December 7, 2011
By: Andrew Rucker, Kayla Villayvanh,
Megan Lanagin, Savitrii (Kiki) Rizki, and Zea Collentine
Management 311: Managing Human Resources Professor Vandra Lee Huber Foster School of Business, University of Washington Introduction Our paper examines Starbucks’ human resource management practices related to recruiting, hiring and compensation, benefits. Our study focuses on the recruiting practices for Starbucks’s core competency teams in the United States: the coffee divisions – those working directly to create and re-create profitable brewed beverages. These are the product people in headquarters, and the baristas and store managers in the customer frontline. We have excluded, however, employees at roasting plants, and any suppliers. In order to understand the relationship between human resource practices and company goals we have first looked at the shifts in CEO leadership as well as a SWOT analysis of Starbucks as a whole. We then take a closer look at compensation and benefits, recruitment and hiring, and lastly a SWOT analysis of human resources practices. History Orin Smith succeeded Schultz as CEO in June 2000. In the ten years prior to his position as Starbucks CEO, Mr. Smith held a number of executive positions at Starbucks. As discussed in Chapter 5 of Human Resource Management, there are several advantages to relying on internal sources. Not only does the firm know the applicant, but the applicant knows the firm. Before he was CEO, Mr. Smith held positions as executive vice president, chief financial officer, and chief operating officer. Under Smith’s leadership as CEO, growth and earnings remained strong. When Mr. Smith retired in 2005, Jim Donald was hired as the CEO. Mr. Donald became one of the first Starbucks executives to be hired from the outside. This marked a transition for Starbucks from internally developed executives to external involvement (Gray). In many cases, recruiting from the outside can be a way to strengthen the company and introduce new ideas. However, while Mr.
Donald was CEO, share prices dropped 48% during a six-month period. Investors were impatient and dissatisfied. In 2008, Howard Schultz returned as CEO. Mr. Schultz’s focus was slow expansion, close unprofitable stores, and fast track international plans (Adamy). In 2010, Mr. Schultz urged fellow bosses to hire more people. Starbucks has plans to open hundreds of new stores in the United States and elsewhere. Mr. Shultz challenges companies to create jobs. In 2011, Starbucks planned to create more than 3,500 new jobs in the United States (Howard’s Way). Conflict Worker complaints from Starbucks’ baristas in the past couple of years have resulted in negative publicity for Starbucks. Recently, an outburst from an employee that worked at a California Starbucks went viral on Youtube. The employee in the video complained about impolite customers and dissatisfaction at work. The video has over 900,000 views. Other complaints that have caused negative publicity for Starbucks are comments from part-time employees that they have no guaranteed number of work hours per week, and complaints that the wage is barely above the minimum wage (Starbucks Baristas 8). Strengths Starbucks has a wide geographic presence that is continually strengthened by expansion. Starbucks has operations in more than fifty countries. Company-operated retail stores in the US and international markets accounted for 84% of total net revenues in the 2010 fiscal year. Currently, Starbucks is focused on a stronger presence in Brazil, Central America and Asia. In Brazil, Starbucks acquired a Brazilian coffee company; in Central America, Starbucks entered an agreement with Central America’s largest multi-brand franchise operator to open Starbucks stores throughout Central America; and in Asia, Starbucks has a new partnership with Tata Coffee (Datamonitor 5). Research and development...