It Must Thrive Inside to Be Experienced Outside
Treat employees like partners, and they act like partners.
FRED ALLEN, American radio personality
Words matter! Therefore, many leaders have moved away from using the word employee because it connotes a power dynamic in the work relationship. The term suggests that there is a more powerful person (the employer) and a less powerful one (the employee). Additionally, employee describes a financial or transactional relationship—if you employ me, I work for you and you pay me. In lieu of employee, two popular alternatives have become part of business-speak—associate and team member. While these words are a softer way to describe the connection between people in an organization, they also imply a more affiliative or collaborative environment. Sadly, at some businesses, words like associate and team member ring hollow. In some settings, team members are not afforded the respect, trust, and appreciation that would indicate members of a true interdependent group. As for associates, frequently there is very little “association” between the leaders and the led. So why is the word partner used at Starbucks? And does that word describe reality or a good-feeling intention?
Business definitions of partnership typically involve a number of elements:
• An agreement between two parties to pursue common objectives
• Shared investment to realize those objectives
• A distribution of the risks and rewards emerging from pursuit of the objectives
Most business owners enter into a work agreement with new hires that hopefully has both parties seeking a shared goal. Typically, those who have been hired invest their time and talents alongside the time, talents, and financial resources of the owners. However, there is no true partnership because employees do not receive a distribution of the rewards from the business’s profitability beyond a predetermined wage agreement. The employees, if you will, are definitely not partners because they have no access to the upside or any liability for the downside of the business relationship. So is the Starbucks “employee” relationship a business partnership? Well, in the most technical sense of the word, no. Starbucks “partners” face no financial liability from their working relationship, but they do enjoy a functional partnership in that they are granted Bean Stock.
By 1991, Starbucks was starting to enjoy healthy enough levels of profitability for Howard Schultz to ask for the support of the Starbucks board of directors in creating an equity reward program for employees. Since Starbucks was a private company at the time, the proposed plan was designed to grant stock options company-wide, calculated as a proportion of the employees’ base pay. Howard believed that such a program would establish a direct connection between the contribution of employees and the overall market value of Starbucks. Though the board members expressed concern that this type of program might dilute the value of the shares of the investors who were funding the business, the plan was unanimously approved. When the Bean Stock program was presented to employees in 1991, Starbucks stopped using the term employees and began calling everyone partners, since even part-time staff members could become eligible for the program after six months on the job.
Through the years, the Bean Stock program has continued to evolve to increase the benefit to partners. In November 2010, Starbucks began to grant Bean Stock in the form of restricted stock units (RSUs) instead of stock options. In addition, Starbucks expanded eligibility to more than 115,000 partners in 19 markets, with a recent addition being Rwanda. Howard and the board shortened the vesting period and allowed partners to receive actual shares of Starbucks stock when they vest, as an alternative to realizing the market gain from the time of the grant to the time when they exercise their stock options. Bean Stock and the company’s Future Roast 401(k) program, coupled together, constitute key components of Starbucks forward-looking compensation plan.
In fiscal year 2012, Starbucks delivered more than $214 million in pretax gains to partners from vested RSUs or from the exercise and sale of their Bean Stock options and more than $55 million to 401(k) participants in the form of the employer match, which demonstrates a guiding philosophy of leadership that success is best when it’s shared. Through a steadfast commitment to this philosophy in good years and in bad, Starbucks leaders set themselves apart from those in most businesses. Communicating with partners in 2011, Howard noted, “For the past two decades, Starbucks has been one of the only retailers with a stock program that includes part-time hourly partners. This truly sets us apart from other organizations by making us not only a preferred place to work, but a business whose partners’ pride in ownership undeniably contributes to the authentic connections you make with your customers. Bean Stock grants fulfill our long-standing promise to you: that if we succeed as a company, you succeed with us…. I have been touched personally by the many letters I have received from partners sharing how the company’s performance is helping them care for their families. These are difficult times for many people, and we have to continue earning the trust of our customers and partners in all aspects of our business.”
While I certainly don’t have access to Howard’s mail, I have encountered my share of partners who are eager to talk about how the Bean Stock they have saved over time has changed their lives. Kaycee Kiesz, a 20-year partner and program manager, Global Diversity, reports, “I went on a YMCA volunteer trip to Thailand and to Bali for a yoga retreat thanks to Bean Stock. The program also helped me put 20 percent down on my house. I wouldn’t have been able to come up with the amount I needed for the house if it hadn’t been for the generosity reflected in the Bean Stock program. The dollars are fantastic, but I also feel taken care of.” One partner indicated that he had used Starbucks Bean Stock on three occasions, once to remodel his home, once to purchase land, and once to purchase dental implants, noting that Bean Stock had essentially given him his smile back. Volunteer trips, houses, remodeling, and the ability to regain one’s smile—not bad rewards for partnering with Starbucks to drive shareholder value.
At the Global Leadership Conference in Houston in 2012, approximately 5 percent of the district managers and store managers in attendance had not activated their Bean Stock accounts. The goal was to have every one of those individuals stop by a conference booth to complete their activations. What a pleasant surprise for those partners who found out for the first time that they had an account balance of $13,000, or better yet, a long-time partner who had more than $50,000. Some business owners would say that they don’t have the profit necessary to create a program like Bean Stock. I wonder if part of their problem with profits might not result from a failure to provide incentives to those who could have helped them earn more.
In the United States, the first forms of workplace insurance occurred in the mid-1800s, when employees received policies covering them in the event that they sustained disabling injuries from steamboat or railroad accidents. While employer-sponsored health insurance popped up in the 1920s, such plans didn’t truly proliferate until World War II, when the federal government placed stringent wage controls on businesses but exempted health benefits from counting against salary caps. Enriched health-benefit plans were a way for companies to attract the best employees possible in a challenging wartime labor market.
Now fast-forward to 1961. Although many employers provided health insurance at that time, Howard Schultz’s father was not lucky enough to work for such a company. That year, Howard personally experienced hardship because of the uninsured health costs his family incurred as a result of his father’s breaking his ankle at work. Jump with me one last time to 1987. Howard Schultz, along with a group of investors, purchased Starbucks from Howard’s former employers. Within one year, the company had grown from 17 to 55 stores, and Howard was in front of his board of directors making a pitch for health-care benefits for full-time and eligible part-time employees. Since Starbucks wasn’t profitable at the time (unlike when Howard sold the idea of Bean Stock in 1991), he experienced considerable resistance from the board. Howard argued that the cost of providing health-care benefits was 50 percent less than the cost of hiring and retaining a new employee. He made a case for part-time employee coverage on the grounds that two-thirds of the workforce at the time were not full-timers. In addition to the fixed costs of replacing employees, Howard addressed the impact of high turnover on the customer experience by indicating that regular customers form relationships with baristas that are disrupted when employees churn. Howard’s reasoning was compelling, and the board approved the Starbucks health-care benefit. As a result, Starbucks became among the first companies in the United States to provide comprehensive health insurance for all eligible employees, including people who worked just 20 hours a week. What some would see as an unnecessary expense, Howard saw as an investment in people and in Starbucks future. Toward the end of this chapter, we will look at the return on that investment from the standpoint of partner engagement and retention. Furthermore, we will explore the impact of high levels of employee engagement on innovation and customer loyalty.
The provision of health-care benefits in the quick-service restaurant sector was revolutionary in 1988, as was the extension of health-care benefits to part-time workers. In 1994, U.S. president Bill Clinton even consulted with Howard as the president explored health-care policy. To date, most employers still do not offer health benefits to part-time employees, and many of those that had provided them dropped the offering during the recent economic challenges. According to the 2012 Kaiser Family Foundation’s Employer Health Benefits Survey, “In 2012, 28% of all firms that offer health benefits offer them to part-time workers, a significant increase from the 16% reported in 2011 but similar to the 25% reported in 2010.”
I started this chapter by saying that words matter. In the words of Starbucks partners, concern shown through widespread health-care benefits matters more. Posting on a blog, one barista wrote, “I can also say in all seriousness that I owe Starbucks my life. If it weren’t for the OUTSTANDING health coverage Starbucks provides to its employees, I wouldn’t have been able to spend 90 days at a residential treatment center for a life-threatening eating disorder. The health insurance I had through my part-time job at Starbucks paid for a major portion of my treatment and aftercare, neither of which I would have been able to afford on my own.” Juan, a Starbucks shift supervisor, puts it this way: “It’s really amazing to me that we can just start out for a few months working 20 hours a week and get quality health insurance and its good benefits. I’ve had some health problems recently that required hospitalization. My insurance was my saving grace. It seems like a gift. Health insurance is but one example of how I feel valued and appreciated. In essence, leadership is saying my work means something, and that’s a large part of why I have such a strong love for this company.”
Throughout this chapter, I will be discussing a variety of ways in which Starbucks leaders demonstrate appreciation of, respect for, and investment in their people. My intent is not to say that this is “the” way to make the connection or to imply that the way Starbucks connects is perfect. I am, however, asserting that Starbucks leadership is dedicated to employee engagement and that concerted effort is needed to sustain a substantial workforce advantage.
In a blog article posted on the website for CollegePlus, a company that creates customized dual credit and bachelor’s degree programs, columnist and blogger Caitlin Muir explains that the title of her article 33 Companies That Can Save You From College Debt was not her initial choice. “Originally, this article was going to be ‘Why I love Starbucks.’ As a former barista, the company was good to me. Not only did I get cheap health insurance, great hours, and a flexible schedule but I got something that really helped me. Tuition reimbursement.” Caitlin goes on in the article to explain how this Starbucks benefit, along with other resources, allowed her to graduate without having student loans hanging over her head.
The “ability to grow and develop” is a key factor in securing employee engagement. To make that growth happen, leaders must attend to workplace opportunities and seek educational opportunities outside of the workplace. “Starbucks U” is an example that merges on-the-job training with formal academic offerings.
Starbucks U refers to a recently created program for U.S. partners, wherein they are eligible to receive college credits for training provided as part of their job (for example, the barista training course described in Chapter 3, shift supervisor training, and so on). Starbucks leaders have secured college-credit eligibility for partners by working with the American Council of Education (ACE) to accredit select training offerings. Similarly, the leadership has collaborated with City University of Seattle and Strayer University to amplify the impact of the company’s existing tuition reimbursement program for eligible partners in the United States and Canada. The City University program, for example, provides eligible Starbucks partners with the opportunity to have their application fee waived, a 25 percent reduction in all undergraduate and graduate tuition, and exclusive scholarships, among other benefits. Similarly, the Strayer University program offers 20 percent tuition discounts, free academic tutoring and advising, and the flexibility of 24/7 online courses. One partner noted, “I decided to go back to school last year…. I enrolled at Strayer University and received an initial $1,000 scholarship from Strayer as well as a 20 percent discount on tuition and credit for Starbucks training. A few months after I started school, I received a $2,500 fall scholarship from Starbucks U. All of this is because I am a Starbucks partner. Starbucks has made a difference in my life, a girl from Haiti who barely spoke English when I started working here. It has been the best time of my life.” Leaders who are interested in growing their people find ways to collaborate with other businesses and with learning institutions like Strayer University and City University to offer benefits that they might not be able to provide alone. By finding strategic alliances, these leaders stretch and extend their employee benefit budgets and serve to answer an important question for their people: “Do you care enough about me to help me achieve personal as well as professional development objectives?”
In addition to supporting partners through the Bean Stock program, retirement funds, health-care coverage, and educational benefits, Starbucks leadership oversees a program that encourages partners to help one another. The CUP (Caring Unites Partners) Fund began in 1998. It emerged when a group of partners worked with Starbucks leadership to establish a mechanism for raising and distributing funds for partners who encounter a disruptive hardship. Funding for the program comes from voluntary contributions by partners and the proceeds of fund-raising events that they sponsor. Starbucks administers the fund. An applicant may receive up to $1,000 if that partner is determined to have encountered an uncontrollable, financially unmanageable, catastrophic circumstance—such as the impact of Superstorm Sandy, which affected many partners in the northeastern quadrant of the United States in 2012. Eligibility for funding is independent of a partner’s ever having made a contribution. While employee-to-employee funds have become more prominent since the late 1990s, the CUP Fund at Starbucks is noteworthy on several levels: sustainability, infrastructure, ongoing leadership support for the fund, expansion into international markets (more on this in Chapter 6), and how the CUP Fund connects partners to one another and to organizational pride.
People have a natural tendency to want to help those with whom they work. Many of those helping efforts, however, are ad hoc or poorly organized. Since employee engagement is connected to peer cohesion as well as employer support, leaders at companies like Starbucks offer the infrastructure and systems to maximize a caring community (this is evidenced not only in the CUP Fund program, but also in the Partner Access Alliance Network, which will be addressed later in the chapter). The company’s participation in the program is largely administrative, but it also takes the form of financial contributions such as those from the busy Starbucks store located on the eighth floor of the Starbucks Support Center in Seattle, Washington.
Starbucks partners express appreciation for the opportunity to give to and receive from the CUP Fund. Partner Shao Wei, a student at Tianjin University in Tianjin, China, experienced two tragic events in rapid succession shortly after becoming a part-time employee at the Starbucks Baisheng store: her father was diagnosed with advanced liver cancer, and six months later, doctors needed to operate to remove a tumor from her mother. Shao notes, “For a poor family like ours, the huge medical cost is an extremely heavy burden. The store manager found out about the sudden blow to my family. He was very accommodating in terms of shift arrangement. Later, I had to work at several different stores. The store managers and partners at each store were both helpful and supportive. They even helped me apply for the CUP Fund. The aid from the CUP Fund is more than just money. It’s more of a mental support.”
Thanks to the support of her peers, Shao Wei is looking to make a career at Starbucks. “This June, I will graduate from college. I plan to stay at Starbucks for further professional development. Starbucks gives me energy. Starbucks makes me stronger. In my future work, I will pour my passion into every cup of coffee and serve every customer with a smile.” Even those who have not needed assistance from the CUP Fund find value in it. Alison Edwards, program manager, Global Learning at Starbucks, adds, “The CUP Fund is about taking care of other partners. They are part of my community. Given all the challenges in the world today, we all need a community that cares and offers a security blanket, like the CUP Fund. When I go home each day, I am proud that I work for a company where people can feel loved and I can give and receive support.”
While you may or may not be able to help create or administer a program that allows your team members to support one another in times of crisis, clearly there are low-cost aspects of your infrastructure that can be leveraged to care for your team members. Often the returns to your company (in the case of Shao Wei, an interest in going from a part-time job to pursuing “professional development” as she serves “every customer with a smile”) are far in excess of the resources you will expend.
The Starbucks Partner Networks are yet another example of a low-cost/high-return investment on the part of the leadership. Partner resource groups are provided meeting space at Starbucks and opportunities to work with senior leaders.
Kaycee Kiesz, program manager, Global Diversity, notes, “The company regularly leverages our networks to derive full value from new business, drive innovations, build relevance in new markets, and reinforce the humanity of our brand in the global communities we serve. The senior leadership team listens to concerns and supports the efforts of the members. The Access Alliance Network, for example, consulted with our Legal department to update our service dog policy. The network was also instrumental in creating our Starbucks Braille and large-print menus and Braille Starbucks Card. The Armed Forces Network partners closely with staffing/recruiting to help veterans make the transition into Starbucks careers. Our networks are often called upon to provide translation services, offer feedback on marketing materials, and help in product development.”
According to Carolina Morales, senior financial analyst at Starbucks, one project of importance to the partner group Hora Del Café was to connect with partners in Brazil. “Our group focuses on kindling connections to Hispanic heritage. We share our love of Hispanic culture, food, music with one another and with all interested partners and leadership. We also want to be able to help our leaders look at Starbucks business through the lens of our culture. Recently, our executive sponsor helped us arrange a videoconference with our Brazil office, and we explored their aspirations for the Brazil market and began a conversation as to how we could help. We had a packed house here at the Support Center in Seattle, with so many people wanting to know more about Brazil and what the opportunities are there. It was such a powerful start to our relationship; our partners in Brazil seemed so inspired that we were enthusiastic here in the United States about them. The love was there.” Often caring for other team members involves a critically important yet not costly investment: logistics support. When a business makes meeting space, business infrastructure, and organizational abilities available to employees who seek to care for one another and/or create positive communities, its team members engage one another in pursuits that fortify a dynamic and healthy workplace.
REFLECTION ON CONNECTION
1. What are your employees saying about your level of financial support for them in terms of their physical, emotional, educational, and financial well-being?
2. Have you looked for strategic partnerships that could allow you to extend your employee benefits budget (for example, an academic institution that will work with you to accredit your training classes for college credit)?
3. How might you leverage your business infrastructure to produce high-value/low-cost opportunities to support your team members logistically?
President Woodrow Wilson once said, “The ear of the leader must ring with the voices of the people.” This is easily said, but less easily done! In fact, systematic and authentic listening may be one of the most economical and differentiating investments a leader can make. Many leaders either are too busy to listen or are more interested in speaking. As a result, listening intently, regularly, and respectfully to team members separates the great leader from the good one.
At Starbucks, effective listening takes many forms. While leaders listen informally at an individual or team level, Starbucks also has formalized a department that consistently listens for the needs and engagement level of partners. Virgil Jones, director, Partner Services, at Starbucks, notes, “Our team conducts surveys, focus groups, and continuously takes a pulse on our partner population. Within that department, the most important thing I do on a daily basis is listen to our partners. The second most important thing I do is continue to touch base with our partners and adjust, because with the way technology is advancing, the things that are hot, interesting, and engaging with our partners today is going to be completely different 18 months from now.” By routinely asking questions and listening to partner input, Starbucks leaders are able to anticipate, tailor, and shift their employee-related resources for an ever-changing workforce. Virgil adds, “If you look at our total pay, we have many traditional buckets—401(k), health-care benefits, compensation—and my group is the X-factor group where we consistently look at our demographic and we try to come up with new, innovative programs that will appeal to our partners. For example, health and wellness and college-related needs are important to our demographic. Included under health and wellness is our Partner Connection program.”
According to Virgil, Starbucks has about 400 different teams and clubs in the United States, with 30,000 partners participating. For sports teams, Starbucks typically offsets approximately 50 percent of the fees that participants incur and welcomes non-Starbucks partners to participate. Since approximately 60 percent of Starbucks partners are technology-savvy students, many partner-engaging services involve discount programs with computer and phone companies.
Michelle Gass, president, Starbucks EMEA (Europe, Middle East and Africa), like many other Starbucks senior leaders, demonstrates a different kind of regular and personal listening that fuels partner engagement. Her approach comes in the form of “listening tours.” According to Michelle, “I travel across the EMEA region regularly and conduct listening tours and roundtable meetings. These are informal meetings where we spend about 90 minutes paying attention to the thoughts, needs, and ideas of those we serve. While listening is important, taking swift action to elevate experiences is essential. These tours are an ongoing process of connection and discovery, not an event.” Starbucks senior leaders deploy a variety of processes to connect, discover, and respond to the needs of partners.
For many leaders, one of the earliest forms of empathy building they encounter comes in the form of store immersion. Clarice Turner, senior vice president, U.S. Business, arrived at Starbucks with a solid background in food and beverage service. She had worked with PepsiCo and Yum! Brands for 16 years, and immediately prior to coming to Starbucks, she had been president and COO of Papa Murphy’s Pizza. Despite her varied and established experience in the industry, she was sent to a four-month immersion program that began with working behind a Starbucks counter. Clarice reports, “At that time, I thought, ‘Okay, I’ve been in this industry for a long time. Surely I can get up to speed quicker than four months.’ But those experiences are something I now credit as having the most impact on me being able to hit the ground running and truly embrace the essence of Starbucks. That time was such a gift. I did every job in the store, from taking out the trash and cleaning the bathrooms to actually training to be the store manager. I also trained to be a district manager, regional director, and regional vice president before I assumed my role at the time as division senior vice president. From the onset, it was clear that my role as a leader involved immersing myself into and empathizing with our partners.”
It is common for Starbucks leaders to talk about the significance of their initial immersive experiences. Cliff Burrows, president, Americas, indicates, “I worked for six weeks at our Queen Anne store in Seattle. I am sure I wasn’t the best barista ever, but I enjoyed every moment of my store immersion. That was over 10 years ago, and I will never forget the people and experiences I had there. It was an immediate, profound, and personal introduction to our work and to the world of partners who make it happen one cup at a time every day.” At Starbucks, the practice of immersion was initially introduced for leaders at the level of vice president or above. Now new managers and leaders throughout the organization are afforded opportunities to gain a deeper understanding of the life of barista partners by spending time in the store and behind the bar.
Often leaders see listening as a passive pursuit. At Starbucks, listening is synonymous with connecting, discovering, understanding, empathizing, and responding. The benefits of this listening fuel the entrepreneurial and adaptive spirit of a brand that could easily have lost its nimbleness as a result of its growth and scale. In many ways, when leaders demonstrate formal and informal listening, they not only engage employees but also gain access to information that helps them stay relevant to the needs and observations of their team members. Of course, listening is a skill that parallels another critical leadership behavior: observation. When it comes to employee engagement, observation often comes in the form of acknowledgment and recognition programs.
While most of us intend to recognize the achievements of our team members regularly, those intentions often get lost amid the deluge of challenges and demands that we face every day. By creating effective reward and recognition programs, leaders at Starbucks develop recognition excellence as a core competency within the organization. In their book The Carrot Principle: How the Best Managers Use Recognition to Engage Their Employees, Retain Talent, and Accelerate Performance, Adrian Gostick and Chester Elton suggest, “In response to the question ‘My organization recognizes excellence,’ the organizations that scored in the lowest fourth overall had an average return on equity (ROE) of 2.4 percent, whereas those that scored in the top fourth had an average ROE of 8.7 percent. In other words, companies that most effectively recognize excellence enjoy a return that is more than triple the return of those that do so the worst.” Similarly, Gostick and Elton found that managers who were rated highest on recognizing employee contributions also typically produced the highest levels of employee satisfaction, employee retention, and even customer satisfaction.
Because of the importance of recognizing excellence, Starbucks leadership has developed a broad array of recognition and award programs, which include, but are not necessarily limited to, the following:
PERFORMANCE AWARD PROGRAMS
M.U.G. award
Bravo award
Team Bravo award
The Green Apron program
Spirit of Starbucks award
Team Spirit of Starbucks award
Manager of the Quarter
Manager of the Year
District Manager of the Year
A detailed review of all of the Starbucks awards and recognition programs is beyond the scope of this book, but the diversity of offerings affords a number of important teachable lessons, including the following:
• The value of peer-to-peer recognition
• The need to scale rewards at both the individual and team levels
• Reliance on social aspects of recognition
• The enterprise-wide importance of awards
Many of the reward programs offered at Starbucks involve nominations from peers (Bravo awards, Spirit of Starbucks awards) and/or direct and immediate recognition by peers (M.U.G. awards, the Green Apron program). Rather than relying only on managers or leaders to catch people who meet the criteria for recognition, the entire organization is mobilized to immediately, or through nomination, bring those acts of excellence to light.
Similarly, excellence is recognized in terms of both individual effort and team collaboration at Starbucks. In the course of my function as a professional speaker, I have attended a large number of sales conferences, award banquets, and even service recognition events. It is rare to see awards provided to groups at these events. At Starbucks, an award like the Team Spirit of Starbucks “is presented to teams or groups of partners who work together to contribute well beyond their day-to-day responsibilities, making a significant and positive difference at Starbucks. The Team Spirit of Starbucks Award recognizes a team of partners for a single, exceptional achievement.” According to the criteria for the award, that exceptional achievement must also reflect the Starbucks mission. While individual awards can foster healthy competition within an organization, they can also undermine collaboration. Balancing individual and team recognition allows both independent and interdependent excellence to be acknowledged at your company.
While some businesses get caught up in high-cost extrinsic rewards and bonuses, most of the awards offered at Starbucks do not involve items with substantial tangible value. In the case of M.U.G. awards, Bravo awards, or Green Apron recognition, partners receive pins, handwritten notes, or certificates to acknowledge their achievement. These pins often carry a social value among baristas, who typically wear them on their aprons. Consistent with trends in social psychological research showing that extrinsic rewards can extinguish intrinsic motivation, the emphasis at Starbucks is much less on prizes and much more on acknowledgment.
Kay Corio, a former Starbucks partner and a recipient of the Spirit of Starbucks award, shared her views of recognition at Starbucks. “I was honored to win the award. I appreciated that leadership let us know what excellence looks like and that I would be in a position to garner acknowledgment for my effort. I believe that recognition at Starbucks plays an important role in offering us uplifting moments in acknowledgment of the work we do.” Providing uplifting moments for those who uplift customers—that is the role of leadership at Starbucks.
REFLECTION ON CONNECTION
1. Do you conduct “listening tours” with your people? What are your systematic approaches to leadership listening (for example, formal surveys or regular roundtable sessions)?
2. In addition to your direct observation of behavior that demonstrates excellence, what peer-to-peer recognition programs have you developed?
3. How are you balancing individual and team awards? Do you emphasize acknowledgment or rewards of substantial financial value?
So why invest so much in your people? While it feels good to generously encourage the growth, development, and well-being of your team members, does it make good business sense? Let’s address this issue at a macroeconomic level and then examine the specific benefits that Starbucks derives from its partner engagement efforts.
Across industries and continents, companies with highly engaged employees have been shown to produce improved sales, profits, and shareholder value. One such example comes from the Kenexa Research Institute’s WorkTrends report. According to the findings, “Organizations with highly engaged employees achieve seven times greater 5-year TSR [total shareholder return] than organizations whose employees are less engaged.” Other research groups have found that as employee engagement increases, workplace errors and lost-time accidents decrease. Elevated employee engagement is also linked to increased repeat customer purchases and strong customer advocacy.
As you will recall, Howard Schultz initially appealed to the Starbucks board of directors for health-care benefits based on his projection that it would ultimately save the company money in turnover-associated costs. From a research perspective, such an argument is sound, given findings like those of the Corporate Executive Board, which state, “By increasing employees’ engagement levels, organizations can expect an increase in performance of up to 20 percentile points and an 87% reduction in employees’ probability of departure.” However, do investments in programs such as health insurance for eligible part-time employees at Starbucks actually result in retention rates greater than those of competitors in the quick-service sector? Typically, Starbucks reports a voluntary annual turnover rate for full-time partners of around 12 to 15 percent (meaning that 12 to 15 percent of full-time partners voluntarily elect to leave the company for other options); however, this percentage does not reflect the entire picture of turnover, since a large number of employees are part-time. Analysts who have taken into consideration both the full-time and part-time employees suggest that the actual turnover rate is somewhere around 65 percent. For many of us, 65 percent seems remarkably high, but author, broadcaster, and journalist John-Paul Flintoff puts it in perspective: “While other fast-food retailers lost staff at rates as high as 400% a year, Starbucks’ turnover was a relatively low 65%.”
Assuming that your turnover costs exceed your cost of benefits and you turn over one-sixth as many employees as your competition, your business will be well positioned for long-term success. This is particularly true if your engaged employees help you innovate new processes or help you reduce waste. Given the size of Starbucks, a simple act performed by an engaged partner can result in phenomenally large benefits to the company. Such is the case of Joe Young, a barista in Hutchison, Kansas, who was engaged in his job and developed a process improvement that also eliminated waste of an expensive Starbucks product, namely, whipped cream. Cliff Burrows announced the accomplishment at the 2012 Global Leadership Conference, noting, “Joe found a way in his store to improve the quality of the partner experience, the quality of the beverage, and he saved the company between 5 and 10 million dollars within the year.” Are your employees engaged and generating solutions that produce savings (albeit probably not on the scale of Joe Young’s) in your business? Are they seeing the business from the perspective of an owner?
At Starbucks, the ultimate value of employee engagement occurs in the millions of interactions that take place every day in buildings carrying the Starbucks brand. Since managers can’t monitor all of those interactions, the care and concern leaders extend to partners is reflected in the loving discretionary effort partners show in their moments with customers. A highly engaged workforce consistently contributes to remarkable service experiences for customers, much like the ones reported by Starbucks customers.
In a blog post written by a member of the My Starbucks Idea community, one customer writes about her visit to a store she had not previously visited. Her father had died the night before, so she and her sister were getting the arrangements made for the days to come. They stopped at a Starbucks for drinks, and the barista could see that she had been crying and asked what was wrong. The customer described what happened after she told the partner that her father had died: the barista “reached onto the counter and patted my hand, extending her sympathy and telling me the drinks were on them. It sounds so trite but it was such a comfort…. I will always remember that kindness.” The barista who served that customer went off task to give comfort to the deeply saddened person, and in the process was fully engaged in the Starbucks mission of producing uplifting moments.
Having an engaged workforce means that employees can do what is right for customers without having to be told. They can rise above the rules, processes, and procedures inherent in doing a job to make purposeful connections with the people they serve. In the end, employee engagement produces memorable kindness, profitability, sustainability, and customers for life. As an added benefit, it is much easier to manage a fully engaged workforce when the work culture is a pleasant and enjoyable one. What steps will you take to drive greater engagement within your team? The engagement of your customers relies on the engagement you produce for your employees, partners, team members, associates, or whatever you choose to call the people you serve.
The ability to grow and develop is a key factor in securing employee engagement.
Leaders who are interested in growing their people find ways to work with other businesses and learning institutions to offer benefits that those leaders might not be able to provide alone.
People have a natural tendency to want to help those with whom they work. Consider overseeing a program that encourages employees to help one another.
Listening is not a passive pursuit; listening is synonymous with connecting, discovering, understanding, empathizing, and responding.
Good leaders provide uplifting moments for those who uplift customers.
Rather than relying only on managers or leaders to catch people meeting the criteria for recognition, the entire organization should be mobilized to recognize individuals and teams that perform acts of excellence.
Across industries and continents, companies with highly engaged employees produce improved sales, elevated profits, and increased shareholder value.
Having an engaged workforce means that employees do what is right for customers without having to be told.
Employee engagement contributes to memorable kindness, profitability, sustainability, and customers for life.
It is much easier to manage a fully engaged workforce when your work culture is a pleasant and enjoyable one.
