As published on brandchannel on April 17, 2013.
Last year, Starbucks declared its support of same-sex marriage, which resulted in a boycott by the National Organization for Marriage. The coffee chain hasn’t backed down one bit, however, as CEO Howard Schultz continues to blur the line between business and the personal lives of his millions of customers.
At a recent annual shareholders meeting, Tom Strobhar, a shareholder and founder of the Corporate Morality Action Center, an anti-abortion, anti-gay marriage organization, suggested the boycott had a negative impact on first quarter sales and earnings. The ever-outspoken CEO swiftly responded, “Not every decision is an economic decision… The lens in which we are making that decision is through the lens of our people. We employ over 200,000 people in this company, and we want to embrace diversity.”
Schultz then told Strobhar he was more than welcome to sell his stocks and take his money elsewhere. While the remarks seem brazen, Starbuck’s outspoken stance on hot-button political issues and support of equal rights for its employees has been a part of the brand’s long-term strategy to increase internal brand engagement and decrease turnover. What’s more, taking a stance on causes that affect its workforce has had a positive impact on its bottom line.
Historically, Starbucks has been a leader in prioritizing employee retention. It was the first American company to offer comprehensive health insurance and equity in the form of stock options to every single employee. Its pro-social, pro-diversity human resources policy has put it on Fortune‘s annual “100 Best Companies to Work For” list ever since it launched in 1999.
The strategy also has decreased costs and differentiated the company from its competitors in an industry where turnover rates are a major issue. According to the National Restaurant Association, there is a 75 percent turnover rate within the service industry, with the average cost of replacing an employee ringing in at $3,000.
John Richards, President of Starbucks North America from 1997 to 2001, aided in the company’s growth from 500 to 3,000 retail locations and worked closely with Schultz in the development of the company’s early-stage core strategy. Richards told brandchannel that the company consciously developed policies to not “churn and burn” employees through a strong benefits package and creating a place where employees were proud to work.
This included, he told us, a “comprehensive compensation program” for its “partners,” the company’s term for employees. The program includes: “competitive base pay, comprehensive health care for eligible full and part-time partners, with an average of 20 hours per week, equity in the company in the form of Bean Stock, a 401(k) savings plan with employer match, tuition reimbursement, short-term disability, paid vacation time, and product discounts,” according to ABC News.
Since its implementation in 1988, the company’s employee benefits package has been enhanced by ‘social benefits’ — a big retention tool for a workforce where the typical employee is around college-age.
“The company pays a lot of attention to causes,” Richards told us. “When you are in the middle of it, different things come and go, it seems like there is always a new cause, but for the typical employee who is college age or somewhere in that area, [Starbucks] seems like a place that from a spiritual and commitment perspective is kind of a better place to be. If they are going to work for a place, it is more consistent with their value system than some other corporate retail company that doesn’t pay attention to stuff like that.”
The most recent decision to support gay rights is an example of aligning with its employees’ core values. Nonetheless, the company still faces criticism for not supporting all causes, such as the negative publicity it received from a false email circulated online claiming that Starbucks would not provide troops with their coffee because the company does not support the Iraq War.
The company’s focus on going the extra mile to care about what matters to employees stems from Schultz’s experiences as a youth growing up in public housing in Brooklyn, NY.
When he was 7-years-old, Schultz’s father, a truck driver, fell on ice at work and was promptly fired, with no benefits or workman’s compensation. In an interview with CNN’s Mallika Kapur, Schultz said, “I think what I was trying to do early on was build the kind of company that my father never got a chance to work for.”
That lesson is part of the company’s DNA today, Richards told us. “Starbucks, in part, has proven that taking better care of employees can eventually help them, particularly in a very competitive business,” he said.
While the focus on employee retention is both a part of Starbucks’ core values and business plan, and the good vibes have extended well beyond its famed baristas to the legions of loyal Starbucks customers that believe the brand to be more about lifestyle than just coffee.
Despite stiffer than ever competition from the likes of McDonald’s and Dunkin’ Donuts, Starbucks remains a leader in brand loyalty, internal and external. The company’s mantra is best described in Schultz’s book Onward, where he says, “Starbucks never set out to be cool. We set out to be relevant!” Clearly, if it’s relevant to employees, it’s relevant to Starbucks’ senior leadership — and relevant to the brand and its stakeholders.
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