STARBUCKS’ HUMAN RESOURCE MANAGEMENT PRACTICES 1

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Starbucks' Human Resource Management Practices

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Abstract Starbucks’ Human Resource Management Practices

The Starbucks Corporation utilizes its human resources practices and policies as a strategy to
The Starbucks Corporation sees its employees as a key part of its view of itself as a
gain competitive advantage and drive the overall success of the company and its globalization
business serving the community; its employees are vital for its growth, helping the business
efforts. The purpose of this research paper is to analyze Starbucks’ recruiting practices,
grow and thrive (“Working at Starbucks,” n.d.). To work at Starbucks is much like working
training structures, and overall human resource management strategies in order to give insight
with friends, its website claims; the company understands appreciates, respects, and includes
into how the Seattle-based coffee company stands out from its competitors and remains a
different kinds of people. It is a company that also embraces diversity. Starbucks provides all
successful enterprise in spite of the challenges facing it.
employees and their same-sex or opposite sex-partners comprehensive health benefits that

include medical, dental, and vision care as well as tuition reimbursement, stock options,

vacation, and the 401 (k) retirement plan (Noe, Hollenbeck, Gerhart & Wright, 2010).

Starbucks is also company that practices open communication. It keeps employees or

“partners” frequently informed, its senior leaders frequently holding “Open Forum” events to

answer employee questions and mitigate issues or concerns. Starbucks believes that it is

important to hire those not just for the ability to be trained in cafe work and customer

satisfaction, but also those with an aptitude for social consciousness. Its mission is to inspire

and nurture the human spirit “one person, one cup, and one neighborhood at a time” (“Our

Mission,” n.d.). The company is well-known for its ethical sourcing of coffee from farmers

all over the globe and environmental leadership (by 2015 all its cups will be reusable or

recyclable). It is also renowned for its community involvement through volunteer work in

neighborhoods where stores are located (Noe et al., 2010).

Performance Management, Benefits, and Customer Satisfaction

Starbucks has offered a variety of training programs to provide employees sufficient

knowledge of the company’s values and how to foster it amongst their customers. According

to Obloga (2011), “First Impressions” has given insight to baristas as how to interact with

customers in terms of service principles. Employees are made aware of the company’s
STARBUCKS’ HUMAN RESOURCE MANAGEMENT PRACTICES 4 STARBUCKS’ HUMAN RESOURCE MANAGEMENT PRACTICES 5

history and learn how to perform coffee preparation and use a cash register. In addition, they At Starbucks people are said to be its main resource. Hence, training efforts, as noted

learn the right kind of communication skills to interact optimally with customers in order to above, comprise its balanced scorecard; a balanced scorecard involves four perspectives. The

create the environment that Starbucks aims to promote (Obloga, 2011). learning and growth perspective involves employee training and cultural attitudes of the

Starbucks has tried to develop its human resources practices and make them stronger company. Kaplan and Norton (1996) emphasized that learning is more than training; mentors

to the extent that employees have better relationships with their managers and feel connected and tutors should also be within the organization as well as a streamlining of the

to the organization as a whole. Starbuck’s has gained admiration and recognition by being a communication process, utilizing technological tools that allow better interaction among

pioneer in offering the same benefits to part-time workers as are offered to full-time employees, as Starbucks does with “Open Forum.” The customer perspective, which focuses

employees. Such benefits include health care, dental, and vision insurance (Obloga, 2011). on importance of the customer and customer satisfaction, is essential as noted above; if

Benefits also cover alternative medical treatments, such as hypnotherapy and naturotherapy. customers are not satisfied, they will go somewhere else and the company will be left behind.

Starbucks additionally offers their employees benefits such as income protection, saving In measuring customer satisfaction, it is important to examine the kinds of processes that go

plans, partner discounts, and free drinks on a regular basis. Another unique benefit of into providing a product or service to those customer groups (“Balanced Scorecard Basics,”

Starbucks is their “Adoption Assistance Program,” which reimburses employees a certain n.d.). Therefore, Starbucks values the customer perspective of their balanced scorecard as per

amount of expenses incurred during a child adoption process. Noe et al. (2010) stated that the training described.

such benefits serve to increase employee motivation, recognition, and retention; they also Recruitment Growth, Company Performance, and Work-life Balance

assist in decreasing employee turnover.

The recruitment process is a pivotal strategy for Starbucks to accomplish its

Fundamentally, Starbucks believes its baristas are the key feature to the Starbucks objectives in finding the right kinds of personnel to carry out its mission and business

experience and customer satisfaction. Starbucks wants them to have coffee knowledge and strategy. Fortunately for the company, it had experienced periods of accelerated growth,

product expertise, providing great customer service. For example, to make sure that opening up more than four stores and adding 200 employees each day until 2007 (Noe et al.,

customers were delighted and served coffee to high-quality standards, Starbucks closed most 2010). With such a rapid growth rate, however, it had to assimilate those new hires quickly

of its stores in 2008 for a full day training event (Noe et al., 2010). The training event, known into the company to meet its growth goals. In the process the company made hasty decisions

as “Perfect the Art of Espresso,” was held to help baristas deliver high-quality espresso. One and cluttered new stores with merchandise whilst losing focus on coffee. Starbucks’ CEO

activity involved pulling an espresso shot and then evaluating and reflecting upon the process Howard Schultz and other top executives did not earn bonuses in 2008 as a result of the

and the product. (Did it take too long or too short a time? Was it the right color?). Staff company’s subsequent poor performance. According to Noe et al. (2010), Schultz asked the

discussions about how the training would be of use to customers occurred at each store (Noe board of directors that year to decrease his 1.2 million in base pay to $1; the company’s new

et al., 2010). This highlights the degree to which the company values the training of its corporate jet went up for sale. Starbucks closed 300 underperforming stores and laid-off over

baristas and views the importance of their role in the Starbucks experience.
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6,700 employees. Starbucks also announced that it would no longer be matching employees’ recruit, develop, and retain employees who possess the skills and vision. It must seek the

contributions to their 401 (k) retirement plans. opportunity to make positive changes to compensation, benefits, and reward and

recognition programs and additionally provide training and development opportunities to

However, in spite of store closures and tough times, Starbucks has remained a highly
its employees (Mathis & Jackson, 2009); it must promote work-life balance in the
regarded company to work for, reaching in 2013 number 94 on Fortune’s 100 best companies

to work for (“100 Best Companies,” n.d.). Its continued success arguably is due to its manner Starbucks has done.

successful administration of human resources management, denoting all the efforts that
Core Practices and Values
Starbucks undergoes to recruit, develop, and retain its employees. Its recruitment strategies
Having a business process perspective entails possessing knowledge of the
involve strategic human resource planning as well as utilizing “social recruitment” online via
company’s internal business processes. These processes are measurable and in so doing it is
its career site to target its hiring audience. Once hired, keeping or retaining valuable human
essential that successful companies bring together its products and services with consumer
capital implies evaluating performance regularly, encouraging success, providing benefits
demand. These actions are best handled by those who know the company’s business
and the ability to undertake the necessary actions to keep them within the organization,
processes most intimately, not consultants, but rather in the case of Starbucks, its employees.
including promoting work-life balance (Noe et al., 2010).
Hence, Starbucks’ human resource management practices help support the company’s
Work-life balance is the concept of balancing one’s working life with one’s health and business strategy in providing services the customer values. For example, Starbucks’
well being. In general, it can be a difficult endeavor, particularly in those whom feel Frappucino was a drink invented by one of its employees (Noe et al., 2010). Initially,
overworked and who find it challenging to juggle the demands of their job with the rest of Starbucks’ leadership including thought it was a horrible idea. They fought it out in many
their lives. To help curb job burnout, it is useful for an individual, regardless of where they meetings but the employee in question kept getting more and more data supporting her case
work, to employ tactics such as building downtime into one’s schedule, dropping activities
for how much customers liked it. Upper management finally gave in and gave the go ahead to
that deplete time and energy, exercising, and seeking relaxation strategies (Uscher, 2012). begin making it, and it now is a $1 billion a year product.
Companies and organizations can also play a critical role in creating meaningful work-life
Therefore, the value of a product or service is determined by its quality and how
balance, Starbucks being a prime example. While one estimate is that less than 30 percent of
closely the product fits customer needs. In enhancing Starbucks’s competitiveness, its
part-time workers in the United States have paid sick leave or paid time off, at Starbucks
willingness to listen to employee input, allows emergent strategies to come directly from the
part-time employees are eligible for paid sick leave or paid time off if they work 240 hours a
marketplace by determining and responding to the exact mix of customer desires (Noe et al.,
quarter (Noe et al., 2010).
2010). Accordingly, Starbucks aims to have the right kinds of people in place who have the
Human resource management in general has to serve as an internal adviser, and
skills and foresight to evolve the company. “If people relate to the company they work for, if
be viewed as open-minded, fair, professional and efficient. Human resources must
they form an emotional tie to it and buy into its dreams, they will pour their heart into
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making it better. When employees have self-esteem and self-respect they can contribute so If inspiring and nurturing the human spirit involves having passion, certainly

much more; to their company, to their family, to the world.” Noe et al. (2010) wrote that this Starbucks is passionate about the quality of their products and look of their cafes, their

statement of Schultz’s exemplifies the increasing importance of human capital in developing newest store in Amsterdam being a prime example. Not only do they source high quality

and maintaining competitive advantage. coffee beans, roasting them with great care, they have recently innovated in Amsterdam with

high quality coffee making equipment - the Clover (R) brewing system at their first store
To maintain competitive advantage involves harmonizing the four perspectives of
equipped with its own in-house bakery. There are new design aesthetics, an amplified coffee
Starbucks’ balanced scorecard, synchronizing them together as would a conductor in a
theater, and the depth of connection to Dutch culture that is according to their website setting
symphony comprised of different instruments. The responsibility of fostering the harmony
the stage for its future across Europe (“The Clover Brewing System,” n.d.).
perspective is best led by who are adept in all areas of Starbucks’ corporate instrumentation,

and from a bird’s eye view perspective can transformatively align those areas that are out of From its infancy, the Starbucks marketing strategy has consistently focused on
balance, synergizing them, thereby reinforcing the organization’s stated mission. To better creating a “third place” for people to go to between work and home. What sets it apart from
understand the degree to which Starbucks harmonizes the four business scorecard apart from traditional coffee houses in my current hometown of Vienna, Austria, for example,
perspectives, let us first re-examine its mission statement. is its passion for unique products that cater more to students and young urban professionals,

A mission statement is a short-written statement of the purpose of a company or in addition to its ability to create a unique and relaxing atmosphere catered to more healthy

organization. The statement should guide the actions of the entity, provide a sense of minded people. This differentiates it from the Viennese coffee houses that commonly allow

direction, and guide decision-making in a manner that ultimately synchronizes the aspects of smoking, have no internet access, no selection of music, and have no unique beverage

the scorecard in a clear and coherent strategy. A poor understanding of its strategy products on the menu to the extent Starbucks offers. As a result, Starbucks cafes in Vienna

formulation may result in an entity choosing strategies it is not capable of pursuing (Wright, have become centers for socializing and a common meeting point for many according to my

McMahan & Williams 1994). Notably, Starbucks has been repositioning itself in the experience. The company has managed to create a cafe experience that is comfortable,

marketplace and this is reflected in its change of its mission statement. Its old mission attractive, and entertaining in order to attract customers and keep them coming back.

statement was "To establish Starbucks as the premier purveyor of the finest coffees in the Therefore, “third place” is central to Starbucks’ mission statement, practices, and values.

world while maintaining our uncompromising principles as we grow" (Thompson & As are many successful companies today, Starbucks is also subject to the scrutiny
Strickland, 1997). Starbucks has since changed its mission statement to a broader and deeper that it has not achieved its success at the expense and exploitation of others. In light of this,
statement of purpose as noted above. Let us contextualize Starbucks’ mission statement the company is passionate about ethically sourcing their coffee beans and caring for and
further by examining how it influences its practices and values. improving the lives of people who grow them (Noe et al., 2010). Nevertheless, when I was

living in San Francisco, California in the mid-1990s, the opening of a Starbucks was often
STARBUCKS’ HUMAN RESOURCE MANAGEMENT PRACTICES 10 STARBUCKS’ HUMAN RESOURCE MANAGEMENT PRACTICES 11

met with objection from local cafes, their owners, and patrons alike. Starbucks appeared Starbucks in a kind of quandary. According to Brush (2011), Starbucks has needed to take
rather ruthless to many at that time in establishing themselves quickly in nearby locations in care to not cheapen its brand whilst responding to this impressive challenge from
neighborhoods where there was a strong local connection to the community. However, McDonald's. Starbucks has navigated through this market issue well so far. It has attracted
notwithstanding, Starbucks seeks be “good neighbors” as per its postings on its website customers with its premium coffee brand, Seattle's Best Coffee, at more than 30,000 quick-
(“Being a Responsible Company,” n.d.). service partnerships, their cooperation with Subway being one example. “This gives the

Competitive Challenges company exposure to this space without putting the Starbucks name into the fray. By

No matter its efforts to be an ethical and sound company on all fronts, Starbucks stealthily moving into this part of the market, Starbucks looks more like McDonald's, at least

began having considerable trouble beginning in 2008, not only with falling revenues from behind the scenes, without diluting the premium aspects of its name in the eyes of the public,”

the recession, but also due to increased competition from primarily McDonald's and Dunkin' wrote Brush (2011).

Donuts; both had entered the quality coffee market by that time (Brush, 2011). Brush wrote Unions, Equitable Pay, and Working Conditions
that though it had taken awhile, the two chains finally noticed the huge profits Starbucks was
In spite of Starbuck’s successes in many quick-service partnerships and in its overall
making from coffee sales. Let us focus on the threat from McDonald’s.
strategy to keep McDonald’s in particular at bay from its customer base domestically and
Initially, McDonald's knew it could not sell $5 coffee drinks like Starbucks does.
internationally, separate human resource management issues still abound. Specifically, there
Starbucks and McDonald's have differing customer bases: one that tends to be more affluent,
have been issues raised in the balanced scorecard by segments of employees in terms of
the other a bit more price sensitive. Keenly aware of its customer base, McDonald's is
equitable pay. According to Noe et al. (2010) external equity takes place when an employer
"always keeping an ever-vigilant eye on everyday affordability, which is the most important
pays a wage rate on par with the wages current in “external” job markets. Internal equity
thing for our consumers," said CEO Jim Skinner said during a company conference call with
exists when an employer pays wages on par with the relative "internal" value of each job.
shareholders. "They get pinched everywhere," Skinner added. "They should not suffer the
This is determined according to what the employer perceives is of the importance of the
same fate at McDonald's" (Brush, 2011). Nonetheless, McDonald’s has since begun selling
labor being performed (Romanoff, Boehm & Benson, 1986).
premium coffee and it has been big hit, with sales growing remarkably. "We believe
In May 2004, Starbucks's workers at the 36th and Madison store in midtown
McDonald's could evolve into Starbucks' fiercest rival in the specialty coffee segment,"
Manhattan organized the first Starbucks barista union in the United States. The union drive
stated analyst R.J. Hottovy, who in 2011 covered both companies for Morningstar (Brush,
had its origins in barista's complaints that a starting wage of $7.75 an hour was not a living
2011).
wage in New York City and that Starbucks had refused to guarantee a regularity of hours per
The advent of McCafè’s inside the main and the often “going green” McDonald’s
week (Allison, 2007). “They're underpaid, their hours stink, and many can't afford the
restaurants is a notable attempt to create its own version of “third place,” all which puts
company's health insurance,” stated Daniel Gross in 2007, an Industrial Workers of the World
STARBUCKS’ HUMAN RESOURCE MANAGEMENT PRACTICES 12
STARBUCKS’ HUMAN RESOURCE MANAGEMENT PRACTICES 13

(IWW) organizer who had spent three years as a Starbucks barista in New York. "Starbucks
As Starbucks made record profits of $1.7 billion this year, enough to give $8000 to
has falsely cashed in on a socially responsible image," said the energetic Fordham Law
every single Starbucks worker. But instead of compensating us fairly for our hard
School student who, according to Allison (2007), had become involved with the union around
work, CEO Howard Schultz handed out millions in dividends to wealthy investors
the time he left a prior job at Borders Books and Music. "There's a tremendous amount of
while squeezing us like never before. Since 2008, under-staffing has gotten worse, our
discontent among Starbucks workers," stated Gross.
pay has remained stagnant with smaller merit increases, our health insurance
Two years before the Allison (2007) Seattle Times article was published, Starbucks premiums have doubled, our benefits have been cut, and we have been saddled with
had agreed to pay more than $165,000 to settle unfair-labor-practices complaints, although more labor-intensive tasks like up-selling VIA and other products and brewing coffee
it admitted no wrongdoing (Allison, 2007). Perhaps, like many corporate executives,
in "cadence" every 6 minutes (“Unite for Good Jobs at Starbucks,” 2012).
Schultz, as stated by Allison, believes his company treats employees so well that they
Such petition efforts are arguably healthy mechanisms for union-oriented Starbucks
should not want a union. In his 1997 book about Starbucks, Shultz wrote about building
employees and their supporters to vent their feelings and bring awareness to their views on
trust with employees after buying the company a decade earlier. "I was convinced that under
equitable pay and overall working conditions.
my leadership, employees would come to realize that I would listen to their concerns,"

Schultz wrote. "If they had faith in me and my motives, they wouldn't need a union,” he Starbucks’ Experience Globally

wrote (Schultz, 1997).

When Starbucks has done well internationally, it has grasped the simple concept that

In deciding what to pay employees, Romanoff et al. (1986) stated that employers McDonald’s apparently has understood when it comes to HRM and business practices: when

should carefully define the appropriate market(s) to assure accurate external wage in Rome, do as the Romans do. However, Starbucks could arguably go further. While the

comparisons. Defining the market too narrowly can result in wages that are higher than coffee chain offers the same espressos, Frappuccino and lattes globally, the McDonald’s

necessary. Should a company that is doing business in two locations define its pay practices menu changes according to the dictates of local culture and tastes. In Japan, a consumer is

solely in terms of its metropolitan labor market, it could set wages that are unnecessarily able to purchase an Ebi Filet-O (a shrimp burger), while McDonald’s customers in Turkey

high for its rural areas. Therefore, geographic location is a major determiner of what to pay can get kebabs, and the McCurry Pan is available in India (Herron, 2008).

employees (Noe et al., 2010). Hence, $7.75 an hour was arguably not a living wage in New
In the past, Starbucks has sometimes failed to understand local social values, mores,
York City in 2004, nor would it be today, adjusted for inflation.
customs, and traditions most notably in Australia, Israel, and Beijing, China, where a

Moreover, on the Starbucks Workers Union website there is clear discontent with Starbucks’ location in the former Imperial Palace in the centuries-old Forbidden City closed

the company with claims that Starbucks has sought to please its shareholders on the backs in July 2007 (Herron, 2008). Herron stated that the coffee shop had been a source of

of employee labor. The organizers appeal to employees and supporters alike to sign the continuing controversy since its opening in 2000. Protesters had felt the presence of the

following petition:
STARBUCKS’ HUMAN RESOURCE MANAGEMENT PRACTICES 14
STARBUCKS’ HUMAN RESOURCE MANAGEMENT PRACTICES 15

American chain at this location was an affront to Chinese culture. Herron also noted that
measures. Such efforts involve scanning the internal and external environments of the
Berg (2008) had written of the pitfalls of globalization, stating: “The secret of the company’s
company, identifying strategic business opportunities as well as people issues, then
success in the American market wasn’t that it sold coffee. It sold coffee culture. The other
developing catered and innovative HRM strategies; communicating those strategies and
aspect of Starbucks’ appeal in the U.S. has been its establishment of the cafe as a social hub
disseminating them effectively to their people is what should follow (Noe et al., 2010). As
(i.e. as a “third place”). But when Starbucks came to Australia to bring coffee and its cafe
we have reviewed in this research paper, Starbucks has done this well on many of these
culture to the masses, it found that we already had it. Particularly in Melbourne, we have
fronts, which has kept it a successful company in spite of the issues pressing it as per those
better coffee and more relaxing cafes than anything that Starbucks brought with it.”

Therefore, the more Starbucks seeks to integrate itself with the local culture’s values hitherto described.

and expectations, in the manner McDonald’s has done, the more appeal it will have. Such

success inevitably draws on having the right people in place on all levels of local

management. Upper management and employees alike should be sensitive to these aims

and able to perform effectively and transformatively. Certainly, the mission, values, and

best practices of Starbucks appear to be in alignment with these HRM goals. Yet practice

shall make it more perfect.

Conclusions Drawn

According to Noe et al. (2010) HRM strategies should support the overall business

strategy. Short and long-term benefits can come out of supporting a company’s business

strategy in general, as has been the case in Starbucks’ application of its best practices and

relevant HRM activities. In terms of applying specific and guided human resource strategies,

first it is necessary for Starbucks’ upper management to continue to understand HRM

activities in terms of their strategic value, particularly in so far as cultural sensibilities,

equitable pay, and strategic direction are concerned. Starbucks, though not perfect, has

overall been successful in this regard.

It is vital too, for Starbucks’ upper management to maintain their efforts in authentic

and transformational leadership activities, as opposed to falling into a more transactional

tone where there is too much focus on record keeping, compliance, and disciplinary
 STARBUCKS’ HUMAN RESOURCE MANAGEMENT PRACTICES 17
STARBUCKS’ HUMAN RESOURCE MANAGEMENT PRACTICES 16

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