The Importance of Putting People First
Starbucks’ plan to pay its workers’ college tuition may signal a new era in how employers consider their employees.
In a recent episode of the PBS series, Endeavor, the new CEO of a department store in Oxford, England, suggests that a longtime manager call to check on a clerk who failed to report to work. But it has always been the responsibility of the employee to contact the store, the manager protests, not the other way around.
Undaunted, the new CEO (the founder’s son) explains that he may be new but the one thing he knows is that “Burridge’s is its staff,” and he intends to look out for their welfare. He sends the manager to make the call. A bit patrician perhaps (the series is set in the 1950s, after all), but it’s a reminder that there can be a human connection between employer and employee.
It is in this light that I began to consider the recent announcement that Starbucks had forged an alliance with Arizona State University to make 40 online degree programs affordable for its employees. Some hailed it as a breakthrough for baristas who might otherwise skip college or graduate with a pile of debt. Starbucks’ CEO Howard Schultz has spoken of the program as both a social statement and a solid business move: The New York Times reported Schultz as saying, “I believe it will lower attrition, it’ll increase performance, it’ll attract and retain better people.” He told The Daily Show’s Jon Stewart that he was concerned with rising income inequality and student debt.
But not everyone was so enthused. Critics quickly leapt on the program’s limitations. It was initially touted as offering a “free” college education, but the fine print revealed that it was only no-cost for junior and senior years and if the student qualified for government or university aid. Still, Starbucks’ employees become eligible on day one with the company, are not restricted to work-related courses, and do not have to promise to stay with the company for any period of time. So it may be an imperfect benefit but, for many, it’s significant nonetheless. Help with college tuition was employees’ most requested benefit, according to Schultz.
The more interesting question, however, is whether this and similar moves by other leading companies signals the next evolution of the sometimes-implicit-sometimes-explicit expectations that employers and employees set for each other. Might it be time to move from “human resources” to “human assets”? Resources are exploited and depleted; assets are carefully tended and expected to grow.
In the years after World War II, most people stayed with a single company for their entire career. Health insurance was free and lifetime pensions were the norm for those working for large firms. Wages for the average worker rose amid the general prosperity. In the 1980s, things began to shift: More restrictive health insurance plans were introduced as a way to curb costs while pensions were largely replaced with employee-funded retirement savings. The 401K was born and soon became the norm for private-sector workers. Layoffs signaled that no job was guaranteed. Wages for average workers stagnated.
There are many reasons for this shift, but things had gotten stark by the early years of the 21st century: For those with desirable skills, “free agent nation” meant flexibility, control, and the ability to demand greater compensation. For others with skills that were less valued, this new reality offered stingy or non-existent benefits, little security, and often a patchwork of part-time jobs to make ends meet (as chronicled, for example, in the best-selling Nickled and Dimed). Without access to easy consumer credit for everything from auto leases to college costs, the whole thing would have collapsed long ago (but that’s a topic for a future column).
This latest move by Starbucks—along with its existing programs that offer stock and health insurance, even to part-time workers—is an example of corporate leadership that offers a fresh alternative while acknowledging some hard truths: The benefits of the good old days are unaffordable because of rising costs and an aging population. Lifetime job tenure is dead and most people embrace workforce mobility. Yet in a consumption-based economy, workers must be able to afford more than the basics, and they deserve a certain measure of security. In essence, what Schultz is saying is that the company will take decent care of you while you’re working there and will help you help yourself to move on to something better if you choose. In doing so, Starbucks can help create consumers who will be able to afford its products and—just as important—create brand ambassadors who will remember their time with the company fondly.
As a leader, Schultz has moved beyond the transactional to the transformational: He seeks to find common ground between his aspirations and goals for the company and those embraced by his workers. And he’s betting that this is the best way to generate profits for shareholders. Starbucks may be the first to offer such an innovative approach to funding college but it is not alone in understanding the connection between fairly compensated workers and happy customers. Warehouse club Costco has long been known for paying higher wages and offering more generous benefits than its rivals—and generating greater sales per square foot, too. Grocer Whole Foods has documented its progressive practices and their business benefits in the book Conscious Capitalism. The entire fair trade movement is based on the premise that businesses must have sustainable supply chains and labor pools, if they are to thrive. Even stingy Henry Ford acknowledged the wisdom of paying his workers enough to enable them to buy the product they labored to make.
A customer’s experience is the sum of every interaction he or she has with a company, its products and services—and, as young Burridge and Schultz have realized—its people. This is the true value of the brand. Those companies that view their employees as assets worthy of investment will reap the dividends.