CLOSING CASE Starbucks: Taking a Stand on Social Issues When Howard Schultz founded Starbucks in growth. As he stated: "We can't achieve our stra- 1987, he wanted to create a company that would tegic objectives without a work force of people genuinely care for the well-being of its employees. who are immersed in the same commitment as He had been very influenced by his memories management. Our only sustainable advantage is of his father, noting that his father "struggled the quality of our work force. We're building a a great deal and never made more than $20,000 national retail company by creating pride in-and a year, and his work was never valued, emotion- stake in-the outcome of our labor." ally or physically, by his employer ... This was Schulz set out to accomplish his goals by creat- an injustice ... I want our employees to know ing an empowering corporate culture, exceptional we value them." He also believed that happy employee benefits, and employee stock owner- employees are the key to competitiveness and ship programs. While Starbucks enforces almost Copyright 3020 Cengage Learning. All Rights Reserved. May not be copied, canned, or duplicated, in whole or in purt. Due to electronic rights, some third party content may be suppressed from the eBlock and or eChapkr(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional contest at any time if subsequent rights restrictions require it.fanatical standards of coffee quality and customer 20 hours a week can work towards a bachelor's service, the culture at Starbucks towards employees degree through an online program from Arizona is laid back and supportive. Employees are empow- State University. cred to make decisions without constant referral to An ethical sourcing plan. Starbucks' coffee management, and are encouraged to think of them- must be purchased from suppliers that adhere to selves as partners in the business. Starbucks wants Starbucks' "C.A.F.E." standards. These standards employees to use their best judgment in making include practices related to product quality, eco- decisions and will stand behind them. This is rein- nomic accountability, and transparency (e.g., sup- forced through generous compensation and benefits pliers must provide evidence to demonstrate that packages. the price Starbucks pays reaches the farmer), so- In 2000, Schultz announced that he was resign- cial responsibility (e.g., third-party verifiers pro- ing as CEO and left the firm to pursue other ven- vide audits to ensure that suppliers are using safe, tures (though he remained chairman of the board of fair, and humane working and living conditions, directors). However, after Starbucks began to suf- including minimum-wage requirements and the fer from slumping net income and decreasing share prohibition of child and forced labor), and envi- price, Schultz returned to the helm in 2008. Rather ronmental leadership (e.g., measures to manage than cutting costs and reducing the work force, waste, protect water quality, and reduce use of Schulz announced his "Transformation Agenda"- agrochemicals). a controversial plan to invest in Starbucks' em- Whether investors and consumers were inspired ployees, environment, and community. His plan by the Agenda, were encouraged by Schultz's re- included: turn, or just floated up with the recovering economy Competitive employee compensation plans that is unclear, but Starbuck's stock price and balance include equity-based compensation for nonexecu- sheet roared back to life. Revenues and net income tive partners. In 2013, $230 million was paid out began to climb again and, by September 2014, Star- in equity awards. In 2015, Starbucks gave all bucks' sales had reached $16.4 billion-160% of baristas and supervisors a pay raise and increased what sales had been when Schultz returned as CEO starting pay rates across the United States. In and an all-time high for the company. With a 12.6% 2018, Starbucks's U.S. baristas earned between net margin and 19.2% return on assets, Starbucks $7 and $15 an hour (with an average of $9 an was one of the most profitable food retailers in the hour), plus an average of $742 a year in cash world. bonus, $286 in stock bonus, $442 in profit shar- In late 2014 and early 2015, Schultz decided ing, and $1,095 in tips. to leverage the company's influence in the world Industry-leading health care benefits and 401K by speaking out on such issues as gay marriage benefits for both part-time and full-time work- (Schultz supports it), gun-carrying laws (Starbucks ers. Other companies that offer health benefits requests that people not carry guns into their loca- to part-time workers typically only do so for tions, even in states that permit it), and treatment employees who work at least 30 hours a week. of veterans (in March 2014, Schultz committed Starbucks broke with industry norms by creating $30 million of his own money to posttraumatic benefits for employees who work at least 20 hours stress disorder programs and other initiatives to a week. help veterans, and vowed to hire 10,000 veterans Tuition reimbursement for students. In June and military spouses by 2018). 2014, Starbucks unveiled a "College Achievement The company drew some ire in taking on issues Plan" wherein employees who work more than that bear little relationship to its core activities.Critics admonished that such initiatives risked [Starbucks] to try to redefine the role and responsi- alienating some consumers and investors, and cre- bility of a public company.' ating elevated expectations that the company might not always be able to meet. As Schultz noted, "I can Sources: C. Birkner, "Taking Care of Their Own," Marketing News, tell you the organization is not thrilled when I walk February, pp. 44-49; M. Rothman, "Into the Black," Inc., January into a room and say we're now going to take on vet- 1993, p. 58; D. Ritter, "3 Reasons It's Hard to Hate Starbucks," Wall crans (issues)." But he adds, "The size and the scale Street Cheat Sheet, July 6, 2014; www.usatoday.com, A. Gonzalez, of the company and the platform that we have al- "Starbucks as Citizen: Schultz Acts Boldly on Social, Political Issues," Seattle Times, March 15, 2015; www.seattletimes.com, www.starbucks lows us, I think, to project a voice into the debate, .com (accessed April 28, 2015): Yahoo Finance; Hoovers; Data from and hopefully that's for good ... We are leading www.glassdoor.com retrieved October 13, 2018