Howard Schultz, CEO and chairman of Starbucks Coffee Co., explains how the welcoming rituals his company practices helps imprint the Starbucks culture and reduce employee turnover.
Masters in Business
Howard Schultz of Starbucks explains the importance of an employee's first days
It's a clichÉ, but it's true: you never get a second chance to make a good first impression. Yet surprisingly few entrepreneurs heed that simple wisdom when it comes to welcoming new employees.
Not Howard Schultz. Schultz, CEO and chairman of Starbucks Coffee Co., in Seattle, makes sure he tells all new employees how delighted he is to have them aboard--even though he has to do so by video, since the coffee giant recruits roughly 500 people a month for its approximately 26,000-person staff. Even part-time retail workers (called "partners" in Starbucks-speak) repeatedly hear how much they're valued during the 24 hours of training they undertake in their first 80 hours of employment.
Perhaps Schultz appreciates the importance of a good start because he himself began as a Starbucks employee, back in 1982, when the company was a small retailer. "What struck me most is how much people cared," he recalls. "It was the passion that everyone had about the coffee that tied us together." Still, in 1985, Schultz couldn't resist the entrepreneurial urge: he left to create his own coffee company. Two years later he purchased the assets of Starbucks.
Today Schultz tries to replicate the early Starbucks culture in each of the chain's more than 1,600 stores. Whether or not he succeeds, employee turnover, which hovers around 60%, remains well below the specialty-coffee-industry average of 150%, according to BT Alex. Brown analyst Christopher Vroom. Vroom adds that the Starbucks turnover rate hasn't changed much since 1992, even though the company's revenues have grown from $93 million in that year to $967 million in 1997. Staff writer Stephanie Gruner met with Schultz to hear his views on getting workers off on the right foot.
Inc.: Why do you pay so much attention to employees' first days?
Schultz: The imprinting period of a new employee is probably less than a couple of weeks. The analogy I think of has to do with young children. In the early stages of children's lives, you want to make the kind of impression that provides them with high self-esteem and good values. Then you want them to go out and make their own decisions about life. Well, in many ways, the early stages of the life of a Starbucks partner is very similar to that. I think you have to engage the employee early on by sharing how much you care about what you do. For people joining the company we try to define what Starbucks stands for, what we're trying to achieve, and why that's relevant to them.
Inc.: Why make such an investment in part-time workers--a segment of the workforce notorious for high turnover?
Schultz: The worst thing we could do is convince ourselves that these people are not going to be with us a long time and, as a result of that, not invest in them the same way we invest in everyone else. That thinking goes back to the earliest stages of the business, when we realized that the store was going to be open for long hours--in some cases from 5:30 a.m. to 1 the next morning. One could make a case that the most important people in the business are people who work part-time, because of the extraordinary dependence we have on them.
How do you greet new hires?
Chances are, you don't have CEO Howard Schultz's training budget. Still, small businesses can adopt many of the orientation practices that Starbucks says it uses. Test yourself to see how well you're doing.
Does the CEO welcome all new hires? At Starbucks, Schultz greets all new hires via video.
Do new employees learn on their first day about your company's history and culture? In that initial video, Schultz tells about the company's history and his personal experiences at the company.
Do you teach new employees about your mission and values? New employees discuss the Starbucks mission statement and do customer-service role-playing.
Do you choose mentors? The Starbucks policy is to team each new part-timer with a more experienced employee who can help teach the new person the ropes.
Do you inquire into what drew employees to your company? Starbucks asks new employees what they look for and admire in a company.
Do employees learn firsthand about your products and services? Admittedly, Starbucks has it easy on this count. "You can taste what we're about," Schultz explains. "You can't taste an insurance company."