Motivating Sales Forces: Starbucks Coffee Company's Use of a Total Rewards Program
Motivating salespeople through effective total rewards programs just makes good business sense. Properly implemented and administered, a company's rewards program can serve to not only motivate a sales force to sell more, it can also help retain these valuable employees and avoid unplanned turnover. Although studies have shown time and again that pay continues to be ranked among the most important components of a compensation plan, there are a number of other factors that comprise an effective total rewards program that must be taken into account as well. To this end, this paper provides a review of the relevant peer-reviewed and scholarly literature concerning the compensation plan and rewards program used by Starbucks Coffee Company to motivate its legions of salespeople around the world. A summary of the research and important findings concerning motivating the sales force at Starbucks are provided in the paper's conclusion.
Review and Discussion
Background and Overview of Starbucks Coffee Company
As of July 2012, Starbucks Coffee Company (hereinafter alternatively "Starbucks" or "the company") had 17,651 stores in Argentina, Aruba, Australia, Austria, Bahamas, Bahrain, Belgium, Brazil, Bulgaria, Canada, Chile, China, Costa Rica, Curacao, Cyprus, Czech Republic, Denmark, Egypt, El Salvador, England, Finland, France, Germany, Greece, Guatemala, Hong Kong/Macau, Hungary, Indonesia, Ireland, Japan, Jordan, Kuwait, Lebanon, Malaysia, Mexico, Morocco, New Zealand, Netherlands, Northern Ireland, Oman, Peru, Philippines, Poland, Portugal, Qatar, Romania, Russia, Saudi Arabia, Scotland, Singapore, South Korea, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, United Arab Emirates, United States and Wales (Corporate profile, 2013).
The company has reached this level of growth by treating their employees "with respect and dignity" and Starbucks even calls them "partners" rather than "employees" to reflect the collaborative nature of the enterprise
(Corporate profile, 2013, p. 2). At present, Starbucks provides its employees with several benefits, including comprehensive health coverage for both full- and part-time employees as well as an incentive profit-sharing program called "Bean Stock" (Corporate profile, 2013, p. 2). A noteworthy aspect about Starbucks is that employees can "pick and choose" the rewards package that best suits their individual needs. In this regard, Fitz-Enz (2010) reports that, "Starbucks has branded its total rewards concept as 'your special blend,' again, making an obvious play on its coffee products. 'Your special blend' indicates the ability that employees have to customize their total-rewards offering" (p. 78). Finally, all Starbucks employees receive two pounds of Starbucks coffee of their choice a week as part of their rewards program (Corporate profile, 2013).
Six Features of an Effective Total Rewards Program
Rewards are aligned with the company's strategic goals. In other words, it does not make sense to reward behaviors and performance that does not contribute to the company's strategic goals. For instance, Graham and Roth (2008) report that, "Understanding your business strategy, and aligning that business strategy with your total rewards program, is another key element when it comes to gaining competitive advantage for the organization and its shareholders" (p. 85). In sum, Graham and Roth (2008) recommend "developing a reward strategy that is designed to drive the business strategy" (p. 14).
Rewards are something employees actually want. Coffee mugs, certificates of achievement and other inexpensive awards have their place in a rewards program, but effective total rewards programs ensure the rewards that are offered are things employees actually want. For instance, according to the editors of Human Capital Review (2013), "Rewards only work if they are meaningful to employees and influence their affiliation with the organization" (Ten steps to a more effective total rewards program, 2013, para. 1). The most efficient way to find out what employees want from their rewards program is to survey them to identify their preferences and opinions. Failing this step, it is entirely possible to implement and administer a total rewards program without achieving any meaningful results. In this regard, the editors add that, "Too many companies are missing the opportunity to understand whether their investment in different rewards plans are valued by employees and support the company's attraction, motivation, and retention goals" (Ten steps, 2013, para. 2).
The rewards program provides opportunities for learning and development. According to Rumpel and Medcof (2009), learning and development "includes programs and practices related to career training and employee development, supporting performance management and succession planning systems" (p. 28)..
The rewards program considers all of the rewards available in the workplace. Because there is no "one-size-fits-all" approach to motivation, total rewards programs should introduce individualized innovative rewards. In this regard, Rumpel and Medcof (2009) advise that, "Total rewards attempts to optimize the firm's reward offerings to yield the greatest return for reward dollars spent. This involves integrating diverse programs that are not necessarily thought of as rewards by everyone" (p. 28).
The working environment is taken into account. In this regard, Rumpel and Medcof (2009) note that rewards program should include programs and practices related to the workplace environment, including (a) diversity and organizational culture initiatives, (b) performance support, (c) work/life balance such as flexible working arrangements, (d) elements related to organizational reputation, (e) elements related to challenging and interesting work, and (f) the quality of relationships with colleagues.
The rewards program includes appropriate benefits. The types of benefits that are typically included in this area are (a) financial rewards (including health and welfare benefits), (b) retirement plans, (c) savings plans, (d) vacation and (e) other paid time off (Rumpel & Medcof, 2009).
Description of Sales Force Behaviors that are Aligned with the Compensation Plan
Sales force behaviors that are aligned with Starbuck's compensation plan include remaining with the company, working hard while ensuring customers receive cheerful personalized attention (Corporate profile, 2013). These behaviors are congruent with the best industry practices described by Flamholtz and Randle (2011) who advise, "Compensation systems can be designed to reward people for their tenure with the organization (an indicator of commitment to the culture). They can also be designed to motivate the kinds of behavior that are consistent with specific aspects of the company's culture" (p. 57).
How a Value Proposition is Achieved for Current and Future Starbucks' Employees
Although the various components of the Starbucks' rewards program are regarded as being more valuable by some employees than others, it is clear that the company's profit-sharing plans have contributed to its success. According to Starbuck's Chairman and CEO Howard Schultz: "We believed very early on that people's interaction with the Starbuck's experience was going to determine the success of the brand. The culture and values of how we related to our customers, which is reflected in how the company relates to our employees, would determine our success" (cited in Jensen & McMullen, 2007, p. 49). The company's rewards program embeds Starbucks' corporate values in ways that help promote a sense of ownership in the company. In this regard, Schultz adds, "We thought the best way to have those kinds of universal values was to build around company-owned stores and then to provide stock options to every employee, to give them a financial and psychological stake in the company" (cited in Jensen & McMullen, 2007, p. 49).
Attractiveness of the Rewards Program to Future Starbucks' Salespeople
Particularly noteworthy has been Starbucks' identification of what works best and then doing more of that. As Fitz-Enz (2010) points out, this cost-effective approach has paid major dividends: "Starbucks is well positioned to compete because it has removed some of the organizational procedures that, in the past, might have led the organization simply to throw more money into the compensation silo, hoping that would solve the retention issue" (p. 78). Moreover, the company's total rewards program is sufficiently flexible that all employees can tailor their program to their individual preferences (Jensen & McMullen, 2007). In this regard, Jensen and McMullen conclude that, "Branding…