Starbucks High HR Commitment Practices

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Table of Contents

Introduction
High commitment HR practices
Starbucks high HR Commitment practices
Historical background of Starbucks Company
Starbucks HRM policies and challenges in growth strategy
Challenges in HRM at Starbucks
Recommendations
Conclusion
Reference List

Introduction

There have been major evolutions in human resources for the last 3 decades. This has been necessitated by the fact that employees improve their performance when they are motivated at their respective workplace. Competition in all industries in the world is being experienced especially after the adoption of the globalization strategy.

This has caused companies to develop better strategies of improving their performance to overcome stiff competition in the global market. Improving human resources management practices has been identified as an important strategy of promoting the performance of organizations. The relationship that exists between employers and their employees determines the performance of an organization.

The culture of an organization also determines the direction of an organization (Searle 2010). This paper discusses high commitment HR practices as experienced by Starbucks Company. Starbucks is a company that produces and markets beverages. The company has been successful in maintaining high commitment HR practices. The company has also encountered challenges in maintaining better HR practices.

High commitment HR practices

According to Marchington and Wilkinson (2006), “a particular bundle of HR practices has the potential to contribute improved employee attitudes and behaviors, lower levels of absenteeism and labor turnover, and higher levels of productivity, quality and customer service” (p. 71).

He further explains that such practices improve the profit levels of an organization. Some examples of such practices include the provision of security of employment; offering opportunities for employees to train and develop their skills; providing relevant information and consultation; increasing the pay rate among other aspects.

Therefore, there is a direct link between high commitment practices and improved performance in an organization.

The ingredients of high commitment HRM are “employment security and internal labor markets; selective hiring and sophisticated selection; extensive training, information sharing and worker voice; self-managed teams/team working; high compensation contingent on performance; and reduction of status differentials/harmonization” (Marchington and Wilkinson 2006, p. 73).

High commitment practices allow companies to attach wages and salaries to performance. This means that employees’ performance is highly valued.

To increase the performance of employees, managers increase wages to match the performance of employees. Any promotions or awards are based on the performance of individual employees. This encourages employees to improve their performance and the firm benefits by gaining better results (Searle 2010).

In addition, teamwork is encouraged in high commitment HR practices. As such, all employees are grouped according to their skills and talents. Therefore, companies develop better skills development because workers with similar skills are grouped together, and they can learn from each other. Teamwork encourages employees to seek help from each other and from their seniors.

In a team, there is no bureaucracy and this allows junior employees to interact freely with their seniors. With the existence of teams, individuals provide support to each other.

This allows informal and formal systems to prevail in the organizations. Informal groups offer support to workers morally, spiritually and in other ways. Teamwork allows all workers to contribute successfully to the goals of the organization (Burke, Martin and Cooper 2011).

In the modern organizations, training employees has become necessary especially where technologies change. Training offers employees improved skills to perform better. When employees are trained regularly, they acquire skills to develop innovative products.

Innovations can only be done by use of modern technologies. With the increasing competition in almost every industry, innovation has become important in the production, marketing and other processes of a company. Innovation has caused product differentiation in many industries (Cooper and Burke 2011).

Product differentiation allows companies to develop better products which match the needs of customers. A company can survey the prevailing needs of customers and develop products which match their needs. Product differentiation has increased competition in industries because it increases the demand for products.

In an effort to increase competition in modern organizations, the need to differentiate products has intensified. Industries which have reached maturity stage have found it impossible to develop new brands and the only way to attract customers is to differentiate the existing products.

This allows companies to improve the existing products. Therefore, innovation, product differentiation and adoption of better technologies have been applied to increase competition in the market (Godwyn and Gittell 2012).

Market research has become essential in identifying the needs of customers. Research has been applied in developing better methods of production and marketing. As such, companies identify the changing needs of customers. This allows a company to develop products which match the needs of customers.

Companies are investing a lot of resources in research to identify the appropriate methods of production and marketing processes. Research helps develop better products and prevents companies from manufacturing products which have no demand in the market. As such, companies develop products which have high demand in the market. Research has also been applied in human resources management strategies.

This helps companies to identify the best practices to promote the performance of employees. Therefore, research has been of great importance in achieving high commitment HR (Lamb, Hair and McDaniel 2009).

Companies find it challenging to balance the costs of maintaining high employee benefits and the profits made from sales. Providing employees with superior benefits requires a company to incur a lot of costs.

This affects the profits made by a company. Some companies extend the costs of maintaining employees’ benefits by increasing prices of products. This affects the demand for the products of such companies and this may reduce the sales volume (Araimi 2011).

Countries have adopted legal frameworks which require companies to improve the welfare of their employees. These laws are developed to safeguard the interest of workers at all levels. The right to unionize has become essential for companies to embrace. The role of trade unions is to protect the interests of employees and to solve conflicts between employees and their employers.

High commitment practices require that companies should allow employees to unionize to ensure their interests are safeguarded. Any company that restricts its employees from unionizing may face legal actions (Cooper and Burke 2011).

Starbucks high HR Commitment practices

An example of a company that practices high commitment HR practices is the Starbucks Inc. In 2005, the Fortune Magazine voted Starbucks as one of the best companies where people can work. Starbucks treasures its human resources and this has drawn a lot of attention from many labor organizations.

The company has a strong relationship with its employees and this has increased the performance of employees at the work place. Employee turnover at Starbucks is minimal because employees are satisfied. The company adopted strategies which encourage friendship between employees and the management staff (Boudreau and Ramstad 2007). Employees are supported at their places of work.

Starbucks has experienced low rates of employee turnover despite the high rate of turnover in the retail industry. Starbucks extends benefits programs to employees working on part time basis. This is not a normal thing that other companies in the industry offer.

The employees of Starbucks were rated the most productive in the retail industry. The company has adopted a culture of supporting its employees to improve their performance (Regani 2005).

However, despite the fact that Starbucks has been rated as the best employer, it faces challenges which affect its expansion programs. The company has experienced the challenge of attracting and retaining the right category of workers in the correct numbers. This challenge affected the company during its initial stages because it was unable to expand its operations rapidly.

However, after establishing its first Initial Public Offer in 1992, the company started to improve its performance. Today, the company faces the challenge of supporting its workers at high level of benefits because the number of employees has increased unexpectedly. Reducing the HR costs by decreasing employee benefits would affect the policy of the company of retaining employees (Boudreau and Ramstad 2007).

Historical background of Starbucks Company

In 1971, Starbucks was established by Bowker, Baldwin and Siegl. The initial intention of establishing the company was to make and sell coffee beverages to customers. The company started by selling whole bean coffee only.

The idea of selling coffee bar was developed later after the company had already started its operations. The company’s growth was slow during the initial stages. Only four stores had been opened after one decade of operation in the US market (Boudreau and Ramstad 2007).

Howard Schultz was later hired in 1981 as the marketing manager of the company (Regani 2005). Schultz introduced the idea of using coffee bars, an idea borrowed from Italy. This strategy increased the sales of the company and more stores were opened within a short time of period.

However, the partners of the company conflicted with Schultz idea of selling coffee bars because it would distract the company from its core business strategy. Schultz left Starbucks and established Giornale. The performance of Giornale improved within a short time, but Starbucks’ performance went down.

In 1987, Starbucks was acquired by Giornale. Starbucks expanded rapidly, and within a decade, the company had been able to open more than 100 retail stores. Today, the company has retail stores in other countries and there are strategies to continue opening more stores in other countries in the world (Boudreau and Ramstad 2007).

Starbucks HRM policies and challenges in growth strategy

The management of Starbucks realized that motivating and human resources commitment would offer the company a competitive edge in the retail business. This ideology has made the company to take caution when recruiting employees and efforts have been made to retain employees of the company. The company is committed to improve the welfare of its employees (Regani 2005).

Starbucks hires people on the basis of how they are adaptable, dependable and their team working abilities. The job posts of the company clearly states that the company seeks people with such skills (Kossek 1999). This makes interested people to self-test their skills before applying for any job post in the company.

After the selection process, the company trains the employees to acquire skills relevant to the activities of the company. This enables employees to improve their efficiency of performance. Starbucks trains all classes of employees, including the part time workers.

The company has created training centers where employees are trained. After selection, employees undergo 24 hours training process at the training centers located at each region where the company operates. The training syllabus was organized by a team of experts to standardize the skills of employees. Doctrines of the company are included in the training curriculum (Boudreau and Ramstad 2007).

Making coffee in Starbucks is regarded a science, and all new employees are required to undergo rigorous training to acquaint them to the procedures of making the best coffee brands. During the training process, employees are educated on how to conduct retail business, skills on making coffee, and creating positive experiences for customers.

There are more details of activities involved during the training program. In relation to human resource management, the training program improves the skills of employee by encouraging them to maintain high self-esteem; listening and acknowledging others; and asking for help when need arises (Boudreau and Ramstad 2007).

The managers are trained differently and their training takes a longer period of time. A period of 2 to 3 months is used to train managers. Other training aspects include operations at the stores, procedures that have been set by the company, and other management aspects.

Starbucks also trains its managers on how to handle people from diversified cultural backgrounds. Employees of the company also take training courses from other training centers. The company sponsors training activities for all its employees (Regani 2005).

Employees of Starbucks appreciate the training programs because they make them feel valued and appreciated. The training sessions also creates a sense of importance to the employees, because the company invests significantly to prepare employees for their jobs. The benefits programs for the employees are highly appreciated by the employees (Wright and Kehoe 2007).

The program covers employees working on both part time basis and full time basis. Schultz adopted a philosophy of handling employees like a family, to increase their loyalty and morale. Through this philosophy, Starbucks has designed a schedule that creates a balance between work and life for employees. This program considers the welfare of employees physically, mentally and spiritually (Regani 2005).

Starbucks offers the highest wages to its employees. The hourly wage exceeds the required state regulation by a great margin. The company also offers benefits such as health, options of buying stock, and other attractive perks for the employees. Schultz played a key role in creating an employee-friendly program after acquiring Starbucks.

Schultz was of the belief that employees would improve their performance if they are included in the decision making process. Making employees own the performance of the company was important because they felt that they contributed to the success achieved. In 1990, Starbucks established the Bean Stock Plan which allowed employees to buy stocks of the company.

This program provided part time employees to buy shares of the company. Employees who had worked with the company for half a year and worked for at least 20 hours weekly were allowed to buy shares of the company. Employees of the company were offered subsidized prices for products they bought from the company (Wright and Kehoe 2007).

Starbucks did not only offer monetary benefits, but also created other strategies which offered non monetary benefits. Starbucks offers its employees with offset fitness packages, provides childcare, as well as elder care. Working Solutions Plan was established to cater for employees’ personal needs. These programs helped employees not to miss work when problems affected their families.

In addition, partner Connection Plan was created to help employees link up with employees from other stores. This led to the creation of informal groups within the company. Examples of such groups were: the Wonderful World of Food and The New Parent Network among others. These groups were based on social, recreation, parental and volunteer activities (Regani 2005).

Starbucks has introduced flexible workplaces to accommodate the needs of all classes of workers. This was established to help employees have a balance between work and life activities. There was also flexibility in the benefits program of the company. As such, employees are free to select the most suitable benefits according to their needs (Wright and Kehoe 2007).

Employee surveys are also conducted on a regular basis to monitor their performance. Feedback from employees would be obtained to identify their needs. The surveys are important because they help identify the effectiveness of the benefits programs.

The company changes its strategies based on the feedback from employees. The company designed good benefits programs to attract, as well as retain professionals and other skilled employees (Wright and Kehoe 2007).

Gretchen (2005) opines that the culture of Starbucks helps the company in recruiting and retaining the best employees. The culture of the company has its origin from the mission statement that was created in 1990. The culture also reflects the values upheld by the company.

The principles of the company are based on providing a good work environment and treating employees in a respectful and dignified manner (DeNisi and Griffin 2005). The management has made a lot of efforts in maintaining the mission of the company. Employees are issued with copies of the mission statement upon joining the company.

The management reiterates the mission statement of the company to ensure that employees are aware of it. The company has gone to an extent of printing the mission statement at the back of the business cards of all employees. This shows that the company is aggressive in maintaining the mission of the company (Regani 2005).

The values of the company treasure equality among employees. To implement the equality values of the company, Starbucks acknowledges all its employees as partners. This shows that all workers have a right to own the shares of the company and that they can contribute to the decisions of the company.

There is no single employee who is superior to others. This has led to the creation of few job titles. As such, the company encourages humility among all employees irrespective of their job group (Wright and Kehoe 2007).

Starbucks has made efforts creating the environment of a small company. This has encouraged the entrepreneurial spirit of all employees of the company. Senior employees appreciate the work of their juniors whenever good performance is reported. This has been encouraged irrespective of the high growth rate that the company is experiencing. Starbucks has encouraged an informal work set up.

Interaction among employees is allowed and this has helped during conflict resolution. In addition, the employees are free to interact with customers. The company proposed that the employees should have the ‘Starbucks Experience’ when handling customers. This has created customer loyalty to the company because many customers are willing to buy as many times as possible from the company (Regani 2005).

Starbucks encouraged employees to be innovative by offering them all the essential resources. The strategy has helped the company develop unique products. For example, Frappuccino is a brand that was developed by the employees of the company. This strategy gave employees a sense of belonging and this increased the rate of employee retention.

The company also empowered employees to form teams; the top management would be involved in the initial stages then other team members would continue with daily operations. Starbucks offered awards such as Warm Regards, and MUG among other awards (Wright and Kehoe 2007).

Starbucks also conducts research about the best HR practices. The company has employed a team of experts to identify the HR practices in the market. These are integrated in the business processes of the company. Research has also been applied in identifying better production and marketing processes.

As such, the company is able to identify the best products to manufacture depending on the prevailing conditions. Starbucks has been able to develop innovative methods of production, marketing and HR management. The company develops better products compared to competitors because (Noe 2008).

An example where the company applied research was the use of internet in the retail stores of the company. The company installed internet services in all stores to allow customers browse while consuming products of the company. In addition, employees have the freedom to use these services.

This allows customers and employees to identify better internet tools. This has attracted many customers to the company because the company has supportive products. Starbucks also applies other technologies in attracting customers and potential employees (Miller 2009).

The beverages industry has encountered a lot of competition in the recent past. There is free entry and exit in the industry. The labor market has also been competitive in the industry. This scenario has required companies in the industry to improve their production systems. The high competition has also been accelerated by globalization of the markets (Bohlander 2010).

With globalization, investors can establish businesses in as many countries around the world as possible. It is also possible to trade in many countries. The autarky condition has made companies which were prosperous under domestic trade to face competition. Starbucks encounters stiff competition in today’s market environment compared to the initial scenario.

This has made the company to strengthen its competitive strategies to overcome the stiff competition in the market. Starbucks has been able to dominate the US market by offering superior quality products. This has been achieved by applying appropriate HR practices.

The employees of the company have been a core competence of the company. This has made the company achieve better results despite the high competition in the market (Jackson, Schuler and Werner 2011; Wright and Kehoe 2007).

Challenges in HRM at Starbucks

Starbucks started experiencing challenges in managing employees in the 2000s. The company encountered a lot of challenges in maintaining its mission of being a good employer when rapid changes started to be experienced in the company. In the 2000s, the high labor costs started to be reflected in the financial strength. The increase in employee costs forced the company to increase the prices of its beverages.

In 2004, Starbucks had to increase its beverage prices by 11 cents. However, the prices were burdensome to customers because they were already paying premium prices for the products of the company. The problem was worsened by the fact that the company could not reduce employee benefits because it would negatively affect the morale of employees (Regani 2005).

Starbucks was affected by the economic recession that affected global economies in the year 2008/2009. Many countries were affected and this reduced the sales of the company. The purchasing power of customers was reduced and this reduced the sales volume of the company.

The company was forced to close some stores because it was not profitable to maintain high number of stores during the turbulent economic conditions. The company had to apply retrenchment strategy to reduce the number of employees. This policy was aimed at cutting down the costs of the company (Lussier 2012).

To solve this problem, the some retail stores of the company restricted benefits to full time employees. This affected part time employees. The impact of this strategy was worsened by the fact that the company employed approximately 65 percent part time employees. As the company continued to grow, the costs incurred on human resources increased (Cowitt 2010).

As the company grew larger, complaints arose that the company no longer cared about the needs of its employees. It was alleged that Starbucks blocked its employees from forming unions. The company lost its mission of being friendly to employees as expansion continued. Complaints were made that the employees had physical problems and that wages, as well as working hours were not favorable.

It was reported that employees who sought to establish unions were fired. The management argued that the employees were being treated well and this provides no need to unionize. Starbucks stopped compensating work-related injuries (Tania 2004).

The ability of the company recruit and retain qualified professionals is in high doubt because people have developed a bad perception about the work practices. Competition for good employees has intensified because more companies are entering the market (Regani 2005).

However, despite the challenges facing Starbucks’ human resources management, the company is still successful. The company has a turnover rate of 60 percent against a turnover of 200 percent in the industry. Some part time employees have worked with the company for more than ten years.

This is not normal in other companies in the industry. The company enjoys a high employee rate of satisfaction compared to some competitors in the industry (Wright and Kehoe 2007).

The success of Starbucks has been attached to the way it treats its employees. The rapid expansion has been attributed to the strong workforce. The Starbucks Experience was made possible by the employees of the company. This has differentiated the company from other companies in the industry. Starbucks still recognizes employees as the building blocks, especially in achieving competitive strategies.

Starbucks invests a lot of resources on the welfare of the employees. The management of the company has realized that offering premium products requires treating employees well. It has been a philosophy of the company that achieving high customer satisfaction requires improving the level of employee satisfaction (Wright and Kehoe 2007).

Despite the challenges that Starbucks encounters in the industry, the company still holds a better position. The company has opened many stores in the US markets. The management has also been able to penetrate into other countries. The company employs people from different cultural backgrounds. This has made it possible to access more markets abroad (Lewis 2011).

Recommendations

The management of Starbucks should introduce micro-management. This means that each retail store should be managed independently. As such, all the activities of one store will not affect the other stores. Managing employees of the company will improve because the costs will be allocated to the activities of a specific store. This will reduce the burden which the company is currently experiencing.

The benefits provided to employees should be related to the performance of the store they work at. This will reduce sharing the cost burden; and the managers of each store will be forced to improve the performance of their employees. In addition, managing a small group of employees will be efficient, compared to a large organization.

Conclusion

High commitment HR practices refer to the behavior of organizations in managing their employees appropriately. With the increasing competition in the global markets, there has been a great need to improve the welfare of employees so as to achieve competitiveness. High commitment in HR practices has been applied as a core competence by companies.

The increasing competition has made it necessary for companies to develop strategies which improve the welfare of employees. Competition has not only been experienced in the market for products, but also in the labor markets. Professionals and skilled employees have been in great demand.

Starbucks has advocated for good employee relationship, and this has been implemented to achieve high performance for all workers. During the growth stages of the company, the management encouraged the application of good human resource practices. The company offered numerous employee benefits to both part time and full time employees.

Starbucks has improved the performance of its employees by training them after recruitment. The company also improves the skills of employees by performing continuous training. Starbucks has achieved a lot of success because it offers better employment packages. The company experienced a lot of challenges in maintaining high employee benefits costs, especially after the expansion.

The company has been forced to cut down the benefits and increase the prices of its products. The image of the company has been affected and the company has been unable to attract and maintain high qualified employees. However, despite the challenges facing the company, Starbucks remains on course in maintaining high employee satisfaction.

The company enjoys low employee turnover compared to other companies in the industry. The company has employees who have worked for more than ten years as part time workers. This shows that the company is still valued by employees.

Reference List

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