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Monday, August 25, 2014

Strategic CSR - Starbucks

The article in the url below covers the summer announcement by Starbucks that it is willing to pay for the tuition of its employees to attend university—even part-time employees. The article offers a good summary of the agreement:
 
"On June 16th Howard Schultz, the boss of the coffee retailer, told a meeting in New York of hundreds of top-performing employees—and their families—that the firm will pay for their university education. From later this year, it will cover all the tuition fees in the final two years of college for staff who work at least 20 hours a week, and may also contribute to the cost of their first two years. The only conditions are that they must get their degree online from Arizona State University, and achieve a certain number of course credits."
 
I have seen some commentators complain that the employees have to pay a large amount out-of-pocket before Starbucks starts contributing (i.e., the first two years of tuition). Nevertheless, the benefit strikes me as exceedingly generous. The interesting question, therefore, is why would Starbucks do this? Beyond the "highly caffeinated PR" suggested in the article, one fact mentioned (almost as an afterthought) suggests one of the primary motivating factors:
 
"Although the attrition rate at Starbucks is well below the fast-food industry's average of around 110% a year, it is still said to turn over two-thirds of its workforce annually."
 
That is amazing. An average of 110% turnover means that most fast-food companies lose their entire workforce, on average, every year. While some people obviously stay on, which means that other positions are filled multiple times over, this is a huge cost of doing business in this industry. As such, if the "average fast-food company" has got any sense whatsoever, I would think it is something they are trying to fix. While high-school students working for extra pocket money are never going to stay around for long, it seems that offering fulfilling careers for the adult proportion of the workforce would be a good investment:
 
"[Howard Schultz, Starbucks CEO] thinks shareholders will benefit because employees will be more motivated and loyal. … Reducing [employee attrition], and thus the cost of recruiting, training and integrating new workers, could save a fortune. Mr Schultz says he hopes eventually to offer similar help with higher-education costs to employees outside America. … Starbucks is hardly the first firm to pay college fees for some staff, though other employers typically do so only to give them specific skills needed by the firm, and require them to remain on the payroll for some period after completing the course. Starbucks employees will have no such obligation, though Mr Schultz says he hopes they will see enough career potential with the company to want to do so."
 
Take care
David
 
David Chandler & Bill Werther
 
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From baristas to BA-ristas
June 21, 2014
The Economist
Late Edition – Final
63