This paper examines how Starbucks Coffee Company designs and administers its total rewards program to motivate its global sales force. Drawing on peer-reviewed and scholarly literature, the paper outlines six key features of an effective total rewards program — including strategic alignment, employee-valued rewards, learning opportunities, workplace environment, and benefits — and evaluates how Starbucks satisfies each criterion. The paper also explores how Starbucks' "Your Special Blend" approach, Bean Stock profit-sharing plan, and stock ownership model create a compelling value proposition for both current and prospective employees, contributing to the company's notably low turnover rate within the food and beverage industry.
Motivating salespeople through effective total rewards programs simply makes good business sense. When properly implemented and administered, a company's rewards program can not only motivate a sales force to sell more — it can also help retain valuable employees and avoid unplanned turnover. Although studies have shown time and again that pay continues to rank among the most important components of a compensation plan, a number of other factors comprise an effective total rewards program and must be taken into account as well.
To this end, this paper reviews relevant peer-reviewed and scholarly literature concerning the compensation plan and rewards program used by Starbucks Coffee Company to motivate its global salespeople. A summary of the research and important findings concerning motivating the sales force at Starbucks is provided in the conclusion.
As of July 2012, Starbucks Coffee Company (hereinafter alternatively "Starbucks" or "the company") operated 17,651 stores across Argentina, Aruba, Australia, Austria, Bahamas, Bahrain, Belgium, Brazil, Bulgaria, Canada, Chile, China, Costa Rica, Curaçao, Cyprus, Czech Republic, Denmark, Egypt, El Salvador, England, Finland, France, Germany, Greece, Guatemala, Hong Kong/Macau, Hungary, Indonesia, Ireland, Japan, Jordan, Kuwait, Lebanon, Malaysia, Mexico, Morocco, New Zealand, Netherlands, Northern Ireland, Oman, Peru, Philippines, Poland, Portugal, Qatar, Romania, Russia, Saudi Arabia, Scotland, Singapore, South Korea, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, United Arab Emirates, United States, and Wales (Corporate profile, 2013).
The company reached this level of growth by treating its employees "with respect and dignity." Starbucks even refers to employees as "partners" rather than "employees" to reflect the collaborative nature of the enterprise (Corporate profile, 2013, p. 2). At present, Starbucks provides its employees with several benefits, including comprehensive health coverage for both full- and part-time employees and an incentive profit-sharing program called "Bean Stock" (Corporate profile, 2013, p. 2).
A noteworthy aspect of Starbucks' approach is that employees can "pick and choose" the rewards package that best suits their individual needs. In this regard, Fitz-Enz (2010) reports that "Starbucks has branded its total rewards concept as 'Your Special Blend,' again making an obvious play on its coffee products. 'Your Special Blend' indicates the ability that employees have to customize their total rewards offering" (p. 78). Finally, all Starbucks employees receive two pounds of Starbucks coffee of their choice each week as part of their rewards program (Corporate profile, 2013).
The scholarly literature identifies six key features of an effective total rewards program, each of which is reflected in Starbucks' approach.
a. Rewards are aligned with the company's strategic goals. It does not make sense to reward behaviors and performance that do not contribute to the company's strategic goals. Graham and Roth (2008) report that "understanding your business strategy, and aligning that business strategy with your total rewards program, is another key element when it comes to gaining competitive advantage for the organization and its shareholders" (p. 85). In sum, Graham and Roth (2008) recommend "developing a reward strategy that is designed to drive the business strategy" (p. 14).
b. Rewards are something employees actually want. Coffee mugs, certificates of achievement, and other inexpensive awards have their place in a rewards program, but effective total rewards programs ensure that the rewards offered are things employees genuinely value. According to the editors of Human Capital Review (2013), "Rewards only work if they are meaningful to employees and influence their affiliation with the organization" (Ten steps to a more effective total rewards program, 2013, para. 1). The most efficient way to find out what employees want from a rewards program is to survey them to identify their preferences and opinions. Failing this step, it is entirely possible to implement and administer a total rewards program without achieving any meaningful results. As the editors add, "Too many companies are missing the opportunity to understand whether their investment in different rewards plans are valued by employees and support the company's attraction, motivation, and retention goals" (Ten steps, 2013, para. 2).
c. The rewards program provides opportunities for learning and development. According to Rumpel and Medcof (2009), learning and development "includes programs and practices related to career training and employee development, supporting performance management and succession planning systems" (p. 28).
d. The rewards program considers all of the rewards available in the workplace. Because there is no "one-size-fits-all" approach to motivation, total rewards programs should introduce individualized, innovative rewards. Rumpel and Medcof (2009) advise that "total rewards attempts to optimize the firm's reward offerings to yield the greatest return for reward dollars spent. This involves integrating diverse programs that are not necessarily thought of as rewards by everyone" (p. 28).
e. The working environment is taken into account. Rumpel and Medcof (2009) note that a rewards program should include programs and practices related to the workplace environment, encompassing: (a) diversity and organizational culture initiatives, (b) performance support, (c) work/life balance such as flexible working arrangements, (d) elements related to organizational reputation, (e) elements related to challenging and interesting work, and (f) the quality of relationships with colleagues.
f. The rewards program includes appropriate benefits. The types of benefits typically included in this area are: (a) financial rewards, including health and welfare benefits; (b) retirement plans; (c) savings plans; (d) vacation; and (e) other paid time off (Rumpel & Medcof, 2009). The U.S. Department of Labor also outlines baseline standards for employee benefit plans that inform best practices in this area.
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