Starbucks had been suffering due to what they explain as bad decisions regarding where they were opening new stores. During the recession, they closed 10% of their stores. They took responsibility for their downturn and did something about it.
How do they do it? Smart business decisions. Instead of whining on TV about employees needing healthcare, they looked at their own management decisions and made some tough calls in 2008.
Cliff Burrows, who heads Starbucks’ domestic business, said the problem wasn’t that Starbucks was oversaturated, but that the company hadn’t been careful about its store openings. In the years leading up to the downturn, the company was opening well over 1,000 stores a year. That led to cafes in locations where signs or traffic might not be optimal, he said.
Burrows said Starbucks has gotten more sophisticated, and noted that the cafes opened in recent years are among the company’s best performers. Sales at new cafes are averaging about $1 million a year, for example, above the company’s target of $900,000. It costs about $450,000 to build a new cafe.
Starbucks has offered “a comprehensive compensation program since 1988 to their “partners” (their term for employees).
This benefits package includes “competitive base pay, comprehensive health care for eligible full and part-time partners, with an average of 20 hours per week, equity in the company in the form of Bean Stock, a 401(k) savings plan with employer match, tuition reimbursement, short-term disability, paid vacation time, and product discounts.”
Based in Seattle, Starbucks has been named by FORTUNE magazine as one of the “100 Best Companies to Work For” in America every year since the list’s inception 13 years ago, ranking number 18 in 2010
Starbucks has been a long supporter of healthcare reform. On their website, they write, “As a long-time provider of comprehensive health coverage to full-time and eligible part-time employees, Starbucks has been a steadfast supporter of meaningful healthcare reform.” Furthermore, “Starbucks commitment to wellness extends to our own Partners (employees). Thrive Wellness, our internal broad-based wellness program, has been in place since 2004. The Thrive program provides partners with a variety of tools, resources and benefits aimed at helping all our partners incorporate wellness into their daily routine. From fitness tools, to weight loss and smoking cessation resources, it’s covered under Thrive.”
In 2004 (before ObamaCare), then CEO Orrin Smith told Bloomberg Businessweek that rising healthcare costs were their biggest challenge. He explained that companies that were doing the right thing regarding offering health insurance to their employees were paying for companies who don’t do the right thing (a jab at Walmart no doubt), but that he built Starbucks as place for people like his father to work, because Smith remembers growing up without health insurance:
Businessweek reported in 2004 :
A:My parents didn’t have much — and they didn’t have much hope. We didn’t have health insurance.
And I saw up close the plight of a working-class family. Building Starbucks has been very much about building a company my father never got a chance to work for. The cultural transformation took place when we were small and still losing money, and we decided to provide comprehensive health insurance for every employee, and later stock options for every employee. That was a first for part-time workers. About 65% of our employees, then and now, are part-time.
Q: What’s the upside to providing all that health care?
A: The result is that we probably have the lowest rate of attrition of any retailer in America. Managements of major retail businesses have used employee churn as a mechanism to keep wages low and health insurance out of the labor picture.
When you look at what companies say they do and what they really do, you have to be careful. Some companies that say they offer health care go out of their way to restrict part-timers’ hours [so they won’t be eligible for coverage]. And if they do qualify, they often can’t afford the upfront premium. One of the largest companies in the country is famous for this.
Maybe treating employees with a modicum of respect is a choice made by certain kinds of corporations due to their internal values. It’s also smart business. Yet Starbucks has been the target of efforts to unionize in some areas, with workers objecting to rising healthcare costs and cuts in benefits (among other issues) since the downturn. Solidarity among workers can be a good thing for a company willing to listen, even if they can’t/won’t comply with all of the desires of the workers. Open dialgoue is the best way for those in charge to bear in mind the concerns of the workers.
Citing the ethical importance of creating jobs here in America, Starbucks broke ground on a manufactuing plant in Augusta, Georgia in July of this year, that they point out could have been located in Central America or Asia for 15% to 20% less, “but we felt that creating 200 or so jobs domestically was more important.”
Sad little Walmart announced in 2011 that it can’t afford healthcare benefits for its new part time employees. Somehow the largest retailer in the world is being bested by other successful companies who can afford to respect their workers with healthcare.
Here are 7 companies that offer health care benefits to their part-time workers (list complied in Oct 2011 by ABC News): Target, Starbucks, Lands End, Whole Foods, Home Depot, UPS, and Costco. What do you suppose makes these other companies more able to provide healthcare benefits than Walmart? Is it a matter of corporate cultural values? Walmart is the largest retailer in the world – so either they are mismanaging their profits or they are Scrooging up the retail market as they destroy the function of competition in the marketplace.
Bashing healthcare for employees isn’t smart business, as Papa Johns and Applebee’s found out. Their brands are still suffering severe fallout from their miserly grubbing about having to pay a few cents for their employees to have healthcare.
Brand Index reported, “Anti-Obamacare rhetoric from Papa John’s CEO and a major Applebee’s franchise owner appear to have driven down both chains’ consumer perception with casual dining eaters in the US, and are still impacted two weeks after those remarks were made.”
Starbucks suffered a setback in the early parts of the recession from what they claim was bad business decisions. They got it together internally and instead of blaming employees, they worked hard to regroup. Now they are expanding not only in America but around the globe. Furthermore, days before the 2012 election, Starbucks earnings were better than expected and thus current Starbucks CEO Howard Schultz (who right wingers were using to attack ObamaCare over his concerns regarding its impact on small businesses) told CNBC they were raising shareholders’ quarterly dividends by a rather huge 24% (also, Schultz told them he was voting for Obama).
This suggests that it is possible to be successful and treat your employees with human decency. In other words, griping about profit shouldn’t be a get out jail free card to punish employees. Yes, times are tough and everyone has to make sacrifices (including the CEOs) — but it is possible, with the right intentions, to both create a decent place to work and be successful.
Shocking, I know.
Image: EMA, sustainability report
Ms. Jones is the co-founder/ editor-in-chief of PoliticusUSA and a member of the White House press pool.
Sarah hosts Politicus News and co-hosts Politicus Radio. Her analysis has been featured on several national radio, television news programs and talk shows, and print outlets including Stateside with David Shuster, as well as The Washington Post, The Atlantic Wire, CNN, MSNBC, The Week, The Hollywood Reporter, and more.
Sarah is a member of the Society of Professional Journalists.