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Starbucks Recruiting, Compensation, and Benefits Analysis

December 7, 2011

By: Andrew Rucker, Kayla Villayvanh,


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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 Starbuckss 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 Smiths 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. Schultzs 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 (Howards 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 Americas 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 of new products allows Starbucks to strengthen its product portfolio. The R&D department of Starbucks develops new food and beverage products as well as new equipment. In 2009, R&D created the VIA Ready Brew coffee and sales from the VIA ReadyBrew coffee contributed $22 million to net revenue in fiscal year 2010 (Datamonitor 8). Weaknesses Recalls on products have harmed Starbucks brand image. Such recalls include products with peanut butter, glass water bottles, and grinder blades. Most recently in January 2011, Starbucks recalled glass water bottles due to concern that the bottle could shatter when the stopper was inserted or removed. Similarly, grinders used by baristas in the stores were recalled since the grinder could fail to turn off or turn on unexpectedly. The grinder recall took place in 2009. Continual recalls threaten the value of the Starbucks brand and could cause a decline in product demand (Datamonitor 8). Opportunities
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Having an increased amount of free cash flow in the past couple of years has allowed Starbucks to invest more in improving the customer interface and thus enhancing their experience with the company. In January of this year, Starbucks released an application for use with certain Smartphones that allows customers to pay for their in-store purchase by simply having a barista scan a barcode displayed on the phone. The app works just like a Starbucks gift card, except allows customers to manage their account more conveniently by being able to add money to their account via Paypal and check their rewards from their phone. The app is available for use in all of Starbucks 6,800 stores as well as 1,000 stores operated by Target and has been used by over 3 million customers so far. Starbucks also sees great opportunity in expansion in Asian markets. In China, fast economic development and a middle class population that is expected to double by 2025 fuels an increasing demand for consumer goods in the country. The company has laid plans to open 1,000 stores in China by 2015 which is expected to represent 32% of their international store openings between now and then. Similar trends are seen in India where a country that was once a majority of tea drinkers has shifted toward coffee due to the rising middle class population. In the US, the rapidly growing market for single-serve coffee generated nearly $2 billion in revenue in 2010. In March of this year, Starbucks entered into an alliance with Green Mountain Coffee Roasters for the distribution of Starbucks branded K-Cups for use in Keurig single-serve coffee machines. They will be available for purchase everywhere Keurig products are sold as well as at some Starbucks stores. This is a major opportunity for broadening the companys customer base. Threats Profit margins for the company, which have been rising over the past several quarters, are expected to decline in the future due to rising coffee prices worldwide and a rising labor cost in the U.S. Growing coffee demand in developing nations combined with speculation of poor coffee crops in South America and rising oil prices will drive the cost of raw coffee up. Specifically, a shortage in the Arabica coffee plant caused a 53% increase in its price from 2008 to 2010. With the cost of coffee making up 17% of Starbucks total cost of goods sold, continued increases in price will definitely negatively affect their profit margin. In addition to the rising cost of coffee, the increasing minimum wage across the US will also cut into Starbucks margins, especially when considering the 137,000 employees they have. Current Health of Starbucks In 2009, shortly after Howard Schultz returned to his previous position of CEO, he spoke about the health of the company at the Annual Meeting of Shareholders saying, Despite the challenging economic environment, Starbucks is profitable, has a strong balance sheet and generates solid cash from operations Our customers connection with, and trust in the Starbucks brand remains at a high level. We are laser-focused on delivering the finest quality coffee and getting the customer experience right every time (Starbucks Details). Just one year before this statement was made, Starbucks stock hit an eight year low, the lowest price it had been since
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September of 2001, and the number of employees and stores hit an all-time high. In 2009, the stock climbed from under $8 per share up to over $20. The stock price continued along an upward trend in 2010 as Starbucks continued to dominate the coffee market while cutting costs. At the Annual Meeting of Shareholders in 2010, Schultz commented on the changes he had led the company through over the past two years and on the companys strategy for the future: As we approach our 40th anniversary, weve reframed the way we work and think to create a new kind of company one that will achieve disciplined, profitable growth by embracing the global marketplace and leveraging our brand strength through new and existing channels. We will invest in our partners to ensure world-class customer service and bring relevant innovation to market, all while demonstrating a social conscience and remaining true to our core values (Starbucks Outlines). Even in the face of a challenging economy, the company saw rising sales and earnings as well as a record amount of free cash flow at the end of fiscal 2009. With all this cash, they not only invested domestically and abroad, but also instated a dividend for shareholders beginning in April of 2010, a definite positive sign for stakeholders about the health of the company. The stock price has continued to rise and neared the $45 mark in the last few months. On November 3 of this year, Starbucks released their fourth quarter sales figures and posted record fiscal year results. Net revenues, global sales, operating margins, and free cash flow were all up significantly from just the previous year. The record results we reported today for the fourth quarter and the full fiscal year are a testament to the overall health and strength of our global business said Troy Alstead, CFO (Starbucks Records). Schultz is also very excited about the health of the company today, how well customers are reacting to the overall Starbucks experience, and how well the company is positioned to expand its market in the coming years. Starbucks Labor Demand Now, as healthy as they have ever been, Starbucks looks to strategically re-expand starting in 2012, after closing hundreds of stores worldwide and downsizing nearly 40,000 employees over the past three years. The company disclosed targets for the coming year in their 2011 annual report, among them are the opening of 350 company-operated stores globally, with 200 of them being located in North and South America. They also plan to have 550 additional licensed stores opened in the coming year. They did not address how many new employees they will be hiring in order to fill the jobs created by the store openings, but based on data from the past several years it can be predicted that the company will need to hire over 5,000 people (previous data suggests an average of fifteen employees per company operated store for 2012, a number that has declined from over twenty per store since 2008). These 5,000 people represent a fairly small increase in employees relative to how the company has changed over the past several years, with the average yearly change of employees since 2005 being 20,000 people each year. This figure does, however, align with the companys new strategy of disciplined, strategic growth designed to be much slower than in years past. Compensation
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Starbucks has several classifications for in-store workers including baristas, shift supervisors, assistant store managers and store managers. Starbucks baristas compensation does not vary much. According to a survey of 580 Starbucks baristas, the wages range from $6 per hour to $13 per hour, with the average wage at $8.68 per hour. In a similar survey of 286 employees, shift supervisors earn an average of $10.77 an hour, with a range of $8 to $14 per hour. Similarly, Assistant Store Managers earn anywhere from $25,000 to $40,000 per year, with an average of $32,829 based on a survey of 85. A review of 184 Starbucks Store Managers shows the range of salaries was from $34,000 to $58,000. The average Store Manager salary was $43,143. Research availability on compensation for executive level employees was limited; Starbucks is not required to release this information to the public (Starbucks Salaries). Benefits Starbucks calls its employees partners because the company strives to provide employees with a positive workplace based on a direct and open relationship. This includes providing partners with comprehensive benefits. Starbucks has consistently been rated in the top 100 companies to work for due to its rare benefits for part-time employees. The companys partners are eligible for benefits if they work at least 20 hours per week, which includes 64% of the current American workforce . The benefits plan is also championed as economical; the most affordable plan is only $6.25 per week. Starbucks benefits include health coverage, income protection, reimbursement accounts and several other programs (Facts About Starbucks and Our Partners). Health insurance programs are consistent for both hourly and salaried workers. The program includes medical, dental and vision insurance. The medical insurance offering contains coverage for hospitalization, office visits, labs and x-rays, emergency care, prescription drugs, mental health and chemical dependency treatment. The dental insurance coverage includes preventative, basic and major services. Partners pay less out-of-pocket when services are received from a preferred provider. Health and dental insurance are administered through Premera Blue Cross. Starbucks vision plan covers eye exams, lenses, frames and contacts, and is administered through VSP (Your Special Blend). Reimbursement accounts, including healthcare and dependent care, are eligible for salaried and non-retail hourly workers. The Health Care Reimbursement Account allows contributions of $100 to $5,000 each year to pay for out-of-pocket healthcare costs. The Dependent Care Reimbursement Account allows contributions of $2,500 or $5,000, depending on marital status to pay for dependent care expenses. Additionally, Starbucks provides basic life insurance and sick pay for salaried and non-retail hourly partners (Your Special Blend). Moreover, partners are eligible for disability coverage, accidental death and dismemberment insurance, counseling services, financial assistance programs, and adoption assistance. Disability insurance encapsulates short term, meaning twenty six weeks or less, and long-term disability. Benefits eligible partners are able to purchase accidental death and dismemberment insurance, an entirely optional program. The counseling service Starbucks provides is called the Employee Assistance Program, which covers stress-related issues, emotional
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difficulties, critical incidents in the workplace and other concerns. Starbucks offers the Caring Unites Partners Fund, which financially assists partners who fall upon difficult times such as illness, natural disaster or death in the family. Finally, Starbucks subsidizes partners who have chosen to adopt children by up to $4,000 (Your Special Blend). Starbucks time off varies for salaried workers and retail hourly workers. Salaried workers are eligible for holidays, personal days, vacation time and, tuition reimbursement. Two personal days per year are available to partners. Vacation time is based on the position and length of time with the company, accruing monthly. Tuition reimbursement is available to workers who have been with Starbucks for over a year. Reimbursement amounts are higher when partners have been with the company longer. Retail hourly workers are also eligible for holidays, vacation days, and tuition reimbursement (Your Special Blend). Starbucks partners are eligible for the Starbucks Commuter Benefit Program, which helps pay for work-related commuter expenses. The program saves money by deducting commuting amounts on a pre-tax basis. This way, the costs of transportation are not taxed and are cheaper (Your Special Blend). Finally, partners are eligible for both a 401(k) savings plan and stock investment plans. To be eligible for the 401(k) savings plan, partners must be at least eighteen years old and have worked at Starbucks for ninety days. Starbucks matching contributions come in two forms, basic match and enhanced Starbucks match. Every November, Starbucks decides whether the basic match or the enhanced match will be in effect the following year. In the basic match, Starbucks will 100% match on the first 3% of eligible pay that a participant contributes, plus 50% of the next 2% of eligible pay a participant contributes each pay period. In the enhanced Starbucks match, there is a 100% match on the first 6% of eligible pay a participant contributes each pay period (Your Special Blend). The Starbucks Stock Investment Plan gives partners the chance to purchase company stock at a discounted price through regular payroll deductions. After ninety days of employment, partners are eligible for a 5% discount on Starbucks stock at the end of each calendar quarter. Additionally, Starbucks offers Bean Stock of up to 14% of an employees gross pay to share in the companys growth (Your Special Blend). HR Recruitment Process Model for Starbucks Core Business Information on Starbucks recruiting model was gathered through both primary and secondary sources. In addition to online and library research, our team interviewed a former Starbucks Category Management Intern, Anna Marie Tallariti, who interned this past summer after her Junior year of undergraduate studies at the University of Washingtons Foster School of Business, as well as a former Corporate Recruitier, Jaylene Linsle. Up until 2008, she recruited and did all of the hiring for store construction from site development, property leasing, to senior management. We took what was applicable from her interview for our study on the recruiting practices of category/product people. Last, we cover the recruiting practices for retail stores based on information from team member who is a current Starbucks barista, Kayla Vilayvanh.
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Vacancy Characteristics of Professional Services Careers in Consumer & Foodservice The latest Starbucks organization chart places category (product) directors, developers, and interns in the Consumer & Foodservice division as well as the Marketing division. These positions are also classified as Professional Services Careers on the Starbucks Career Center page of their website. Interns: When Category Specialist Interns are hired for the summer, they manage all things product. They own a specific Starbucks product from start to finish, so interns retain high motivation throughout the job. Tallariti was assigned three projects during the internship: 1. A Starbucks Iced Coffee Analysis, 2. A Starbucks Clover Brew Analysis, and 3. Held meetings for Starbuckss Online Platform. Starbuckss Consumer & Foodservice division is further divided into the Global Coffee division and then into specific coffee divisions. Under the VP of Global Coffee, there is a Channel Alignment & Innovation division, an Iced Coffee division, a Brewed Coffee division, a Packaged Coffee division, and the Starbucks Reserve Clover Brew division. Tallaritis internship was for the Reserve Clover Brew program, and she reported to the Clover Brew Director, Kerry Boyle. All directors were keen on integrating interns quickly. The main factor that convinced Tallariti to accept the internship was the job itself, although the recruiter characteristics and interview process played a role. She also applied and was granted interviews for Googles and Nordstroms internships. Compared to Google and Nordstrom internships, however, she felt that Starbucks provided a better person-job fit. Within the field of marketing, she said that she was passionate about product development, not sales at Google nor retailing at Nordstrom. Product Developers: Planning and implementing projects to develop food and beverage products is the typical job summary of a Starbucks product developer (Professional Services Careers). It involves market research for idea generation, product research, product design, market testing, and quality & safety testing. This position reports to a respective Product Director, and supervises temporary and permanent lab technicians. Job complexity, and therefore motivation, is enhanced by this roles task in acting as a key project liaison between cross-functional teams. Also, before projects are implemented, he or she creates a plan for each project with performance metrics and timelines. Initial costs of goods, packaging, labeling, and regulationscompliance is also determined by Product Developers. It is also the responsibility of Product Developers to identify potential suppliers and manage their development of ingredients and products. They are also required to maintain proper documentation, including a project file, developing a technical manual, and recording all intellectual property. After a Starbucks product in the development stage is complete, the Product Developer transitions projects to the Supply Chain and Coffee (SCCO) and Quality Assurance divisions, while supporting technical improvements and testing is an ongoing responsibility. He or she will then consult HR Partner Resources on the development of training materials. Category Directors: The highest position in a product category is the Category Director. This job develops the strategic direction for category growth, and carries out products and
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programs that contribute to the overall Starbucks strategic direction. Category Directors lead the department in defining, developing, producing and managing Starbucks a portfolio of products, programs, and packaging. Similar to Product Developers, Directors track trends in emerging technologies and customer behavior related to their product & program categories. They also recommend pricing for each sales channel, and develop product pipelines that should be effective. They are the conductor between marketing and R&D for their product categories, and ensure synergies with other product teams, functional divisions, and stakeholders. Potential business partnerships are evaluated by Category Directors, who also manage ongoing relationships and negotiate alliances. Category budgets and monitoring, loss, and performance are also responsibilities of Category Directors. This position reports directly to senior management and leadership to ensure support for programs and products. There is a huge leadership component to this position; essentially it is a managerial position. Category Directors oversee whole product teams, providing coaching, feedback, developmental opportunities, team building, and conduct performance reviews. They must ensure their teams adhere to operational and legal compliance requirements. Alongside HR personnel, they oversee the selection and training of category team members (Taleo TOC Page). Professional Services Applicant Characteristics Starbucks has very high standards for interns. They look mostly for college juniors, some seniors, and then an even smaller number of sophomores at the undergraduate level. Desired personal qualifications are A-type, go-getting personalities, and really well-rounded individuals: those who have a minimum 3.5 GPA (but preferably higher - Tallaritis GPA upon hire was a 3.75), do volunteer work, and are involved in the community. Starbucks looks for students who hold leadership positions in student clubs recruiters were impressed that Tallariti is the President of the American Marketing Association (AMA) at the University of Washington. In terms of experience, they choose students who have done one to two prior internships. Qualifications for Product Developers vary depending on whether the position is entry level or a senior position. Regardless, even entry-level positions require an MBA. However, undergraduate degree holders with 2-3 years working experience through an employment agency, or exceptional undergraduates who previously held an internship at Starbucks and developed a great working relationship with their teams and Category Directors are acceptable applicants. Senior-level positions, on the other hand, require at least 5 years of experience in product or menu development in the food and beverage, or related industry. All product development applicants should have experience in benchtop to full-scale commercialization of products, process development, project management, and specifications development. In terms of abilities, product developers must be able to work with cross-functional teams, and have basic Microsoft Office software skills. They should have knowledge of food ingredient functionality, and food microbiology (Taleo TOC Page). For Category Directors, the top managerial position in the U.S. product divisions before the executive-level, applicants must have at least six years of business management experience. They
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must have three years of experience in developing strategic plans. Six years of experience is also required in product or brand management with profit and loss responsibility, and progressive experience managing product or program development from conception through implementation. These applicants must be able to work across company divisions, as well as the ability to lead and negotiate with others effectively. Personnel Policies Internal V. External Recruiting: According to former Starbucks recruiter, Jaylene Linsle, Starbucks practices both internal and external recruiting. One third of entry-level product development and management positions are filled by former Starbucks interns, the rest is filled externally. MBA Interns who perform well in their role are generally asked back for a full-time position. In rare cases, undergraduate interns are provided extra training and mentoring. In our interviewees case, she was pulled in on executive-level meetings, and even made and served Starbucks coffee to the Vice President of the North American division. At the managerial level, internal candidates must have management training to be considered. If employees werent in line for management and want training, they have to show why they want to be trained. In addition, Starbucks reimburses for the cost of tuition, so existing employees can attain the knowledge necessary for internal promotions. Due Process Policies V. Employment at Will: When it comes to either Due Process Policies or Employment at Will, Starbucks has chosen to put grievance processes in place. Extrinsic V. Intrinsic Rewards: As previously mentioned, good compensation and benefits packages are a huge part of Starbucks competitive advantage. In our Compensation & Benefits section, we covered pay and benefits at the corporate and retail level. We will now examine rewards for interns in detail. Even for interns, extrinsic rewards manifest in lead-the-market pay policies. Tallariti said that Starbucks offered her the best compensation and perks package among other corporate internships at Nordstrom and Google. Starbucks interns were paid $20 per hour, plus housing for the entire summer an apartment worth $3000 in rent per month in a modern high rise in Eastlake, Seattle, all utilities were included, subsidized half the cost of an Orca card, as well as optional complete health and dental coverage. Intrinsic rewards for interns include a mix of career development, insider networking, and a memorable experience. Training for career development and personal growth meant learning repeatable routines, such as learning to make all Starbucks drinks like a barista, and professional development workshops. One workshop was a day-long, real-deal class on presentation skills with a presentation coach. Interns also take a class on Starbucks itself, tips of the trade, and its history. They also visited to the Kent, WA Starbucks Roasting Plant. For networking, Tallaritis class of summer interns attended Executive Lunch & Learns that took place one to two times per week where she met fabulous people, such as the President of Seattles Best Coffee, the Director of Starbucks VIA, and the Director of Finance. Twice a week, interns attended another type of activity planned especially for Starbucks interns to have fun and learn something professional.

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Image Advertising: Starbucks has invested resources into image advertising to assure prospects that its a good place to work, and also supports workplace diversity. In a very public town hall meeting, Schultz responded to questions concerned with the fact that Starbucks is currently spending more on health care than on coffee, and in turn the workforce is nervous about shrinking benefits. Schultz responded, We are not ever going to turn our backs on our employees. (Starbucks). Starbucks has also spent HR and marketing dollars on branding themselves as a great place to work through the social media networks of Facebook, Twitter, Youtube, LinkedIn, mobile applications, as well as on their website. (Social Recruiting). Starbucks has taken notice to the fact that nowadays applicants are very responsive to diversity & inclusion ads. The Career Diversity section is featured prominently on the Starbucks websites Career Center. It promotes their support of minority associations, which include the National Council of La Raza Lideres (young leaders) Program, the Human Rights Campaign, the NAACP, the National Hispanic Corporate Council, the National Urban League, and the United States Business Leadership Network. The website also promotes awards and honors by distinguished minority organizations. It announces that Black Enterprise magazine has ranked Starbucks among the 40 Best Companies for Diversity in the country, 15 Best in Senior Management Diversity, and 15 Best in Corporate Board Diversity. The Disability Rights Legal Center has also honored Starbucks for nurturing an environment of respect and sensitivity to people with disabilities (Career Diversity). Corporate Recruiting Methods Recruiting and hiring for Starbucks is difficult. Starbucks is very particular, and its a hard company to get into, said former recruiter, Jaylene Linsle. Its hard to find someone who has the right skills and fits into the Starbucks culture. Theres a big component of being a corporate citizen at Starbucks, and, its hard to find people who can fit in the corporate board room to face the Howard Shultzs, Linsle added. Peter Gibbons, executive VP of the global supply chain operation, admitted that Starbuckswhich turned 40 years old this yearis "starting from scratch" with its recruitment program, and professes a sense of urgency to complete the task ahead of him. Internal & External Recruiting: Because finding the right talent is a challenge, Starbucks recruits both internally and externally. Internal candidates are given priority. New jobs are first posted internally for 3 days. Also, our intern interviewee, Anna Tallariti, had a Starbucks co-intern roommate who is now a full-time Starbucks corporate employee. Linsle, the corporate recruiter, said that all recruiters for all divisions met quarterly for an Organizational, People, & Planning (OPP) Meeting. They would go through everyone in all teams, and talk about how they could promote internally. Linsle said that its not as easy as it might sound because Starbucks is still growing, so theres a balance of promoting from inside and bringing in outside people. Recruiters have to bring in external applicants for almost every job. In fact, Linsle said, Theres a lot of external hiring, and that she didnt even do any internal hiring, but know others who did. She would cold call retail competitors, such as 7/11 or GAP, to try to pull their senior leaders out.

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Direct Applicants & Referrals: The use of either direct applicants or referrals varies throughout the different levels of the corporate product ladder. Starbucks overall corporate recruiting strategy is to develop a good reputation as a great place to work by treating employees, and even any applicants that interface with the company well. Jason Warner, former director of North American recruiting at Starbucks said, "You're not going to refer someone you know and like unless you're certain they're going to be treated well," he said. "But if you exceed everyone's expectations, you create an incredible advantage in the talent market" (To Hire Sharp Employees). Interns are accepted on a direct applicant basis. Entry level positions, however, are swayed by existing employees, although a meritorious referral is hard to earn. Undergraduates are usually expected to work a few years in a marketing agency, however, Tallariti noted that if Starbucks interns were to develop a good working relationship with his or her Category/internship director and team, they would be able to make the hiring connection. The whole team plays a big role in recommendations if you want to go back as an fresh graduate of their internship program. Few former interns like Tallariti developed a close working relationship with their director. Next month Tallariti is going to have an informal sit down with the Clover Brew Category Director to go over her resume, as well as see where she would best fit in the company. In general, former recruiter Linsle said that there are very few referrals for corporate positions. When you have a company like that, a lot of people want to apply. People refer their friends for just about anything and everything, Linsle said. She once had an IRS employee referred for an internal coordinator position. Simply put, most referrals are just not qualified, and just because they are a referral doesnt mean they get preferential treatment, Linsle added. The picture is a very different one at the executive level. Its all about CEO Howard Schultzs connections and ability to attract other big-name executives. He strengthened Starbucks' top management team by hiring people with extensive experience in managing and expanding retail chains. In 1990, Orin Smith, who had 13 years' experience at Deloitte and Touche and an MBA from Harvard, was brought in as chief financial officer. In 1994, he was promoted to president and chief operating officer. Also, Schultz also took care to add people to Starbucks' board of directors who had experience growing a retail chain and who could add valuable perspectives (Starbucks Case). Company Website: Starbucks doesn't want to complicate recruiting with loads of fancy, new and different sites. They just use the ones that work, the tried-and-tested marketing techniques, but done in the Starbucks way. (Social Recruiting). Linsle said that she loves recruiting through the Starbucks website using Taleos platform. She said, Its very successful in recruiting the right candidates. Everyone has to go through the website. Colleges and Universities: From 2008-2010, Starbucks spent two years revamping its supply chain. Starting in 2010, it sought the next crop of leaders to run it in the future. Throughout last fall, executives at Seattle-based Starbucks have been fanning out across a handful of schools including the prestiegous Wharton Business School, Kellog Business School, as well as the University of Washington and the Arizona State University to interview undergraduates and graduate students with backgrounds in business management. Anna Marie Tallariti, our interviewee, found her
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summer 2011 internship through Husky Jobs, and the University of Washintons Career Center also provided her with more information on the internship and hosted her interview process. She found three openings at Starbucks for Category Specialist interns. Applications were available in the spring (February-March), although for the upcoming year, they will be pushing recruiting earlier because they found that a lot of the good candidates were already taken by spring. From the internship process will come a select group of new talent who, starting last July 2011 until an undetermined number of years, will be selected and groomed to head Starbucks' operations for even as long as the next two decades. We want to grow our own talent to support the growth of our business, in North America and globally, and to support normal staff turnover," said Peter Gibbons, Starbuck executive VP of global supply chain operation. Gibbons declined to specify the number of recruits will come on board each year. He adds, The initial phase will be aimed at building out the U.S. organization, followed by a similar staffing process for the company's international operations. Gibbons confessed, "Our business is growing, the competition for top supply chain talent is intense, and our entry into campus recruiting has come later than many other supply chains seeking similar talent." He adds, "We have to do this fast. Its not been done at our company before, and we're getting one shot at it." The strategy will yield multiple benefits if successful. This is definitely a developmental and strategic internship; its not to fill labor shortages cheaply because from a pay standpoint, the interns were paid above market rate with above market perks and benefits. Tallariti attested, They want to get a sense of who you are and if you would be an asset to their company... After the internship, Starbucks definitely keeps tabs on you through your director who keeps in touch. The internship program will brand Starbucks as a bona fide organization both within academia and industry. Also, it will ensure a seamless workforce transition as baby boomers near retirement. Lastly, Starbucks will reap the advanced concepts and ideas that graduates take out of school and into the workplace (Starbucks the Next Generation). Minimally Used Methods - Ads in Newspapers, Periodicals, Classifieds, & Employment Agencies: Use of these recruiting methods are very minimal. According to Linsle, Starbucks uses these outlets when they dont generate qualified applicants out of their website and online ads. Also note that Linsle mentioned Job Fairs are not used to recruit corporate-level employees. Retail Recruiting Methods Like most companies, Starbucks strives to recruit the most talented and skilled employees. More specifically they are searching for people who are adaptable, dependable, and passionate team players. According to Sheri Southern, vice president of partner resources for North America, Its not hard to recruit for this company. People want to work here (Weber, Preserving the Starbucks Counter Culture, February 2005). In 2005 Starbucks was ranked 11th in Fortunes Best Places to Work. Baristas and shift supervisors are the face of retail stores all over the world. With Starbucks established company culture, finding the right employees who will represent the company and uphold their reputation are important. According to the article, Preserving the Starbucks Counter
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Culture, Starbucks brand is so well known that applicants are able to self-select because they know what the company is looking for (Weber, February 2005). There are thousands of retail stores, a company website, and social media channels that promote the Starbucks brand to make it known all over the world. To recruit for baristas and shift supervisors, Starbucks holds job fairs, posts positions on the company website, refers to recommendations from partners, and creates ads, banners, and brochures as well as use social media. Social Media: Social media has become a dominant way for Starbucks to recruit. The growth of Facebook as well as LinkedIn and Twitter are channels that Starbucks has taken advantage of to further expand their company. Through the Internet, Starbucks is able to post open positions, feature stories of employees who work for the company to interest future applicants, and is also able to expand their brand by getting their siren logo seen by the world (Using Social Media to Attract & Engage Passive Candidates, March 2010). For example, Facebook advertising and the fan page are ways people all over the world can connect to the brand. People are able to share their thoughts about Starbucks, like the page, tag the company in their status, and find links to buy coffee through their page. E-Recruiting: Not only is Starbucks looking to recruit the right people for their company, but they are trying to build relationships with people to staff stores as needed. Starbucks is able to staff effectively and efficiently with a software program called Taleo. Taleo is a database that stores candidate applications. Through this software, Starbucks is able to staff more effectively because they are able to review applications that answers basic questions about skill and experience (Weber, Preserving the Starbucks Counter Culture, February 2005). With the large pool of applicants in Taleo, the most skilled and talented are emailed about open positions for assistant manager and store manager. Shift supervisors, assistant, and store managers are also hired and promoted internally. By promoting internally, Starbucks is able to retain skilled and experienced partners who are familiar with the retail operations of the stores. According to the Starbucks Corporate Social Responsibility Annual Report, recruiting methods have successfully recruited more than 54,000 employees (2002). Recruiter Characteristics Business Acumen for Corporate Recruiting: Former Starbucks Recruiter, Jaylene Linsle, commented, The best recruiters tend to come from a sales background than a recruiting or HR background. Its not about the paperwork, its about moving peoples hearts and minds. Its more about listening, hearing, and responding to what candidates want. She said that part of her success is due to her entrepreneurial skills, and that recruiters need to understand the business process and has business acumen. Recruiters need to understand that for every hour, theres a cost, and what the return is on that HR investment. She said, Starbucks did a pretty good job hiring recruiters who are entrepreneurial. However, theres a shortage on qualified recruiters. Starbucks paid an agency $20K to hire her.

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Recruiter Warmth: Tallariti mentioned that the warmth of the recruiter swayed her decision more towards the Starbucks internship. She said, The recruiter really cared that I got in. In addition, Starbucks policy requires timely feedback with personal touches. Timely & Personal Feedback: A Candidate Bill of Rights emphasizes that recruiters use phone calls and handwritten notes over form response letters, sets goals for how quickly applicants should hear back, and encourages recruiters to send out Starbucks gift cards in nominal amounts as goodwill gestures, whether or not an applicant gets a job offer, said Jason Warner, director of North American recruiting. Starbucks goal is to treat candidates like customers by doing something memorable for them. "You can't treat people shabbily, especially in a world where there are far more open jobs than there is available talent to fill them. We strive to put the humanity back into the recruiting experience," adds Warner (To Hire Sharp Employees). Evaluating the Quality of a Source When asked about the effectiveness of recruiting sources, Linsle replied that in particular, she loves Starbucks Career Center on its website because its very effective in hiring the right applicants. She never worked with metrics like yield ratios and cost per hire. Theyre moving so fast that recruiters dont know that theyre paying attention to those metrics. She would use existing contracts for recruiting sources that were signed by other departments. I knew successful sources intuitively, Linsle said. SWOT Analysis of Compensation and Benefits Strengths and Opportunities: Due to the high levels of benefits Starbucks offers, the company has the ability to select among many talented employees and retains its employees. Potential employees are attracted to Starbucks benefits and thus Starbucks has more prospects to choose from. Because of this, managers can be more particular and choose partners that fit the companys culture, passion and work ethic. Satisfied employees are more likely to remain at a company than dissatisfied employees; attractive benefits add to the satisfaction. According to Howard Schultz, it costs $3,000 to recruit and train a new employee, which is a high price to pay for frequent turnover (Starbucks Case). Weaknesses: Although part time employees enjoy the high level of benefits Starbucks offers, these perks come at a price. According to CEO Howard Schultz, it costs $1,500 per year to provide an employee with full benefits. Many other companies do not provide their part time workers with benefits, so Starbucks has a competitive disadvantage to its bottom line. Starbucks is competitive with similar businesses when it comes to compensation for partners. Threats: A primary threat is that other companies will offer more competitive compensation than Starbucks. This will force Starbucks to increase compensation. This could also hold true for benefits. Alternatively, a rise in the minimum wage could result in a forced raise in the wage paid to Starbucks baristas. Rises in barista wages would increase overall wage expenses for Starbucks and threaten profit margins.

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SWOT Analysis of Recruiting Practices Strengths: People want to work for Starbucks - its a desirable company to work for because of its popular branding, above market compensation and benefits, and enjoyable nature of job vacancies in retail and product management. Theres no shortage of direct applicants and referrals from satisfied employees. In addition, Starbucks has made it a requirement for recruiters to make recruiting experiences memorable, thus making the difference when highly desired candidates are choosing between Starbucks and a competitor employer (with personal preferences for the nature of work being equal.) The fact that HR nationwide meets every quarter to evaluate each corporate employee for promotion is also a positive sign for Starbucks recruitment practices. Last but not least, Howard Schultzs appeal and connections makes it easy to attract bigname executives. Weaknesses: Starbucks relies a lot on its website. When it fails, they have to pay employment agencies large sums to find qualified knowledge workers, or resort to newspaper advertisements that can have indeterminate viewership. Another weakness is that Starbucks is a late entrant in campus recruiting. They have only begun to develop networks with top universities for its future leaders. Opportunities: Starbucks has taken advantage of the opportunities in recruiting for their retail stores. The expansion of social media has opened up channels for the company to utilize. The usage of sites such as Facebook, LinkedIn, and Twitter have allowed Starbucks to reach a mass audiences by buying ad space, having a fan page on Facebook, and by allowing employees and the general public to share their thoughts about the company. Being able to brand their company to the public has attracted many applicants who know about the company in one form or another. Starbucks has gained a good reputation as a great company to work for (Weber, Preserving the Starbucks Counter Culture, February 2005). Threats: Starbucks faces several threats in their recruiting practices. Although social media is a great channel for Starbucks to expand their company, other companies are able to use social media channels as well. Other companies are able to use the same resources that Starbucks has so that they can better compete with them. Another threat to Starbucks recruiting is the challenge to attract skilled and knowledge workers. Starbucks is able to sort through the applications to choose the most qualified and skilled on the applications, but cant control the qualifications of people applying, which complicates the recruiting process. Recommendations While Starbucks is currently competitive in recruitment due to its strong benefits offerings, social media use, and high company repute, the company must continually assess its tactics. We recommend that Starbucks continually assesses compensation and benefits to stay competitive. If Starbucks wants to attract and retain baristas, wages offered need to be appealing. However, Starbucks must also maintain wages that allow for the company to profit. The crucial need for sustainable compensation means that Starbucks needs to slowly adjust to more intrinsic and less
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monetary compensation, yet never going lower than above-market rates to abolish its initial strategy. The constantly growing war for talent at a corporate level means that there is a shortage for qualified knowledge professionals, and as baby boomers retire, Starbucks will need to develop a new fleet of leaders. We recommend that Starbucks continue to develop their internship program and maintain high its standards until the program is reputable amongst top universities, and then possibly relax the standards to hire excellent candidates instead of students strictly in the top 10% of their class. We also recommend that within the next two years, Starbucks plans to and actively starts pursuing an official campaign to seek out more existing employees with managerial potential, and invest more to develop internal applicants to ensure they move upwards in the company, instead of outwards.

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