Starbucks: A Great Place to Work means A Very Positive Experience

[Howard Schultz strongly believed that Starbucks’ success was heavily dependent on customers having a very positive experience in its stores. This meant having store employees who were knowledgeable about the company’s products, who paid attention to detail, who eagerly communicated the company’s passion for coffee, and who had the skills and personality to deliver consistently pleasing customer service. Many of the baristas were in their 20s and worked part-time, going to college or pursuing other career activities on the side. The challenge to Starbucks, in Schultz’s view, was how to attract, motivate, and reward store employees in a manner that would make Starbucks a company that people would want to work for and that would result in higher levels of performance. Moreover, Schultz wanted to cement the trust that had been building between management and the company’s workforce.

One of the requests that employees had made to the prior owners of Starbucks was to extend health care benefits to part-time workers. Their request had been turned down, but Schultz believed that expanding health care coverage to include part-timers was the right thing to do. His father had recently died of cancer, and he knew from having grown up in a family that struggled to make ends meet how difficult it was to cope with rising medical costs. In 1988 Schultz went to the board of directors with his plan to expand the company’s health care coverage to include part-timers who worked at least 20 hours per week. He saw the proposal not as a generous gesture but as a core strategy to win employee loyalty and commitment to the company’s mission. Board members resisted because the company was unprofitable and the added costs of the extended coverage would only worsen the company’s bottom line. But Schultz argued passionately, pointing out that if the new benefit reduced turnover, which he believed was likely, then it would reduce the costs of hiring and training—which equaled about $3,000 per new hire. He further pointed out that it cost $1,500 a year to provide an employee with full benefits. Part-timers, he argued, were vital to Starbucks, constituting two-thirds of the company’s workforce. Many were baristas who knew the favorite drinks of regular customers; if the barista left, that connection with the customer was broken. Moreover, many part-time employees were called upon to open the stores early, sometimes at 5:30 or 6 am; others had to work until closing—9 pm or later. Providing these employees with health care benefits, he argued, would signal that the company honored their value and contribution.

The board came round and approved Schultz’s plan. Starting in late 1988, part-timers working 20 or more hours were offered the same health coverage as full-time employees. Starbucks paid 75 percent of an employee’s health insurance premium and, over the years, extended its coverage to include preventive care, crisis counseling, dental care, eye care, mental health care, and treatment for chemical dependency. Coverage was also offered for unmarried partners in a committed relationship. Since most Starbucks employees are young and comparatively healthy, the company has been able to provide broader coverage while keeping monthly payments relatively low.

The value of Starbucks’ health care program struck home when one of the company’s store managers and a former barista walked into Schultz’s office and told him he had AIDS. Schultz said later:

"I had known [Jim] was gay but had no idea he was sick. His disease had entered a new phase, he explained, and he wouldn’t be able to work any longer. We sat together and cried, for I could not find meaningful words to console him. I couldn’t compose myself. I hugged him."

At that point, Starbucks had no provision for employees with AIDS. We had a policy decision. Because of Jim, we decided to offer health-care coverage to all employees who have terminal illnesses, paying medical costs in full from the time they are not able to work until they are covered by government programs, usually twenty-nine months.

After his visit to me, I spoke with Jim often and visited him at the hospice. Within a year he was gone. I received a letter from his family afterward, telling me how much they appreciated our benefit plan.11

In 1994 Howard Schultz was invited to the White House for a one-on-one meeting with President Clinton to brief him on the Starbucks health care program.

By 1991 the company’s profitability had improved to the point where Schultz could pursue another employee program he believed would have a positive long-term effect on the success of Starbucks—a stock option plan for all employees.12 Schultz wanted to turn all Starbucks employees into partners, give them a chance to share in the success of the company, and make clear the connection between their contributions and the company’s market value. Even though Starbucks was still a private company, the plan that emerged called for granting every employee companywide stock options in proportion to base pay. In May 1991, the plan, dubbed Bean Stock, was presented to the board. Though board members were concerned that increasing the number of shares might unduly dilute the value of the shares of investors who had put up hard cash, the plan received unanimous approval. The first grant was made in October 1991, just after the end of the company’s fiscal year in September; each partner was granted stock options worth 12 percent of base pay; the value of these first shares was pegged at $6 per share. Each October since then, Starbucks has granted employees options equal to 14 percent of base pay, awarded at the stock price at the start of the fiscal year (October 1). Employees, if they wish, can cash in one-fifth of the shares granted each succeeding year, paying the initial year’s price and receiving the current year’s price. It took five years for the shares to fully vest. Each of the shares granted in 1991 was worth $132 in October 1996; thus, an employee making $20,000 in 1991 could have cashed in the options granted in 1991 for more than $50,000 in October 1996. In 1991 when the Bean Stock program was presented to employees, Starbucks dropped the term employee and began referring to all its people as partners because everyone, including part-timers working at least 20 hours per week, was eligible for stock options after six months. At the end of fiscal year 1997, there were 8.7 million shares in outstanding options at an average exercisable price of $19.72 (which compared very favorably to the current stock price of $43.50).

In 1995, Starbucks implemented an employee stock purchase plan. Eligible employees could contribute up to 10 percent of their base earnings to quarterly purchases of the company’s common stock at 85 percent of the going stock price. The total number of shares that could be issued under the plan was 4 million. After the plan’s creation, nearly 200,000 shares were issued; just over 2,500 of the 14,600 eligible employees participated.

Starbucks was able to attract motivated people with above-average skills and good work habits not only because of its fringe benefit program but also because of its pay scale. Store employees were paid $6 to $8 per hour, well above the minimum wage.

Starbucks believed that its efforts to make the company an attractive, caring place to work were responsible for its relatively low turnover rates. Whereas most national retailers and fast-food chains had turnover rates for store employees ranging from 150 to 400 percent a year, the turnover rates for Starbucks’ baristas ran about 65 percent. Starbucks’ turnover for store managers was about 25 percent compared to about 50 percent for other chain retailers. There was evidence that Schultz’s approaches, values, and principles were affecting company performance in the intended manner. One Starbucks store manager commented, "Morale is very high in my store among the staff. I’ve worked for a lot of companies, but I’ve never seen this level of respect. It’s a company that’s very true to its workers, and it shows. Our customers always comment that we’re happy and having fun. In fact, a lot of people ask if they can work here."]*

There is nothing more to add. The case speaks for itself.  When the leader of an organization decides to transform his/her thoughts, his/her personal philosophy into a business strategy, it impacts directly on the brand experience delivered to customers.

"Greatness" says Jim Collins, co-author of Built to Last, "is the result of a conscious choice and discipline." We just need to understand this example to prove it. The good, better or extraordinary brand experiences are not the result of chance, are the result of the passion of the leaders of the organization to get it done right. No shortcuts, no way to cheat. There is no place on the podium of success for companies that are not congruent with what they preach and pretend to be what they are not. Companies that try to deliver experiences based on principles or values ​​that do not practice day in and day out can cheat employees and customers once, will not be able to have a second chance. As Martin Lindstrom says: “There are two different ways to brandwash the consumer – you can choose the open, honest approach, or you can take the more devious path. The choice is yours. Remember, regardless of what you do, the consumer will ultimately discover the truth.”

Companies that support the strategy of brand experience on a philosophy that emerges from the purest human principles, which are consistent between what they say and do, are the ones that deliver genuine experiences and communicate without saying a word with the customer’s genuine human essence and thus earn their loyalty.

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[*] Segment reproduced entirely from the Case Study published by McGrawHill: http://www.mhhe.com/business/management/thompson/11e/case/starbucks-1.html

Legendary Hard Rock Cafe closes in Mexico

[The legendary entertainment venue Hard Rock Cafe Mexico closed its doors after 20 years of success and tradition. The establishment will cease operations permanently, the innkeepers reported in a statement. 

The Hard Rock Cafe Mexico was brought by a group of young people in September 1989, also, these entrepreneurs through Operator DB developed the Hard Rock concept not only in Mexico, but worldwide creating projects that strengthened the brand.
 
Artists like Michael Jackson, Elton John (who laid the first stone), Gustavo Cerati, Miguel Bosé, Molotov, Robbie Williams, Gloria Gaynor, James Brown, Alanis Morissette, Enanitos Verdes, Jaguares, Fito Paez and Los Fabulosos Cadillacs, among others visited the venue.]

What could have been the reason for its closure?

In short, the experience. Many times we confuse that the 'stage' makes the experience, (ie space and atmosphere where the experience is delivered). It is automatic because 'the stage' is the element that attracts attention. It is through it that the theme is communicated to visitors sending messages to four of the five senses. The more effective the communication with the senses, the greater the emotional impact that occurs in the person visiting. Of course the stage is crucial in the delivery of extraordinary brand experiences, but it is not unique. It is just one of the factors involved in the process.

For restaurants like the Hard Rock Café (Planet Hollywood or the Rainforest Cafe, and many others that are opened based on a concept or theme), believed and still believe that the key to business success is the concept or topic, ie the stage. They think it's the single biggest motive that the people will need to eat there and do business. For those who created the Hard Rock Café believed the memorabilia and merchandising would be enough to do the business for them. They wanted to live the theme and neglected the elements that could really make people stay in and return: food and service. That is, they forgot that they were a restaurant. 

For any restaurant, drinks, food, and service should not go to second place, and at Hard Rock Cafe Mexico that is precisely what happened. To deliver a truly formidable, memorable, awe-inspiring experience, the product or service that a business offers lies in the center of the reason for it's existence. Call it shop, restaurant or office, all product or service of a business needs to meet the expectations, the level of quality of 'the stage' and must be of a quality that people want to return to consume again.

Not paying attention to the product or service is to act against the experience and the business itself, and that's what happened to Hard Rock Mexico.

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[Source of inspiration: News agency Notimex]

Mike Jeffries' lessons on brand experience (CEO of Abercrombie)

An ABC News report, broadcasted on TV the second week of May 2013 and published later on their website, revealed that the trendy retailer Abercrombie & Fitch carries mostly double-zero and extra-small sizes inside its New York City flagship store. Rebecca Jarvis, from ABC New’s reported there was no clothing for women in sizes larger than a 10, and salespeople at the store confirmed ABC News that Abercrombie doesn’t carry XL or XXL sizes for women. 

Since then the popular casual-clothing is under fire.

Where did all originated?
What can we learn from this case?

A lot.

For good or bad the philosophy (way of thinking, beliefs and frames of reference) of the leader of the organization is directly proportional to the company’s culture, and therefore to the brand experience delivered to customers and employees.

As Rebecca Jarvis report for ABC says, Abercrombie & Fitch’s CEO, Mike Jeffries has been outspoken and controversial. As it also says, Jeffries has not commented on the recent controversy but has been forthright in the about not wanting any customers who don’t fit the cool, young and sexy demographic the company targets. The report continues saying, he gave a 2006 interview to Salon magazine in which he said the store goes after “the attractive, all-American kid … A lot of people don’t belong [in our clothes], and they can’t belong. Are we exclusionary? Absolutely.”

“There are two different ways to brandwash the consumer – you can choose the open, honest approach, or you can take the more devious path. The choice is yours. Remember, regardless of what you do, the consumer will ultimately discover the truth.” Martin Lindstrom.

Jeffries should follow his advice.

The consequences.

Since ABC broadcasted the news, it has been bad for the clothes retailer. On her report, Jarvis informs that the size worn by the average U.S. woman is 14, as well as that plus-size shoppers now make up 67% of U.S. consumers. On Monday May 13 protestors gathered outside the A&F’s Michigan Avenue store in Chicago, outraged about the store’s not carrying clothes in large sizes. And some, the report says, have decided to return their clothes.

Even Kirstie Alley, the Former “Cheers” actress, summed up to the list of Abercrombie & Fitch critics who take exception to the company’s refusal to carry clothing in larger sizes, slamming the store on Tuesday May 14, telling “Entertainment Tonight” she would “never buy anything from Abercrombie.”

The report also comments on the backlash growing online. On Twitter, Facebook, and several petitions on Change.org urge people not to shop at Abercrombie & Fitch until the New Albany, Ohio-based retailer starts carrying larger sizes.

The report mentions a YouTube user that started a “Fitch the Homeless Campaign,” asking customers to rebrand the popular retailer by giving their Abercrombie & Fitch clothes to the homeless.

Here's the video. 

So, whatever you want to sell or offer to the public, through whatever concept of experience you envision, you must get conscious about the way you think and feel about things, life, people. Because within this lies the seed of the failure or success of the experience, products or services you offer. If not, why do you think Disney Parks have been so successful? Read the biographies of the leaders of the most admired companies in the world and you’ll see what I’m talking about. 

Bottom line, it’s up to you to deliver an extraordinary brand experience.



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Source of inspiraton:

http://abcnews.go.com/blogs/entertainment/2013/05/abercrombie-fitch-faces-protests-backlash-for-not-selling-larger-sizes/

Awe-inspiring experiences can enhance your quality of life

New research from the Stanford Graduate School of Business shows that moments of awe can change your perceptions of time, enhancing your quality of life.
I share with you Susan Greenberg’s article published at the website of Stanford Graduate School of Business which talks about a recent research that suggests that eliciting a sense of awe is a way to expand your perception of time. Included in the article you will find my personal notes. If you are a professional dedicated to envision, design, plan, build or deliver brand experiences, this reading is a must for you. 

“Experiencing something awe-inspiring — whether it’s the Grand Canyon, a soaring cathedral, or a Puccini aria — can expand perceptions of time, enhancing quality of life” says Jennifer Aaker, Stanford GSB’s General Atlantic Professor of Marketing and author of a new paper on the subject. The key, she continues, is that awe makes us feel small, not larger than life, the way happiness can “When you feel small, there’s a reapportioning of what’s out there… Time is reapportioned also”. 

The study defines awe as something that is both vast (in size, scope, number, ability, or importance) and capable of altering one’s view of the world. To calculate the effects of awe on how people perceive and use time, Aaker — along with lead author Melanie Rudd of Stanford GSB’s PhD program, and Kathleen D. Vohs, associate professor from the University of Minnesota’s Carlson School of Management — conducted three experiments. 

In the first, they sought to assess whether awe would be more likely than happiness to enhance the perception of available time. They asked 63 students to watch a 60-second television ad. One group watched a commercial depicting people encountering “awesome” images — waterfalls, whales, and space exploration. The other group watched a commercial which showed individuals crossing paths with a parade of happy, brightly dressed people tossing confetti. Afterwards, they all rated their agreement with a series of beliefs, including four key variations on the idea: “I have lots of time in which I can get things done.” 

Consistently, subjects who had watched the “awe” commercial agreed more strongly with the statements relating to ample time than those who had watched the “happy” ad. “When you feel awe, you feel very present — it captivates you in the current moment,” says Rudd. “And when you are so focused on the here and now, the present moment is expanded — and time along with it.”

[Zack’s note: Check RedBull’s YouTube Channel and Redbull.tv and ponder on to which type do their videos belong, the ‘awesome’ or the ‘happy’. Check the amount of views the videos get. What do you think about what their marketing niche is feeling while watching in correlation to this study?]

The second experiment sought to determine whether people who experience awe would feel less impatient, as well as be more inclined to volunteer their time to charity. First, each of 86 student subjects was asked to write a personal narrative. Half described an experience that had filled them with awe — defined as “a response to things perceived as vast and overwhelming that alters the way you understand the world” — and half wrote about something that made them happy. Then, they had to fill out a series of surveys, rating their feelings of impatience, their willingness to volunteer time and donate money to a worthy cause, and their overall feelings of excitement, awe, pride, and happiness.

Those who wrote about awe were more likely to craft essays about nature, art or music, or the accomplishments of others, while those who wrote about happiness were more likely to write about social interactions or personal accomplishments. But regardless of the essay topic, those in the awe group reported significantly less impatience than those who had recounted happy events. Furthermore, the awe essay writers indicated they’d be more willing to volunteer their time — but no more willing to donate money — than the happiness essay writers. That supports the argument that awe makes people feel richer in hours, since participants were willing to be generous only with their time, not with their pocketbooks.

Building on the first two experiments, the third sought to demonstrate that awe, by expanding the perception of available time, would prompt participants to choose experiential over material gifts. In other words, someone who didn’t feel pressed for time would value a temporal, sensory experience over a concrete possession.

To test the hypothesis, subjects were instructed to read one of two stories and attempt to empathize with the main character. The first story, meant to elicit awe, described climbing the Eiffel Tower for an expansive view of Paris. The second described ascending an unnamed tower for a view of a generic landscape. Neither story mentioned the word “awe.” Then subjects rated their agreement with various statements about the availability of time, including “Time is slipping away” and “Time is boundless.” They were also asked to select between a pair of equally priced hypothetical gifts, such as a watch and a Broadway show ticket, or a scientific calculator and a professional massage.

Like the earlier experiments, the third revealed a strong causal link between awe and the sense of more plentiful time. It also showed that members of the “awe” group were more likely than the neutral group to choose an experience — such as dinner out or a movie — over a material possession, such as a new jacket or backpack. Additionally, those who expressed greater feelings of awe reported greater life satisfaction, at least momentarily.

The results of the three experiments proved more conclusive than the researchers had anticipated. “The power of the [awe] effect was surprising,” says Aaker. “It was quite robust".

[Zack’s note: Having worked at Disney Parks, I had hours and hours to observe guests behaviors, responding to all the stimuli surrounding them. Without a doubt I can say that there is a sense of awe evoked in each guest that visits the parks. Of course the degree in which it is evoked would depend on each person’s age, life experiences and other factors, but, since the well thought and planned ‘stages’, as Disney calls every park or attraction, are designed to communicate to the senses (sight, smell, hearing, taste and touch), these highly stimulating messages irremediably evoke a great deal of wonder or awe. They do. They are consciously designed to do that. Being an eyewitness I was able to testify that this sense of awe influenced guests on how to deal with waiting times and money spending. Thanks to this study, now we can understand why people are willing to wait so patiently in line for large amount of minutes, even hours; but, in contrast to their findings though, I observed that guests at the end of the day, tired and exhausted are willing to pay for souvenirs and/or food. Maybe, as this study reports, people are not willing to donate money and they prefer experiences over material possessions, but surely I saw guests were willing to spend on comfort and happiness, for them individually and for their loved ones. My hypothesis is that guests buy food and beverages at the end of the day responding to immediate satisfaction –comfort at the present moment; the action of buying food or beverages, in my opinion, is the answer to a personal question of ‘how can I make this moment comfortable for me (or the others with me) I am tired, exhausted, hungry and thirsty?’ Souvenirs on the other hand, as I dare to theorize, are the ‘happy’ reaction for experiencing something awe-influencing, as the study calls it. To Disney, merchandise stores are a ‘stage’ too, they are a way to continue delivering entertainment. No wonder named the practice as merchantainment. This is not an exclusive Disney concept. As Joseph Pine and Jim Gilmore shared in their book The Experience Economy, is a common practice among brand experience deliverers. As an example, for themed restaurants like the Hard Rock Cafe, Planet Hollywood, or the House of Blues, the food is just a 'prop' for what’s known as “eatertainment”; as for stores such as Niketown, Cabella’s, and Recreational Equipment Incorporated the offering of fun activities, fascinating displays, and promotional events is labeled as “shoppertainment” or “entertailing”. So, what I dare to theorize based on my observations and connections with what I’ve read and analyzed, is that what guests are emotionally seeking through buying a souvenir at any Disney shop, is that they want to take a ‘peace’ of that wonderful stage, and this merchandise, no matter what they choose to buy or how many, become the thing or things that summarizes all the happiness, all that sense of awe and fulfillment felt and lived during their stay and visits to the parks. Therefore, the merchandise transforms into the object that encapsulates all these feelings for the person to prolong them through time. What I reflect on, is that the sense of awe evoked in people thru extraordinary experiences, like Disney does, influences them in a way that they are willing to invest time and money to feel an intense sense of awe no matter how brief or long that moment is when it is actually happening, but also will invest time and money to make it last. For me what on the third experiment researchers asked for products that were no related to the experience, so what would have happened if the objects they asked about had a strong correlation with the awe-inspiring experience? I would dare to say results would be contrastingly different.] 

 

“[Awe] is more of a mindset than we think,” says Aaker. “This research suggests you can cultivate it in similar ways, as you do gratefulness or happiness. Yet, when it is present, awe can transform people and reorient their lives, goals, and values.”

Future studies will examine how malleable awe is, and how it can change other perceptions and behaviors. The larger goal, she says, is to understand how well various emotions — awe, gratefulness, peacefulness, or excitement — serve us in different situations. For now, perhaps the best we can do is watch a sunset or listen to a Brahms piano concerto. Then we’ll feel like we have all the time in the world.

From my point of view as an Experience Adviser, this is a key subject to take in mind for all organizations that would like to deliver extraordinary or awe-inspiring brand experiences, because they would be influencing people’s lives positively resulting in a strong bond between customer and brand.[My final note - Zack] 

Inspiring source: http://www.gsb.stanford.edu/news/research/time-warp.html?utm_source=Twitter&utm_medium=Tweet&utm_campaign=Time

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