Starbucks High Commitment HRM Policies and Growth Strategy

In recent years, there has been much interest in the notion of "high commitment" human resource management (HRM). High commitment HRM focuses on developing self-regulated behavior among employees based on mutual trust rather than external sanctions and pressures. Considering this premise, this paper provides a review of relevant peer-reviewed, scholarly, and organizational literature concerning the advantages of adopting such an approach, as well as an evaluation of 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 is presented in the conclusion.

Founded 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 (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 advises that Starbucks' corporate guiding principles for sustained growth through enlightened human resource management practices are as follows:

Provide a great work environment and treat each other with respect and dignity. Starbucks supports a program called the Cup Fund, to which partners voluntarily contribute in order to help fellow partners in times of financial or other emergencies. 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 partners' children. Its workforce is 61 percent female. The company also maintains strict rules about tattoos and body piercing from a customer image standpoint.

Apply the highest standards of excellence to the purchasing, roasting, and fresh delivery of its coffee. Starbucks pays above-market rates to coffee farmers to preserve its supply chain, assure consistent quality, and improve the lives of growers. Through its Chief of Corporate and Social Responsibility, Starbucks gives back to coffee-growing communities through investment in schools, health clinics, roads, and water projects. Growers operate under Starbucks' preferred supplier purchasing guidelines. To ensure freshness in retail stores, Starbucks invests heavily in employee training by area and region, largely delivered online; approximately 75 percent of its stores have Wi-Fi capability.

Develop enthusiastically satisfied customers all of the time. Creating and maintaining the legendary Starbucks experience is challenging, particularly across different countries. A successful international initiative has been the Coffee Ambassadors and Masters Program, in which partners compete as country teams for Star Team status and earn the opportunity to open new stores in other countries. Notably, Starbucks does not advertise store openings, relying instead on brand reputation and word-of-mouth.

Contribute positively to communities and the environment. Under the "Make Your Mark" program, Starbucks donates $10 to a nonprofit organization for each hour a partner works in the community. Through the Starbucks Foundation, 100 executives serve on community or nonprofit boards. Partner "green teams" monitor electrical usage and recycling opportunities and suggest improvements.

Recognize that profitability is essential to the company's future. Starbucks is approaching the $4 billion revenue mark, and its stock has performed strongly. Same-store sales in stores open for at least one year increased monthly for over 140 consecutive months. Some diversification has taken place with Tazo tea and music, and Starbucks has entered the Fortune 500 for the first time (Stopper, 2005, p. 22).

Currently, Starbucks' partners deliver more than 25 million transactions with customers each week (Stopper, 2005). Given the enormity of its global operations and the critical importance of the human resource function, 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. Stopper adds that "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 its partners over the years in ways that are reflective of the high commitment HRM model discussed below.

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). Dunn (2006) 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" (p. 70). Research on high commitment HRM to date suggests several key findings:

First, there are substantial differences in performance between the most and least effective firms or plants. Second, a significant portion of that difference can be attributed to differences in the management of the employment relationship. Third, there is fairly consistent agreement on what constitutes high-performance work practices. Fourth, there is conflicting evidence about whether best practice is or is not contingent on the firm's strategy, and whether the practices interact in producing their effects — that is, whether all of them must be present at some level. Fifth, evidence suggests that the diffusion of these high-commitment work practices, and their persistence once 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 attainable 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). A growing number of organizations have sought to reduce unplanned employee turnover by inculcating a sense of commitment and loyalty among their employees (Droege & Hoobler, 2003). According to Finnegan and Taylor (2004), "Unplanned, voluntary turnover is most often associated with high labor costs, loss 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 based on mutual trust between management and line employees in order to sustain a competitive advantage (Avolio & Bass, 2002). An increasing number of human resource practitioners have supported high commitment work systems to foster sustainable competitive advantage and reduce unplanned employee turnover (Burke & Cooper, 2005). The high commitment approach seeks to "elicit a commitment so that behaviour is primarily self-regulated rather than controlled by sanctions and pressures external to the individual and relations within the organization are based on high levels of trust" (Gratton, Hailey, Stiles, & Truss, 1999, p. 41).

Although pay and benefits remain among the most important motivational factors in the workplace, the high commitment HRM model recognizes that other factors also play a role in individual motivation and must be taken into account. Chonko and Roberts (1996) report that "of all the many properties that characterize work in formal organizations, pay is one of the most important. Pay has been found to influence significant organizational behavior variables, including turnover" (p. 154). This is a particularly important issue for Starbucks because the company has historically experienced an 80 percent annual turnover rate in its stores (Stopper, 2004).

Even the most well-paid employees may lack a sense of identification with their employers. The high commitment HRM model therefore seeks to firmly internalize a sense of commitment. Fink (1999) reports that "while intrinsic rewards generate identification with work and social rewards help broaden that identification to the team level, internalized values are the principal source of identification with the organization" (p. 19). Based on his analysis of various high commitment organizations, Fink concludes that: (1) to the extent that commitment to the work is desired, intrinsic rewards are both necessary and sufficient; (2) to the extent that commitment to co-workers is desired, social and general rewards are necessary, individual rewards may need to be de-emphasized, and task interdependence should be emphasized; and (3) to the extent that commitment to the organization is desired, fostering the internalization of organizational values is most necessary and usually sufficient, while rule compliance can be a contributing factor but risks producing behavior that is mistaken for true commitment (1999, p. 20).

In sum, the high commitment HRM model focuses on promoting commitment and loyalty among all employees through programs and initiatives grounded in an enhanced sense of mutual trust. An application of these aspects to Starbucks' human resource management practices follows below.

Some major corporations such as Walmart attempt to communicate a sense of teamwork by calling their employees "Associates" (note the capital "A"); likewise, Starbucks calls its employees "partners" (lowercased "p") (Starbucks Corporate Profile, 2012). According to Sparrow, Brewster, and Harris (2004), "In Starbucks, the HR function is called Partner Resources rather than Human Resources, and it plays a central role. It attempts to develop values based on being 'a great work environment,' 'embracing diversity,' and 'pleasing customers'" (p. 115). Consistent with the tenets of the high commitment HRM model, the company places a high priority on career development and has clearly outlined the steps involved in career progression so that all partners have the opportunity to pursue career goals of their choosing (Working at Starbucks, 2012). This focus on career development and training is highly congruent with Gratton et al.'s observation that "investment in self-development and career opportunities is seen as a cornerstone of the high-commitment contract, since it implies people are worthy of training and development" (1999, p. 207).

This sense of being "worthy of training and development" is made abundantly clear to up-and-coming executives at Starbucks through the company's "developing local talent" initiative, in which "young managers are in-patriated to Seattle. Developing talent is important because a typical store manager is aged 21 to 23 and runs a $1 million business. The company develops a strong sense of its values through a two-month immersion process where managers work in-store learning every part of the business" (Sparrow et al., 2004, p. 115). According to the company's promotional literature, Starbucks also engenders commitment by ensuring that all employees — even part-timers — receive healthcare insurance and are allowed to participate in a profit-sharing plan. Starbucks emphasizes that "we believe in treating our partners with respect and dignity. We are proud to offer two landmark programs for our partners: comprehensive health coverage for eligible full- and part-time partners and equity in the company through Bean Stock" (Starbucks Corporate Profile, 2012, p. 3).