A Retailer Of Coffee Beans Management Essay
Starbucks Coffee Company was founded in Seattle in the year 1971 as a retailer of coffee beans. Inspired by the coffee shops and warm coffee culture of Italy, Howard Schultz purchased the company in 1987 with the idea of selling coffee and espresso drinks in addition to coffee beans. Since then, Starbucks has grown at an incredible rate, becoming the world’s biggest retailer roaster and brand of specialty coffee with more than 40 million customer visits per week. With over 145,000 employees, the company has coffee shops in every state of America and in 36 countries around the globe, totaling to over 12,000 coffeehouses and 5,000 licensed locations and joint ventures.
In addition to coffee, Starbucks has also expanded its product line to other goods such as their own brands of bottled water, teas, as well as coffee related accessories and equipment. With this immense expansion, the company achieved revenues of 11.7 billion dollars in 2011 and continues to grow today
From the perception of the Starbucks’ corporate group, the quality of the employees and the baristas was the most significant ingredient of Starbucks’ success, next to the specialty coffee itself. As Howard Schultz said in reference to his employees, “these people are not only the heart and soul but also the public face of the company. Every dollar earned passes through their hands.” (Shultz, Put Your Heart Into It: How Starbucks Built A company One cup at a Time, 1997, p. 125) Huge financial resources and time were devoted to pursuing the most excellent means of obtaining the top quality employees available.
2.0 STARBUCKS MOTIVATION METHODS
Starbucks realized early that highly motivated and committed human resources were the key to the success of a business. In order to do so, they have come out with several methods to motivate its employees for them to feel appreciated and thus will lead them to be committed and loyal to the company. The several methods are to implement healthcare benefits, stock ownership plans, respect for local cultures, employee training and recognition program, internal communications through web portal, and many other benefits.
Besides that, the company takes great care in selecting the right kind of people and makes an effort to retain them. The company’s human resource policies reflect its commitment to its employees.
2.1 Healthcare Benefits
A narrative approach used in Starbucks was to raise health care benefits and broaden them to all staffs who are working more than 20 hours a week. Conventional wisdom would lead one to believe that this step would increase the costs to an unacceptable extent. The company staff at Starbucks reasoned that increasing the healthcare benefits would not only draws higher-quality workers but would reduce the high turnover rate and potentially shrink the overall expenses for the company. Their strategic assessment of the effects increased healthcare benefits would have on the company expenses prove correct with the passing of time.
The cost of training a new barista at Starbucks was $ 3,000 in the year 1989, when they initially began to offer higher healthcare benefits, and the cost of providing an employee with full health benefits was $ 1,500. With the typical turnover rate at a retail or fast food chain ranging between 150% to as high as 400% a year, Starbucks turnover rate of 60% at the barista level and 25% at the managerial level was at the lowest in their industry. (Shultz, Put Your Heart Into It: How Starbucks Built A company One cup at a Time, 1997, p. 128) Without many mathematical calculations it is easy to come to the conclusion that the increased health benefits did indeed save Starbucks money.
The healthcare benefits which were given to the employees are a comprehensive medical coverage, insurance, medical, prescription drugs, dental, vision, life and disability.
2.2 Stock Ownership Plan
Another unique initiative plan that the Starbucks’ corporate team come up with was an employee stock ownership plan affectionately referred to Bean Stock. The basic plan was to grant stock options to every employee, companywide, from top managers down to baristas, in proportion to their level of base pay. Initially, the stock options were offered at 12% of base pay but were then boosted to 14% of base pay. Because Starbucks offered these stock options to 700 employees as a private company they had to obtain a special exemption from the Securities and Exchange Commission (Sec). Sec typically required companies with more than 500 registered shareholders to file for public status. (Shultz, Put Your Heart Into It: How Starbucks Built A company One cup at a Time, 1997, p. 135)
By involving all employees in the equity success of the company, Starbucks effectively created a clear incentive for employees to both reduce costs and treat customers with exceptional service. In addition to the beanstalk program, Starbucks initiated an open forum every quarter to explain the company’s progression and also to encourage questions and suggestions from all employee levels. After the program was initiated, the word employee was no longer used on internal documents; instead it was replaced with the word partners. This was another ploy to create employee loyalty and dedications.
2.3 Respects for Local Cultures
Despite the size of its operation, Starbucks has maintained a strong corporate culture of social awareness. The chairman and the CEO of Starbucks, Howard Schultz quotes “We remain highly respectful of the culture and traditions of the countries in which we do business. We recognize that our success is not an entitlement, and we must continue to earn the trust and respect of customers every day”. Partners are highly motivated because Starbucks is dedicated in creating a workplace that value and respect people from diverse backgrounds, and enables its partners to do their best at work.
2.4 Employee Training and Recognition
Starbucks invests in training of their employees in the skills they would require to perform their job more efficiently. They also are one of the few companies who invest considerably in employee training and provide a comprehensive training to all classes of employees, including the part-timers.
System to recruit, hire and train baristas and store managers, screening, training programs, award for partners and internal recognitions programs.
2.5 Internal Communication
Employees may access to the company web portal to access to company news before it is release to public. This will helps the employees to know more of the products or services given to customers before it released to the public. This will build more confidence towards the employee in answering their customers enquiries regarding the products and services Starbucks offer.
2.6 Other Benefits
There are more than 50 partner clubs and networks that help their employees share interest, and find work or life balance. These include recreational athletic leagues, foreign language clubs and parenting resources. Starbucks also offers thrive wellness program, elite athlete assistance program, career sabbaticals, discounted Starbucks merchandise and other retailers, a pack of coffee each month, education benefits, tuition assistance, opportunities to connect around similar interests, paid vacation and etc.
For my opinion, Starbucks is doing well but they need to provide more benefits to the employees. They could have a business trip for those employees who perform well to visit other top Starbucks outlet in other country to share knowledge and culture and at the mean time the employees have the opportunity to travel overseas country. This will motivate it staffs to perform well and able to achieve the company’s goal.
Next, they should have a regular meeting each week to discuss problems face by the employees, to conduct refresher training for the employees, to educate employees on new products or merchandise. With this, the employees will be updated and aware of the new products and services, and problems or dissatisfaction can be voice out to be corrected by the management rather than employees are being left alone to find solutions to the problems face or leaving the company to find a better working environment.
Other than that, they could have work transferred program whereby the employees who are interested to work in a new environment or were to migrate to another country have the opportunity to work in another country where there is Starbucks outlet. This interested candidate should gained certain level of skills, experience, knowledge and who is a hardworking employee in order to be qualified to be in the program.
The benefits that motivate its employees such as implemented by Starbucks mentioned earlier shows positive results where they were placed seven among large companies among in the Fortune “Best Companies to Work For” survey of 100,000 employees from 406 different companies in the year 2008.
With the recommendation and the current benefits, the employees will be more attracted and highly motivated as they have the opportunity to migrate or change a new work environment and to climb up the ladder. This will further reduce the turnover rate and employees dissatisfaction and thus will lead to a better and friendly customer service. An excellent friendly customer service and highly motivated staff, customers feels more comfortable to walk-in to the store or to enquired more on Starbucks products and this will boost the sales for Starbucks.
Starbucks be capable of attaining higher level of efficiency since we believe the employees’ motivations are enhanced. Vroom’s (1964) Expectancy theory consists of three components which are Valence, Expectancy, and Instrumentality. Vroom suggests that “for a person to be motivated, effort, performance and motivation must be linked” (Droar, 2006, p. 2). Three factors that direct the intensity of effort put forth by the individual, according to Vroom are expectancy, instrumentality, and preferences (Holdford and Lovelace-Elmore, 2001).
First the term valence refers to the feelings of satisfaction people obtain from their preferred outcomes should performance be achieved. When people have preferences of attaining certain outcomes, the outcomes have positive valence. On the contrary, if negative valence exists, people have the desire to avoid the outcomes at all expense. The valence has no value if people are indifferent in training or not attaining the outcomes. Second, Expectancy is defined as “the probability or degree of certainty people estimate on how well a particular alternative action will indeed lead to a desire outcome” (Miner, 2005). The desired outcome depends not only on the preference that the person makes but also on the conditions that are out of the people’s control. Third, Instrumentality is regarded as means people have to successfully achieve their preferred outcomes. In order to successfully achieve the desired outcomes, people must have the experience, knowledge, physical ability and right machinery tools as well as external support such as the appropriate job design, organization structure and work procedures.
2.0 Expectancy Theory
The Victor Vroom’s expectancy theory principle is as follows: Motivation force = Expectancy x Instrumentality x Valence. Because this theory is based on the product of the probabilities of these three components, there will be no motivation, if any of these has a value near or equal to zero. Vroom suggested that an employee’s belief about Expectancy, Instrumentality, and Valence interact psychologically to create a motivational force such that the employee acts in ways that bring pleasure and avoid pain.
First, expectancy is effort-performance relationship. It is the belief that increased effort will lead to increased performance. This is the affected by having the right resources available, having the right skills to do the job and having the necessary support to get the job done. We have calculated the mean, standard deviation, and response correlation to interpret the level of expectancy at Starbucks Table 1 (Appendix 1). The collected data shows that all employees at Starbucks believed that they receive necessary training to help them achieve desired outcomes and perform job properly. In addition, 93 % of them believed that their supervisor helps them to develop their necessary skills to improve their performance. The data from the correlation also showed that for these people, only they believed that their supervisor supported them, they are likely to be motivated to exceed the company’s expectation.
We found out that all of the interviewees agreed that if they put more effort, not only could they outperform their partners, but they also could help their branch to increase revenue, attract more customers and increase customer loyalty. In conclusion, by weighting the data collected from each source, we concluded that the expectancy score of Starbucks is very high.
Second, Instrumentality is performance-reward relationship. It is believed that if you perform well that a value outcome will be received. We also like to uncover to what extend does the individual expect that the outcomes are associated with good performance differ from those outcomes associated with poor performance. This is affected by clear understanding of the relationship between performance and outcome, trust in the people that decides who gets what outcome, and transparency of the process that decides who gets the outcome. At Starbucks, employee performance is measured every six months; the data from the table 2 in Appendix H showed all employees agreed that they were treated fairly. It is a positive sign that shows trust between Starbucks and its employees, they know also that they will be rewarded fairly by their supervisor. Being treated or rewarded fairly is just one of the components of instrumentality.
On the other hand, some of the survey responses signaled some negativity towards instrumentality. The employees answered differently when we asked if they consistently perform well at their jobs, would they be rewarded. Since the coefficient between mean and standard deviation of the questions was a bit high (50%), we decided to perform the second round interview to examine the variance. To our surprise, the result showed that all interviewees agreed that if they do a good job, there is some good outcome for them, which was inconsistent with the survey results. Then, we figured out that the variance came from different attitude toward expected rewards or outcomes they would receive; each employee valued these rewards or outcomes differently. For example, the students who work in Starbucks part-time might not be interested to get more working hours. However, for some full-time employees, being scheduled for more hours can be a measure of compensation or a representation of their worth to the organization. Or, during the economic downturn, having a job is considered big reward for some employee. In employees’ point of views, the expected rewards can be increase in working hours, an increase in their own reputation, flexibility in working hours, recognition from their supervisor, or a promotion. (894words)
From all sources of the data collected , we drew a
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