When Howard Schultz founded Starbucks in 1987, he wanted to
create a company that would genuinely care for the well-being of
its employees. He had been very influenced by his memories of his
father, noting that his father “struggled a great deal and never
made more than $20,000 a year, and his work was never valued,
emotionally or physically, by his employer … This was an injustice
… I want our employees to know we value them.” He also believed
that happy employees are the key to competitiveness and growth. As
he stated: “We can’t achieve our strategic objectives without a
work force of people who are immersed in the same commitment as
management. Our only sustainable advantage is the quality of our
work force. We’re building a national retail company by creating
pride in–and stake in–the outcome of our labor.” Schulz set out to
accomplish his goals by creating an empowering corporate culture,
exceptional employee benefits, and employee stock ownership
programs. While Starbucks enforces almost fanatical standards of
coffee quality and customer service, the culture at Starbucks
towards employees is laid back and supportive. Employees are
empowered to make decisions without constant referral to
management, and are encouraged to think of themselves as partners
in the business. Starbucks wants employees to use their best
judgment in making decisions and will stand behind them. This is
reinforced through generous compensation and benefits packages. In
2000, Schultz announced that he was resigning as CEO and left the
firm to pursue other ventures (though he remained chairman of the
board of directors). However, after Starbucks began to suffer from
slumping net income and decreasing share price, Schultz returned to
the helm in 2008. Rather than cutting costs and reducing the work
force, Schulz announced his “Transformation Agenda”–a controversial
plan to invest in Starbucks’ employees, environment, and community.
His plan included: Competitive employee compensation plans that
include equity-based compensation for nonexecutive partners. In
2013, $230 million was paid out in equity awards. In 2015,
Starbucks gave all baristas and supervisors a pay raise and
increased starting pay rates across the United States. In 2018,
Starbucks’s U.S. baristas earned between $7 and $15 an hour (with
an average of $9 an hour), plus an average of $742 a year in cash
bonus, $286 in stock bonus, $442 in profit sharing, and $1,095 in
tips. Industry-leading health care benefits and 401K benefits for
both part-time and full-time workers. Other companies that offer
health benefits to part-time workers typically only do so for
employees who work at least 30 hours a week. Starbucks broke with
industry norms by creating benefits for employees who work at least
20 hours a week. Tuition reimbursement for students. In June 2014,
Starbucks unveiled a “College Achievement Plan” wherein employees
who work more than 20 hours a week can work towards a bachelor’s
degree through an online program from Arizona State University. An
ethical sourcing plan. Starbucks’ coffee must be purchased from
suppliers that adhere to Starbucks’ “C.A.F.E.” standards. These
standards include practices related to product quality, economic
accountability, and transparency (e.g., suppliers must provide
evidence to demonstrate that the price Starbucks pays reaches the
farmer), social responsibility (e.g., third-party verifiers provide
audits to ensure that suppliers are using safe, fair, and humane
working and living conditions, including minimum-wage requirements
and the prohibition of child and forced labor), and environmental
leadership (e.g., measures to manage waste, protect water quality,
and reduce use of agrochemicals).
When Schultz says, "I can tell you the organization is not
thrilled when I walk into a room and say we're now going to take on
[a particular issue]," who is he specifically referring to as "the
organization"?
As expressed in the case, which of the following did Schultz
believe was the "only sustainable advantage" for the company?
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a. Environmental leadership |
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c. Quality of the work force |
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What was the main criticism of Schultz's decision in 2014 to
leverage the company's influence in the world by speaking out on a
variety of issues such as ay marriage, gun-carrying laws, and
treatment of veterans?
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a. Taking on these issues that bear
little relationship to Starbucks' core activities fails to bring
value to shareholders. |
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b. Starbucks' actions worked toward
redefining the role and responsibility of a public company. |
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c. Starbucks was better served by
focusing on noncontroversial issues such as industry-leading health
care benefits and 401(k) benefits for all workers. |
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d. These actions did nothing to
create an empowering corporate culture. |
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