Starbucks' Human Resource Management Policies and the Growth Challenge
In recent years, there has been much interest in the notion of "high commitment" human resource management (HRM). The high commitment HRM is focused on developing self-regulated behavior among employees that is based on mutual trust rather than external sanctions and pressures. Considering this premise, this paper provides a review of the relevant peer-reviewed, scholarly and organizational. literature concerning the advantages of adopting such an approach and an evaluation concerning how closely Starbucks Coffee Company fits the high commitment HRM model. To this end, a brief overview of Starbucks is followed by an overview of the high commitment HRM model which is then applied to the company's human resource management practices. A summary of the research and important findings are presented in the conclusion.
Review and Analysis
Starbucks' Corporate History
Founded 40 years ago in 1971, Starbucks Coffee Company (hereinafter alternatively "Starbucks" or "the company") began its meteoric growth with just one store in Seattle, Washington. By 1987, Starbucks had grown to 17 stores and by late 1996, the company had more than one thousand outlets across the country (Fine & Cronshaw 1999). Today, the company has more than 17,000 retail stores located in over 55 countries, including Argentina, Aruba, Australia, Austria, Bahamas, Bahrain, Belgium, Brazil, Bulgaria, Canada, Chile, China, Cyprus, Czech Republic, Denmark, Egypt, El Salvador, England, France, Germany, Greece, Guatemala, Hong Kong/Macau, Hungary, Indonesia, Ireland, Japan, Jordan, Kuwait, Lebanon, Malaysia, Mexico, 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 (Starbucks Company Profile 2012).
At present, Starbucks has tens of thousands of employees in these far-flung locations, and the company hires 200 new employees each day; in addition, Starbucks routinely opens two or three new stores each day as well (Stopper 2004). This rapid rate of growth is cited by Mohrman (2007) who advises, "Many highly successful organizations grow by expanding their business model to more markets. Some, such as Starbucks, have done this with such astounding rapidity that the yearly start-ups of hundreds of stores and branches, with the associated processes of real estate development, facilities planning, new market entry processes, and talent acquisition and development, have become major organizational focuses" (p. 35).
The company's executive vice president for partner resources, Dave Pace, advises that Starbucks' corporate guiding principles for sustained growth through enlightened human resource management practices are as set forth in Table 1 below.
Starbucks' Guiding Corporate Principles
Provide a great work environment and treat each other with respect and dignity.
Starbucks supports a program called the Cup Fund. Partners voluntarily contribute to the fund to help partners in time of need. The needs are normally financial emergencies, but may take other forms of assistance. Being "family" is what attracts partners to the fund.
Embrace diversity as an essential component in the way the company does business.
Starbucks extends domestic partner benefits to the children of the partners. Its workforce is 61-percent female. From a customer image standpoint, the company has strict rules about tattoos and body piercing.
Apply the highest standards of excellence to the purchasing, roasting, and fresh delivery of its coffee.
Starbucks pays above-market rates to sustain coffee farmers to preserve its supply, assure the consistent quality of its coffee, and improve the lives of growers. Through the Chief of Corporate and Social Responsibility, Starbucks gives back to communities that supply coffee through investment in schools, health clinics, roads, and water projects. On the growers' side, they operate under Starbucks' preferred supplier purchasing guidelines. The company reports on these community initiatives in its corporate responsibility annual report, and under the banner, "Giving Back," communicates its efforts to partners in its stores and at home. To assure the freshness of the coffee brewed at its retail stores, Starbucks invests heavily in employee training by area and region. Training is done online now, and approximately 75% of its stores have WiFi capability.
Develop enthusiastically satisfied customers all of the time.
Creating and maintaining the now legendary Starbucks experience with enthusiastic...
The desire is to serve the same coffee around the world but there are some local flavors to accommodate differing tastes. A successful international program has been the Coffee Ambassadors and Masters Program. Partners compete as country teams for Star Team status to earn the opportunity to set up and open up new stores in other countries. As an aside, Starbucks does not advertise store openings. It depends on its brand familiarity and reputation as well as word-of-mouth to draw customers to new locations.
Contribute positively to communities and the environment.
Starbucks fosters involvement in the community from corporate to the store. Under a program called "Make Your Mark," Starbucks donates $10 to a nonprofit organization for each hour partners work in their communities. Some stores have engaged the public in their community activities. A $10,000 donation is not unusual. Additionally, through the Starbucks Foundation, 100 executives serve on community or nonprofit boards. Environmentally, Starbucks enlists partner "green teams" to monitor electrical usage and recycling opportunities, and to suggest improvements.
Recognize that profitability is essential to the company's future.
Starbucks is approaching the $4 billion revenue mark and its stock has done extremely well in the market. Same-store sales in stores open at least a year have increased monthly for over 140 months. Some diversification has taken place with Tazo tea and music. Starbucks is in the Fortune 500 for the first time.
Source: Stopper 2005, p. 22
Currently, Starbucks' partners deliver 25 million-plus transactions with customers each week (Stopper 2005). Given the enormity of its global operations and the importance of the human resource function in supporting it, it is little wonder that the company has placed such a high priority on sustaining its brand, beginning with the types of people it hires. In this regard, Stopper adds that, "As the connection to customers, partners (employees) are the key to success. Brand equity has to be built from within and starts with the hiring process. The trick is to find people who fit the Starbucks culture, who have an interest in coffee and want to learn about it, and, most importantly, who can connect with customers and the community" (p. 22). Taken together, it is apparent that Starbucks has invested a great deal in the process as well as its partners over the years in ways that are reflective of the high commitment human resource management model discussed further below.
Overview of the High Commitment Human Resource Management Model
In an increasingly globalized and competitive marketplace, a growing number of organizations have attempted to improve their performance through innovative human resource practices (Pfeffer 1997). For example, Dunn (2005) reports that, "As organizations have struggled in an increasingly competitive economy, superior human resources are increasingly seen as a competitive advantage. This has culminated in substantial interest in developing high-commitment work systems that will attract, motivate, and retain superior employees" (2006, p. 70). The research concerning high commitment human resource management to date suggests that:
1. There are substantial differences in performance between the most and least effective firms or plants;
2. Some significant portion of that difference can be shown to be from differences in the management of the employment relationship;
3. There is fairly consistent agreement on what constitutes high-performance work practices;
4. There is conflicting evidence about whether what constitutes best practice is or is not contingent on the firm's strategy and whether or not the practices interact in producing their effects (i.e., it is important that they all be present at some level); and
5. There is evidence that the diffusion of these so-called high-commitment work practices and their persistence once they are implemented is not as great as would be expected given their apparent effectiveness (Pfeffer 1997, p. 169).
In reality, many companies fail to realize all of the benefits that can be attained through high commitment HRM due to an inability to align their human resources function with corporate goals, including the need to eliminate waste and add value at every opportunity (Pfeffer 1997). In this regard, a growing number of organizations have sought to reduce their unplanned employee turnover rates in recent years by inculcating a sense of commitment and loyalty on the part of their employees (Droege & Hoobler 2003). According to Finnegan and Taylor (2004), "Unplanned, voluntary turnover is most often associated with high labor costs, defeat of skills and company knowledge, low morale, poor customer satisfaction, and financial losses" (p. 12). Companies such as Southwest Airlines, for example, employ a high commitment HRM model that is based on mutual trust between management and line employee to sustain a competitive advantage (Avolio & Bass, 2002). In fact, an increasing number of human resource practitioners have supported high commitment work systems to foster sustainable competitive advantage and reduce unplanned employee turnover (Burke &…
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