Web Exclusive | June 2014 | By Alex Dixon

Starbucks Makes the Grade

Coffee quick serve invests in higher education for employees.
Starbucks employees can now complete online degree coursework through Arizona State University thanks to the brand's new benefit program. Starbucks
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Starbucks made headlines on June 15 with the announcement of its partnership with Arizona State University to provide free online college education to its employees, without requiring that they remain with the company. The initiative, which extends to full-time and part-time employees who may choose from more than 40 undergraduate degree programs, is unique in the quick-serve industry, and it represents the move towards greater consideration of what an employer can do to empower and retain its workers.

“This is a great example of where corporate wealth and power can be deployed strategically to help shape and employer brand,” says Bruce Tulgan, founder of management training and consulting company RainmakerThinking. “It could have the impact of changing the whole meaning of the brand in the marketplace, certainly as an employer. If it works over time it could really raise the level of Starbucks employee base, and I suspect could become a feeder population of a more loyal and better educated management ranks.”

But some experts express concern for companies offering tuition reimbursement programs to newly educated employees who may then leverage their education at other employers. An organization could benefit more from offering financial assistance for school to employees nearing the end of their education, says David Lewis, president and CEO of Operations Inc.

“If you’re going to educate people and give them a chance to take classes in marketing, then make sure that when they’re done, there’s a reasonable chance if they’ve done well…to give them a career path in marketing,” Lewis says.

“Voluntary benefits are very big as a retention tool. Things the company doesn’t pay for but the employee just has the ability to secure because the company offers it: Those are all good, solid means for being able to retain talent.”

Starbucks’ CEO Howard Schultz told The Washington Post he expects as many as 10,000 full-time and part-time employees to take advantage of the initiative in the coming year, and while the cost is difficult to project, it could amount to $50 million a year. But Starbucks isn’t viewing the program as a cost, but rather an investment.

“This [plan] is about the future of our company,” Schultz said at the Partner Family Forum where the program was announced. “We can’t build a great company and we can’t build a great, enduring country if we are constantly leaving people behind.”

Tulgan, who has written several books on operational management, says the micro and macro levels of incentivizing employees play very different roles.

“On the broad level, its about employer branding, it’s about larger strategic impact in terms of potential applicant pool, selection, and retention. So it’s a big play,” Tulgan says. “What we look at with managers is what are the discretionary resources available to you? And how are you using them to create a performance based rewards culture in your operation?”

Employee benefits can also highlight a trade off between the benefits and wages. Lewis says employees increasingly consider what they get in addition to their paycheck, including insurance and flexible scheduling, but also consider which perks come out of their pay.

While many brand policies support discretionary resources at the management level, as in the case of Starbucks, sometimes policies can undermine management, Tulgan says. And while managers don’t have the power the implement enormous, brand-wide initiatives like tuition reimbursements, they still have the power to incentivize employees.

“Voluntary benefits are very big as a retention tool,” Lewis says. “Things the company doesn’t pay for but the employee just has the ability to secure because the company offers it: Those are all good, solid means for being able to retain talent.”

Examples of these benefits include task and scheduling choices, learning opportunities, and relationship opportunities as issues employees in the restaurant industry value, Tulgan adds.

“What a lot of people really want is more control over their schedule,” he says. “A manager needs to create a healthy work environment where people have the basics, whatever it takes to have healthy, productive employees.”