Question

CASE STUDY 3.1: THE STARBUCKS EXPERIENCE

According to CNN Money, barista carries the dubious dual distinction of being one of the nation’s most stressful jobs and among those with the lowest pay. Baristas face many challenges: not only do they have to deal with the physical demands of making and serving coffee, they also have the emotional stress of coping with early morning lines of impatient customers in a hurry. In a recent poll surveying coffee workers, 55 percent of respondents reported upper-body repetitive stress injuries, 37 percent complained of persistent sore muscles, 29 percent said they suffered from anxiety attacks, and 44 percent lamented high stress levels. Considering that the median pay of baristas is $20,300, is the stress really worth it? How might their employers help baristas cope?

Howard Shultz is CEO of Starbucks Coffee, which is worth about $72.4 billion at the time of this writing and is projected to grow. There are more than 21,000 stores in 65 countries with 191,000+ employees, the bulk of whom are serving up your morning joe. After slashing jobs and closing stores in 2009, Shultz and Starbucks are brewing up new business again. The company’s China/Asia Pacific business grew revenue at 85 percent year over year as reported at close of 2014.

When Starbucks was conceived by three friends on the Seattle waterfront in 1971, the number one principle of its mission statement was bold: “To provide a great work environment and treat each other with respect and dignity.” Forty-plus years later, Starbucks continues to provide an exception to CNN Money’s suggestion that the barista job is generally awful. The company frequently tops Fortune’s “100 Best Companies to Work For” list and has legions of fierce brand loyalists, many of them employees past and present. You can read employee testimonials on Glassdoor.com (“When I first started [with Starbucks] I had no intention of making a career out of Starbucks. Now, I have no intention of having a career without Starbucks”), plus numerous glowing blogs and the 2007 bestseller, How Starbucks Saved My Life: A Son of Privilege Learns to Live Like Everyone Else, by Michael Gates Gill.

Managers know that happy, healthy employees make for a better workforce, and a better workforce means a better experience for customers. To keep the money rolling in—while remaining true to its founding principles—Starbucks has had to be proactive about battling the barista blues. In the late 1990s, after conducting its own internal studies, Starbucks enlisted the help of La Marzocco, the Italian maker of espresso machines. La Marzocco in turn reached out to an osteopath and a physical therapist for insight into the company’s concerns about the repetitive actions performed by the baristas. They found that lifting milk jugs and steaming milk, tamping, inserting and removing portafilters, and simply standing for long periods had serious health implications. The demands also placed a dampener on staff “happiness and effectiveness.” To combat the effects, Starbucks worked with La Marzocco to develop a number of new employee-friendly technologies, including the auto-dosing and tamping Swift grinder. Throughout the decades, Starbucks has continued to innovate and automate processes with its employees’ health and safety in mind.

In Peter Ubel’s article in Forbes, “Do Starbucks’ Employees Have More Emotional Intelligence Than Your Physician?” the author suggests that doctors have a lot to learn from Starbucks’ baristas in terms of managing stress and communicating with constituents. He points out that, unlike physicians, Starbucks’ employees are trained to be emotionally sensitive and intuitive and to act accordingly. In the “Latte Method,” they undergo rigorous training on how to recognize and respond to customer needs. When a customer is unhappy, the Latte Method suggests, “We Listen to the customer, Acknowledge their complaint, Take action by solving the problem, Thank them, and then Explain why the problem occurred.”

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With a framework in place to manage customer anxiety, Starbucks also succeeds in soothing employees’ nerves by providing the employee a basis for managing customers that reduces the fear of the unknown. The framework also empowers the employee (gives them tools) to handle stressful customer situations.

There are other ways in which Starbucks helps ameliorate employee stress—physical, emotional, and financial, too. Part-time employees who work at least 20 hours a week receive health care benefits. Salaries are higher than average for store managers and plans are in the works to raise wages for employees across the board; Starbucks’ CEO, in fact, has been a vocal proponent of raising the minimum wage for workers in the service industry. The company recently revised its practices to give employees more consistent hours, which helps with financial planning, not to mention the demands of family life. What’s more, Starbucks employees are eligible for bonuses, 401(k) matching, and tuition reimbursement, and most recently, a free college education through online portals. Employees (called “partners”) are also encouraged to move up the ladder. All these benefits help relieve the typical stress associated with service jobs. An employee who feels valued and who is encouraged to grow will be more invested in his or her job.

Schultz and Starbucks are clearly doing something right. Restaurant industry insider Eric Levine writes, “I’m fascinated how each and every Starbucks, while all corporately owned and part of a billion-dollar company, makes you feel that the owner and his wife are there, and that’s why they care.” Curious about what made Starbucks employees so happy, he decided to launch an informal poll. “I would have thought that the No. 1 reasons would have been benefits and stock options or growth and opportunity. To my surprise, the No. 1 answer—from eight out of 10 employees—was that they love the product, people and culture.”

The service industry is a notoriously stressful one, which Levine knows well. “I have seen servers yell at customers, ‘I have five tables just seated. I’m doing the best I can.’ This energy becomes anxiety and frustration, stressing customers, and costing both the company and the server money. . . . Starbucks employees deal with lines and stress like all the employees in our industry, but their stress is channeled into motion and productivity, not resentment and aggression.”

Case Questions

1.   Starbucks’ core agenda is to provide an excellent work environment and for employees to treat each other with respect and dignity. How were they able to make this happen?

2.   Describe the “Latte Method.” How did it help grow Starbucks?

3.   Employees say that they love Starbucks’ company culture, and Starbucks regularly tops Fortune’s “100 Best Companies to Work For.” How does Starbucks promote organizational commitment and job satisfaction?

Answer 1

1. Starbucks, with the help of La Marzocco relieved their employees from negative effects of physical stress and repetitive actions with the help of employee friendly technologies like auto-dosing and tamping swift grinder. In addition, they continued to innovate and automate processes, keeping employees' health and safety in mind. Further, with the help of Latte method, employees became more comfortable in dealing with the customers. Further by providing handsome wages, health benefits and bonus, Starbucks was able to achieve its core agenda.

2. In the “Latte Method,” Starbucks' employees undergo rigorous training on how to recognize and respond to customer needs. When a customer is unhappy, they listen to the customer, acknowledge their complaint and take action by solving the problem, thank them, and then explain them why the problem occurred.

With a framework in place to manage customer anxiety, Starbucks succeeded in soothing employees’ nerves and empowering them to handle stressful customer situations. This helped in the growth of Starbucks.

3. Starbucks values its employees and encourages them through bonuses, tuition reimbursements and free college education through online portals. They maintain an amazing work culture. Employees get good salaries, benefits and opportunities to move up the corporate ladder. The work environment is made as less stressful as possible.The service industry is stressful. However, at Starbucks, employees' stress is channeled into motion and productivity, not resentment and aggression. Thus, by genuinely caring for its employees, treating them with respect and dignity and by providing them an excellent work environment, Starbucks promotes organizational commitment and job satisfaction.