Responsibility and trust
Companies that don't treat workers well will pay a steep cost, but if corporate executives are proactive in taking good care of workers, won't that require greater expenditures and hurt profits? Wouldn't that be unfair to shareholders?
Starbucks, which has more than 9000 branches worldwide and over 90,000 employees, has used comprehensive benefits to create high growth year after year. In the process it has destroyed the myth that businesses can't do well by doing good.
Employees aren't disposable parts on an assembly line, writes Howard Schultz, Starbucks CEO, in his book Pour Your Heart into It: How Starbucks Built a Company One Cup at a Time, in explaining his conception of how to treat employees. Originally from a poor family in Brooklyn, Schultz saw how his father toiled all his life yet never obtained his employer's respect. He spent decade after decade lacking job security and feeling insecure. Not long after Schultz took over Starbucks, his father passed away. It was then that Schultz decided that treating his employees with the utmost honesty was key, and that his highest objective would be to allow all of his workers to become shareholders. Because the company was losing money at the time, he first convinced the board to reward employees with a comprehensive benefits plan, which was offered, without precedent, to two-thirds of the workforce.
When Starbucks' financial situation stabilized, he convinced the board once again to offer the employees shares in the company. These measures, revolutionary for the restaurant industry, ended up cultivating an extremely loyal workforce. They resulted in low personnel turnover, which saved a lot in training costs. And the employees gratefully responded in kind: To save the company money, some employees would take evening flights for business trips, and at work they would propose money-saving measures and offer concrete ideas about how to increase revenue. Most importantly, they did their utmost to provide enthusiastic service that resulted in highly loyal customers. Financial analysts believe that this is Starbucks' true strong suit, one of the keys to its rapid expansion.
In addition to its relations with employees, Starbucks' relationship to the coffee plantations that supply its coffee is also enlightening. In Faith and Fortune: The Quiet Revolution to Reform American Business, Marc Gunther, a senior writer for Fortune magazine, explains that Starbucks realized that its fate was tied to its suppliers. Consequently, with the help of Conservation International, it publicly announced in 2001 a set of principles for purchasing coffee: Starbucks would spend top dollar for coffee from plantations that protected soil and water quality and biodiversity, so as to protect the environment of the tropics and ensure the quality of Starbucks coffee. At the same time it required coffee plantations to meet labor, human rights and safety standards. These standards were more comprehensive than the "fair trade" standards seen in recent years. Starbucks provided a broader range of protections, because it deeply understood that the coffee plantations were part of its future.
At the same time, when the global price for coffee was collapsing, Starbucks was willing to pay above the market rate because it didn't want to see coffee planters turn to growing coca leaves instead.
Schultz admits that managing a highly ethical company isn't easy. The outside world holds up a magnifying glass to their environmental principles and their treatment of coffee plantations. One has to spend a lot of time and money to deal with issues that competitors needn't concern themselves with. But it's a burden Starbucks bears because the company cares a lot about the opinions of consumers and staff, Schultz writes.
The experience of Starbucks and HP echoes the results of much research conducted over the past several years: Among the companies listed in the Standard & Poor's 500, superstars in their treatment of stakeholders have also had among the most outstanding performances. That's because when a company's management policies are merciful and just, it naturally builds trust that helps to shape high-quality management, and quality management is a leading indicator of outstanding economic performance.
Modern businesses must first move consumers' hearts before cultivating customer loyalty. Starbucks, which stresses respect for its workers and fair treatment of its coffee plantation suppliers, is one such example.