In challenging times you dig in deep, you stick to your values and you do the right thing. You take care of your people and that’s what we do.

It is not uncommon for companies to refer to those that work for them as almost anything other than ‘employees’. Be it ‘associate’, ‘stakeholder’ or ‘colleague’ organizations use a profusion of touchy-feely monikers to differentiate themselves from their competitors. Often though, these alternative designations mean nothing more than a change in label, signifying little in the real world. The revelation therefore that Starbucks refers to its people as ‘partners’ at first provokes a familiar feeling of mild nausea; the giant corporation passing itself off as ‘just one of the guys’. But it’s a sensation that dissipates almost immediately after sitting down with Kuchinad. It would take a heart far more hardened and cynical than ours to doubt the man’s sincerity. Asked about the guiding principles at the core of the coffee giant’s operations, his response is unhesitating: “Creating a great work environment and treating each other with respect and dignity, that is really the cornerstone of everything that we do in the business, from within the physical space of the stores to our support centers.”

Of course, it’s very easy to make statements like this. Where Starbucks differs from many is in backing them up with action. Some may sneer at the organization’s self-consciously cozy staff terminology, but even a cursory examination of the way the company works demonstrates that partnership runs through Starbucks from root to branch. “The company is unique because we hold each other accountable for the work environment we create,” Kuchinad explains. This accountability manifests itself in the open channels of communication that span Starbucks’ global operations. “We have great feedback mechanisms for a company our size,” he continues. “We do pulse surveys several times a year in different markets amongst different employees. Once they tell us what they want we have a dialogue with them in a way that’s respectful, in a way that’s relevant to the business.”

Of course, for an entity like Starbucks that has already reached a position of dominance, handling its people with such care is a workable option. Surely, on the way up business imperatives had to take precedence? Not so, insists Kuchinad. “From the very early days of our company we had to balance profitability with benevolence,” he says. “ We always wanted to be known as a company with a social conscience.” Kuchinad gives an example from his early days with the firm of a middle-management partner who came to him for advice. It turns out that this person was in possession of a stock certificate that had been given to her some time ago by Starbuck’s CEO Howard Schultz and wanted advice on what to do with it. The stock was now worth some $400,000. Kuchinad jokes that his first response was to offer her $100,000 for the certificate, but the episode is illustrative. “ There was no reason in the early days for Howard to give such a gift,” he says. “What it comes down to is we believe very strongly in sharing our success. We believe that if we don’t create value for our partners first, there is no other value to create.”

It’s an approach that has continued through to the present day, particularly in Starbucks’ employee healthcare provision. The company offers medical, dental, vision, prescription drugs and alternative health coverage to its partners, paying 81% of costs for its US staff as well as 67% of the costs for their dependents. Not only that, but the firm’s healthcare program is also open to part-time employees. Those who have been with the company for three months and work around 20 hours per week are eligible to opt in at a very reasonable cost. “I strongly believe that the quality of our program relative to other big companies and the price that we charge our partners is incredibly competitive,” says Kuchinad. “For our average barista to get into the most affordable plan they must only pay less than $11 every two weeks. As you probably know in the US that is almost unheard of.” Offering this level of added value has clear benefits for the company as well as it people, as Kuchinad explains. “In terms of our part-time partners that’s one of the top three reasons why they come to work for Starbucks.” Additional benefits for high performing partners come in the shape of stock options, with Kuchinad estimating that as many as 100,000 people will have been recipients this year alone.

But the benefits that employees receive don’t only come from the company’s coffers. A program called Coffee Unites Partners, or CUP, provides a tangible example of how Starbucks is more like a family business than a global corporation. Kuchinad explains: “It’s a program where partners voluntarily put after-tax dollars into a fund which is then disbursed out to those who have family problems and other sorts of emergencies. With very little bureaucracy, we give up to $1000 to our partners.” He tells us of a recent case where the CUP fund paid for an employee from Hawaii to fly home for their mother’s funeral and to spend a few days with the family. “ It’s a very unique program that really reflects our values and guiding principles,” Kuchinad continues. For such a program to be a success, it requires some extensive employee buy-in and is a real test of Starbucks’ much vaunted focus on partnership. It is a test that Kuchinad is confident the company is passing. “We have partners who contribute three to six dollars a paycheck,” he says. “I was talking to a barista recently and she told me that she was doing the CUP fund before she started saving for retirement. It really talks to you about the community that Starbucks is.”

Diversity also plays a key role at the firm, spreading out over virtually every area of operation. “ There are four key strategic pillars to our diversity strategy,” Kuchinad says. “We focus on the customer, on the community, on our suppliers and on the partners that we have to attract and retain.” Customer diversity is a no brainer. The wider your appeal to people of all backgrounds and cultures the more potential purchasers will be walking through the door. However, the other diversity sectors require a little more clarification. “If you focus on the community we have a fairly strong presence both inside and outside the US in communities that are underserved,” Kuchinad continues. “We have a strong emphasis on being present and being relevant to the diversity of the country itself. For example, there was recently a leadership Hispanic festival in San Diego, and we had a strong presence there interacting with those customers sampling our products.” He also tells us about a program called Make Your Mark where partners volunteer in their communities and Starbucks in turn contributes time and dollars.

Additionally, the company connects to the communities it serves through what are called diversity and inclusion teams. “I would broadly classify them as affinity groups,” Kuchinad continues. “For example, we have the Black Partner Network, the Gay and Lesbian Network and so on. These partners come together around common causes that affect their respective groups as well as integrating the work that they do in the broader community. If I’m looking for diverse talent across the country, I get insights from these groups.” The information gleaned from these groups is used in a number of ways, from designing benefit programs to developing and enhancing mentoring activities. “We leverage diversity in a way that connects our partners back to the community of Starbucks and back to the communities where they live,” Kuchinad explains.

Making big efforts to ensure that the company’s supplier base is diverse is also an ongoing project. Within the next three years the aim is to increase investment in minority suppliers by between 10 and 15% per annum. But the biggest thrust of the Starbucks diversity agenda centres on its people. “If you take a moment and think about our workforce, we are a microcosm of United States for sure, but maybe even the world,” says Kuchinad. Keeping such a varied group happy is an ongoing struggle. “ We have a young population that is more like India or China. A high percentage of our people are under 25 years old and so the diversity of how we attract them and then meet their unique needs is a huge human resource challenge.” This challenge takes on even greater significance in an age where the war for talent rages harder with each passing year.

So what is the big differentiator that makes Starbucks’ such a popular job destination for so many people? Kuchinad is in no doubt: “ Our ‘secret sauce’, if you will, has been our culture,” he says. “If you look at any internal survey that Starbucks has done, many of our partners are here because of our sense of social values, our sense of community and our guiding principles. That’s a factor that attracts the majority of our talent into the company.” Another key element is Starbucks’ ability to create opportunities for talent in a broad spectrum of areas. “ We attract the kind of talent that loves retail, loves customers and loves people,” continues Kuchinad. “At the same time they can bring those values into a consumer product world, because we are a consumer product business. They can bring them into the entertainment world in terms of the work that we do there and also into our brand and products.” Kuchinad believes that this marriage of a strong retail focus and powerful brand identity creates an extremely appealing environment for talented people.

It is clear from what Kuchinad says about the company’s approach to people that Starbucks’ partners are just as vital a commodity as its coffee. “It’s the foundation of everything that we do,” he says. “It comes straight from the top. I’ve heard Howard speak and I’ve spoken to him many times. Our brand really is our people first.” It’s here that the organizations insistence on the ‘partner’ nametag for its employees really makes sense. After all, we don’t make choices based on single criteria and repeat purchases can be predicated on any number of factors. We may like the décor, we may appreciate the background music or we may be taken by the staff. It’s the last element that Kuchinad sees as Starbucks’ biggest weapon. “When we are at our best it’s the first connection between the customer coming in and the barista that makes the experience unique, and we take this very, very seriously.” As a result, a great deal of thought goes into ensuring that all partners are well trained and engaged in their work. Quite aside from the company’s self-image as a caring, sharing organization, there are other more concrete benefits. “ If we create opportunities for our partners then the rest of the value to our customers and our shareholders is almost automatic,” states Kuchinad.

Nobody needs reminding that we’re currently living in some of the most difficult economic times we’ve experienced for quite a while. From consumers to corporations, everybody is feeling the pinch. It’s a reality of which Kuchinad is only too aware. “There is incredible pressure on our partners across the board given the economic crisis in the US and the economy is affecting our business and it is affecting our partners.” To ease that pressure, Starbucks is engaging in some simple moves designed to assist in the day-to-day lives of their people. In certain areas, the company is providing a pre-tax transport allowance which helps people pay for public transportation, elsewhere parking fees are being taken care of. These are small things but, along with other factors such as the generous health care program, they are making a big difference to those in the frontline.

Let us not forget that Starbucks is feeling the effects of our turbulent economic climate too. The recent announcement that the company would be closing some 600 stores in the US has attracted a great deal of attention. For an organization like Starbucks, which has been characterized by astonishing growth since its birth, any deviation form the upward swing sets alarm bells ringing. While Kuchinad accepts that these are tough times for the coffee giant, he’s clearly not about to start panicking. “ From an HR standpoint, our focus now is really on existing stores, on enhancing the Starbucks experience,” he says. It is also heartening to discover that the company’s commitment to its people hasn’t become a secondary concern. Kuchinad tells us that there are major efforts underway to ensure that as many partners as possible can move from closing stores to those that are remaining open. “We have some great partners and I think bringing their knowledge and their passion for the company into other existing stores will be a benefit,” he continues. “It’s one of the most difficult things I’ve had to do, but as I’ve said to many people, in challenging times you dig in deep and you stick to your values and you do the right thing. You take care of your people and that’s what we do.”

As someone from the PR department pops in to tell us our time is almost up, we ask Kuchinad what he sees as his and the wider HR department’s key function. The response epitomizes a man and an organization that both place a tremendous value on bringing people together: “Everything that we do focuses on our partners and our customers,” he says. “If anything gets in the way of that, my job is to remove those barriers.” As long as this attitude persists, Starbucks’ cup should remain half full for the foreseeable future.

Train to win

On February 26 2008, Starbucks underwent a dramatic training exercise. For three and a half hours, every one of the almost 7100 US stores closed as more than 135,000 partners worked to transform the customer experience and work towards ‘Espresso Excellence.’ For that short period, coffee fans were forced to look elsewhere for refreshment. The risk of inconveniencing consumers was deemed worth it to ensure the long-term goal of pleasing every consumer, every time. The training forms part of returning CEO Howard Schultz’s new focus on innovation and customer experience, so don’t rule out more eye-catching educational efforts in the future.

Looking forward

Kuchinad gives a glimpse of Starbucks’ management future

There are a couple of things that we are working on that are unique. We are trying to transform how we train our partners and we’re trying to transform how we pay our people in a way that we can uniquely share the success of the store with our partners in the stores. What we strongly believe is that the success of a store depends very strongly on the stability of the store manager. We are trying to create an environment for our store managers and our district managers that makes it feel more like they own the store. We are creating a situation around learning, around pay and around development that gets us to that destination. The idea is that once there is stability at the store manager level that stability then flows through down to other partners in the store. That’s something that we’re working on.

Starbucks – edited highlights

1971 – First store opens in Seattle’s Pike Place Market

1982 – Howard Schultz joins Starbucks as director of retail operations and marketing

1985 – Schultz founds coffeehouse company Il Giornale

1987 – Il Giornale acquires Starbucks’ assets and is renamed Starbucks Corporation

1991 – Becomes the first privately owned US company to offer stock options to part-time employees

1996 – Starbucks Coffee International opens in Japan and Singapore

1997 – Establishes Starbucks Foundation to promote literacy in communities where coffeehouses are based

1999 – Partners with Conservation International to promote eco-friendly growing methods

2000 – Schultz transitions from CEO to chief global strategist

2003 – Opens store in Beijing, its 1000 th in the Asia Pacific

2005 – Donates $1.5 million to the Asian tsunami relief fund

2007 – Schulz returns as CEO and announces new focus on customer experience and innovation

From tall to vente – the rise of a coffee empire