provide fringe benefits; to allow employees own shares, to encourage they to be the real director of the company.

    2) The salary and benefit system of Starbucks

    Starbucks provides employees with generous salaries and benefits and system improvement, in particular in: the salary is locked in the top 25% of the level of the industry; it sets up a mutual aid staff; it also expands health insurance to part-time staff; in a recession, it even increases employee benefits.

    Starbucks, among the industry every year, will conduct a salary survey, after a comparative analysis, the company may adjust the salary based on the survey in order to ensure its workers’ rights, and gave those who work more than 20 hours per week with medical insurance, employee assistance programs, disability insurance, which the industry is extremely rare. This shows that Starbucks believes that every service personnel and sales staff’s attitude can directly affect customer satisfaction, thereby

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    affecting corporate profits. It proved that the good welfare policy could decrease the employee turnover and other corresponding expenses such as new training costs. The data show that at Starbucks, the turnover rate of barista is 60% - 65%; store manager turnover is about 25%, while other retail staff turnover is about 50%. 3) “Bean stock”

    In Starbucks’ benefits package, the most innovative is the "bean stock" Share

    Option Scheme and it is the first private company providing such equity plan to all employees (including full-time employees and part-time employees). After the implementation of the scheme, the received feedback shows the staff at work perform well and are more intimate when their sever guests. Moreover, many employees who are on business want to save money for the company automatically, so they often take a night flight.

    4) The equal communication between the “Partner”

    Because employees hold equities, thus, in the company, all employees regardless of job size are referred to as "partners." Before making material decisions, the company will first collect ideas from the "Partner", and then draw a conclusion. Moreover, the company told employees in the form of an open forum of events occurred recently to explain the financial position, allowing employees to question senior management. The decentralized mechanism contributes Starbucks to make decentralized decision-making as far as possible, so as to maintain a positive strategy

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on the company, rather than an assembly line style.

    5) Stimulating innovation

    Innovation is the lifeblood of modern business and is a basic driving force for the company to be a sustainable competitive one.

     Starbucks, through effective incentives to create an environment that encourages employees to exchange and innovation. Each quarter, Starbucks headquarters will summarize those innovated ideas within the company, and be promoted as a way for staff to deepen understanding of the product, and then the selling power has been enhanced, more importantly, which motivate the their development of new product of desire. In the best-selling ice "Cappuccino" of Starbucks is independently developed by the staff. There is a more intelligent staff recommendation, a Starbucks store manager advised to Schultz to involve in the music market. Since 1988, Starbucks began to record songs chosen form radio stations, and then play them in the shop, after that, many customers were able to consult them where they brought these CDs. In 1995, Starbucks began selling CD recordings, which have created a lot of income for the company.

    6) Special training

    In the selection of employees, Starbucks’ attention is human nature; the most

    important thing is to comply with Starbucks values. In the company's "mission statement", it the first mentioned: "to provide a good working environment, and create

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    mutual respect, mutual trust and working environment." Starbucks training, not only attach importance to the understanding of the staff of the coffee, the exquisite approach to produce coffee, but also giving a special attention to communication skills between customers. The training of staff can be continued to deepen along with the time in the company, so that employees deeply love their work.

    7) Recruiting more capable

    Enterprise development to a certain extent, the founder must have the magnanimity to hire more intelligent managers, but also willing to put right below. This is an essential situation for businesses to continuously innovate and develop the necessary conditions for the limited capacity of each of the times, if the company request for chances to pass down the their brilliant, it has to keep pace with the time, promote the growth of talent and invite them sincerely to join in the company. Starbucks, in this area is very good. In 1990, Schultz, Bihar and Smith formed a complete management of the core of Starbucks, the three of them learn from each other, each doing its job, making Starbucks a step by step to glory. In 2000, Olin Smith, in 2000, acted as the CEO of Starbucks, was rewarded by "Business Week" as "best managers in 2003". These people have a significant contribution for the rapid growth and expansion of Starbucks.

    三、 Summary

    The New York Times has been reported: "if Schultz is a king in Starbucks coffee empire, so his dedicated staff would then be his subjects." Starbucks employment

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    concept is "staff first", it always put the staff in the first place, and invest employees. Starbucks employee is not only a group of workers providing labor, but partners to create a pleasant environment and provide high quality goods. Starbucks mission is to provide the best working environment, with respect and dignity to every employee. Starbucks by distributing "bean stock", provides medical and benefit programs, and other ways to rally team cohesion.

    Starbucks pursue "people-oriented" business philosophy, the scientific design of pay and benefits system, a unique "bean stock" to attract people, stimulate its workers’

    enthusiasm for work. Starbucks has also established a complete set of in-service training system, so that employees within the company can continue to grow, and gradually improved. Establish these systems for the Starbucks to attract a large number of talents.

    Nowadays, Starbucks has already been one of the most famous retails all around the world. It is settled in various cities and familiar by the local people, but all of them have the same feelings to it, even though it has different localization strategies. It is certain that Starbucks has a quite bright future and chance to make itself much more valuable.

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Reference:

Zhang xi, Tasting coffee: the 10 management lessons of the Starbucks, 2005

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