There
are not many companies that have totally changed the way people behave.
Federal Express is one. Starbucks is another.
The History
It all started in 1971 when two guys,
Jerry Baldwin and Gordon Bowker, fell in love with the taste of the coffee
that they had at college in San Francisco. Alfred Peet had a different way of
roasting coffee beans that we now call ‘dark roasted’. They were so taken by
it that they started their own company in Seattle selling coffee beans and
grinding them for customers. People in Seattle were impressed by the passion
these two guys had for their coffee and before long the business had grown
large enough to have its own roasting plant. Howard Schultz was a salesman
for one of their equipment suppliers, based in New York. When he first
visited Seattle in 1981, he also became captivated by the flavour of their
coffee and struck up a friendship with the owners. He became convinced that
he should work for them and expand the business across America. In 1982 he finally
persuaded them to give him a job as marketing manager.
The Vision
Then in 1983, the vision was created. On
a visit to Milan Howard discovered the hundreds of coffee bars in the city
that acted as social meeting points. He was convinced that he could persuade
Americans to use coffee bars as a ‘Third Place’ (apart from work and home).
This would give him the opportunity to educate even more people on the
delights of his dark roast coffee. However, on return to Seattle, he found
that he could not persuade the owners. The company now had five stores and
had just bought Alfred Peet’s five stores in San Francisco. It was much too
busy integrating these two operations to try something new. Howard
persisted and after a successful small trial, left Starbucks in 1985 to form
his own company. By 1987 he had three coffee shops, attracting people into
drink coffee and eat cookies as well as to buy the beans and equipment to
make coffee at home. Then suddenly, the Starbucks six stores in Seattle were
put on the market. He knew he had to buy them so put all his efforts into
raising the necessary $4 million and so became president of the company at
the age of 34.
The Beliefs
Howard came from a poor family in
Brooklyn and could never forget how his father got no pay while recovering
from a broken leg. He grew up with a strong belief that companies should care
for their workers. He also learnt from his early days in Starbucks that if
the leaders don’t keep in touch with the staff this creates unrest. Above all
he knew that if the staff were passionate about the coffee that they served,
the customers would feel it and keep coming back.
The Mission
Starbucks is very clear that it must
maintain its fundamental belief in the quality of its coffee.
Mission Statement and Guiding Principles
To establish Starbucks as the premier
purveyor of the finest coffee in the world while maintaining our
uncompromising principles as we grow.
The following six guiding principles will
help us measure the appropriateness of our decisions:
- Provide a great work
environment and treat each other with respect and dignity.
- Embrace diversity as
essential to the way we do business.
- Apply the highest
standards of excellence to the purchasing, roasting and fresh delivery
of our coffee.
- Develop enthusiastically
satisfied customers all of the time.
- Contribute
positively to our communities and our environment.
- Recognize that
profitability is essential to our future success.
The
current statement was refined by a group of 50 employees – demonstrating the
commitment to involving staff in the company. Even today there are Mission
Review forms available for staff to suggest changes to a ‘Mission Review
Team’ that meets quarterly.
The Caring
Recognising that customers will remain
loyal if they get to know the front line staff, Starbucks knew the importance
of low staff turnover. Communication and involvement are crucial but there
has to be more tangible things. What Howard describes as second nature in
family-run firms is to stand by people and they will stand by you. So in 1988
he persuaded the board to provide healthcare benefits to all the staff
including part time workers (the key people on the front line). It cost $1500
a year to provide each person with the full benefits, but $3000 to train a
new employee. Even today it is rare for companies to give part time staff
such benefits. The reasons are clear:
Why Health Insurance?
- Respect and dignity
- Right thing to do
- Attract quality
people
Then in 1991, while still a private
company, he launched ‘Bean Stock’, the chance to own shares in the company.
Each employee was given stock options worth 12% of their annual base pay.
Every October the same options are provided and are now at 14% of base pay.
From that moment on all employees have been referred to as partners.
The Environment
As you can imagine, the caring does not
stop with employees. Environmental committees work to a series of
environmental goals.
Environmental
Mission Statement
Starbucks is committed to a role of
environmental leadership in all facets of our business.
We will fulfil this mission by a commitment to:
- Understanding of
environmental issues and sharing information with our partners.
- Developing
innovative and flexible solutions to bring about change.
- Striving to buy,
sell and use environmentally friendly products.
- Instilling
environmental responsibility as a corporate value.
- Measuring and
monitoring our progress for each project.
- Encouraging
all partners to share in our mission
This adds to the pride which every
partner has in being part of the organisation. It also keeps the growing
number of environmentally concerned customers loyal.
A
frequently forgotten aspect of their care for the environment is the work
they do for the ‘CARE’ charity. Starbucks provides them with much needed funds
for its work in Guatemala, Kenya, Ethiopia and Indonesia. In 1995 they
introduced a framework for a code of conduct called ‘Starbucks Commitment to
do our part’. This was a first step towards their goal to improve the quality
of life in coffee producing countries. They work with ‘Appropriate Technology
International’, a not for profit organisation, that works with small scale
farmers to improve their business.
The Customer Focus
The first thing I came across when I
entered the original offices of Starbucks was their organisation chart:
Starbucks Organisation Chart
OUR CUSTOMERS
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ALL OF US
Retaining
this customer focus becomes more difficult as the company grows. They have
four cornerstones to achieve this:
Four
Cornerstones
- Corporate Focus
Define key strategic goals and communicate customer orientated values
- Market Understanding
Establish practices for gathering information about customers and competition
- Value Sharing
Maintain a culture that encourages customer-oriented behaviour and that represents our core purpose
- Process Evaluation
Consistently measure and evaluate performance
Perhaps one of
the most significant features in Starbucks is the job title ‘Director
Customer Feedback Systems’ Wendy Collie has the job of ensuring that the
customer piece has to be integrated into everything that Starbucks does. This
has helped them shift from a product driven to a service driven company.
Howard Behar, who runs the retail operations has stated that "We’re not
in the coffee business serving people. We’re in the people business serving
coffee." Deborah Hauck, Vice President Markets and Products, stresses
that partners have to do whatever it takes to make customers happy –just say
yes! In the past, partners were rewarded for financial results but they have
now developed a balanced scorecard to include the customer focus elements.
Bradley Honeycutt, Vice President HR Services International, looks for
new employees with a customer service bent or passionate with vitality and
drive – the ability to get excited. To make certain that they understand the
product that they are offering, the partners are each given a pound of free
coffee every week.
The Future
With 1500 outlets (all owned, apart from
those at airports) Starbucks opens a new one every day. Such rapid growth has
meant that the style of management has had to change. Howard has been careful
to bring in outstanding people who know how to run large businesses and who
are equally passionate about the values. Spreading the gospel about the dark
roasted coffee and the new social meeting places has speeded up because so
many competitors have arrived on the scene, some with more money to invest in
rapid growth. Starbucks is still reluctant to expand through franchise
arrangements because of the risk of losing their reputation for coffee
quality and customer focused staff. However, joint ventures have been made
with companies that demonstrate their commitment to Starbucks’ values. You
now get Starbucks coffee on United Airlines flights and in Nordstrom stores.
In 1994, Starbucks invented a blended cold drink Frappaccino and this was
launched in bottles in a joint venture with Pepsi last year. New ideas abound
but the focus will always be to make work enjoyable for the 25,000 partners
and give them pride and ownership in the company.
Tony Mosely is
Executive Director of The Society of Consumer Affairs Professionals (SOCAP).
Phone: +44 (0)
1275 845511 or visit: www.serviceexcellence.co.uk
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