Human Resource Management 2012

Human Resource Management

BUSI3323: 1310

Section: 201

Dr: Beverley McNally

Course project

Student names and IDs:

Sukina AL-khatem 201001126

Samar Al-Zayer 201000247

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 Human Resource Management 2012

Executive summary
This project paper discusses several issues related to Starbucks strategic
management and human resource functions. Human resource functions such as
recruitment and selection, training and development, safety and health,
compensation, and labor relationships were explained in more depth in the second
part of the project. A decision such as outsourcing was taken place as well as growth
strategy and how outsourcing HR function supports the expansion plan. Starbucks
criteria of rewarding and benefits system were explained further as part of the
strategic management. Starbucks success of reporting the lowest turnover rate
reflect how effective the human resource department in applying the organization
strategy. Having a great sounded reputation in the market impacts the pool of
employees and corresponding affect the human resource decisions. The strategy of
managing the challenges as pressures, increasing costs, and retaining employees is
the key role for human resource and considered significant part of their routine
functions. Making effective decisions rely on applying the organization’s strategy
successfully. The high quality performance of Starbucks Company reflects the
effectiveness of human resource function. Additionally increasing the number of
stores around the world is a result of successful decisions.

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 Human Resource Management 2012

Table of Contents
EXECUTIVE SUMMARY .................................................................................................................................. 2
PART I ................................................................................................................................................................. 4
INTRODUCTION ................................................................................................................................................................. 4
LITERATURE REVIEW ................................................................................................................................................... 5
CONCLUSION .................................................................................................................................................................. 7
PART II ............................................................................................................................................................... 8
STARBUCKS HR FUNCTIONS .................................................................................................................................... 8
STARBUCKS HR STRATEGIC MANAGEMENT .................................................................................................... 10
CONCLUSION ............................................................................................................................................................... 11
REFERENCES LIST ....................................................................................................................................12

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 Human Resource Management 2012

Part I
Introduction
Having a cup of coffee in the early morning is a habit for most of people. The
story of Starbucks started from 1971 when three coffee lovers thought of opening a
coffee shop at Seattle. The store grew slowly at the end of its first decade 1981 and
then expanded significantly across the world until it becomes the most rapid growing
company. The expansion process is not as easy as it seems on contrast it is a
complicated procedure and needs effective decisions. Human resource department
is the one who is responsible for such decisions. Correspondingly challenges arise
and the human resource strategy supposed to be positive and flexible in its response
to changes in order to be successful. An analyst from IBS Center for Management
Research organization, (2005) stated that: “in the light of its ambitious expansion
program, Starbucks' generous human resource policies made sound strategic sense,
as they kept the turnover low and provided a ready pool of experienced employees
to support expansion.” This project will discuss how strategic human resource
management resolves Starbucks expansion challenges.

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 Human Resource Management 2012

Literature review
Krishnan, (2011) suggested that in today’s fast changing business environment
and technology developments, organizations are looking for human resource
department that will give them the needed competitive advantage to stay ahead of
their competitors. One of the biggest problems that face human resource department
is the administrative role and sometimes lack of strategies that are needed to survive
in the competitive world of business. Understanding and supporting the
organizational strategy would be the key for human resource department to resolve
the arising problems and reduce the costs of unneeded tasks. Involving in tasks that
are not related directly to the core business would influence the performance
negatively. Therefore, one of the options for eliminating such expenses is
outsourcing.

According to American Society Training and Development periodical, (2007)

they had an article about Starbucks outsource its HR function mentioning that:” the
goal of the alliance is to help Starbucks build a single global platform for HR services
to support rapid global expansion.” However, outsourcing is considered as a feature
of the modern economy. It is one of the strategic decisions a company can do to
perform effectively and cut off costs which would help the organization to focus more
on the quality of their products and services rather than pressuring themselves with
irrelevant functions to the core business. It is part of the strategy of ensuring the
highest quality of all services provided to the customers as well as to the employees.
In addition, doing such functions internally might add unnecessary costs, for that
reason firms take the decision of outsourcing to avoid such expenses.

Naomi, (1998) discussed several aspects of how Starbucks impassion

workers to drive growth. First, the company’s mission statement that says” Provide a
great work environment and treat each other with respects and dignity.” Second,
offering work/life programs that help employee to be creative, culturally committed,
and passionate partnership. Records show that turnover rate is 60 percent and that
is reflected positively on the company’s success making workers get ongoing
benefits. The strategic human resource role in retaining good people, empowering
employees, and building loyalty assisted the company to grow successfully and be

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 Human Resource Management 2012

generous in their rewards. Effective managerial decision making, encouraging

democratic operations, inviting ideas and solutions and sharing rewards led human
resource to survive its ambitious expansion.

Bradley & Hargis, (2011) discussed in their article about human resource
management functions and how it affects the organization strategy of success.
Human resource represents the design, development, and implantation of the people
management that affects how well the organization is performing in the business.
Human resource has five main functions, which are recruitment and selection,
training and development, compensations, relationships between employees.
Human resource strategy play a substantial role in targeting talented employees as
well as hiring qualified individuals, keeps motivating employees by initiatives and
rewards, ensuring safety environment, developing training programs to improve the
workers’ skills. Starbucks invested considerably in training employees and was well
known for committing to their employees.

Stephen, Lakhani, Brown & Malmi, (2008) suggested methods to improve

the quality of human resource performance. Many multinational organizations work
on their strategic human resource management to be at the highest standards of
quality. Even though there is a big expansion in strategic management and human
resources and combining them together to improve the organization ability to
perform effectively in today’s competitive world of business, some organizations fail
in aspects of strategic human resource management. Nowadays there are
knowledge firms who hire skilled employees and send them to different companies
all around the world to educate HR departments more about strategic human
resource management to improve their organization.

According to Singh, (2003) it is very important to find the competencies of HR

and link them to the various parts of the organization that leads to the formulation of
a strategy plan. There are factors both internal and external that affect the strategy
formulation process which are politics, economics, technology, and culture.
Furthermore, Starbucks used the external and internal factors for the sakes of their
growth strategy which is apparently manifest the success of their expansion through
significant figures whether the number of stores around the world, rate of turnover

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 Human Resource Management 2012

and stock prices. People can taste the creativity of Starbucks’s products through the
variety of drinks and beverages they are offering.

Conclusion
In conclusion, Starbucks strategy of expansion revealed how successful
human resource management they have. Getting over the challenges effectively
reflect the positive performance of its human resource department. Studies show
how organization could be professional in planning and dealing with obstacles as
well as embracing the values of the firm and never delusion its culture while
developing to a higher level. Understanding the functions of human resource and
recognize its importance is essential to the business. Being successful means
moving to a higher level without giving up a single advantage and that is implied to
Starbucks Company. Giving the priority to the customer satisfaction and employees
contentment is the key for success.

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Part II

Starbucks HR functions
Human resource department is vital to any organization and as what
Howard Schultz, owner of Starbucks, said: “human resources are the most important
asset for the organization it must be managed to be in tune with the organization
goals to have the competitive advantage over its competitors.” Recruitment and
selection is one of human resources functions that Starbucks must strategically
manage to ensure positive outcome. According to Bratton and Gold, (2007) defined:
“Recruitment is the process of generating a pool of capable people to apply for
employment to an organization”. While selection was defined as using specific
instrument to choose from the pool of applicants, individuals who fit with legal
requirements, management goal and would be successful in the job. Starbucks must
determine certain characteristics and skills such as friendliness, commitment to
provide excellent services to customers, attention to details and specific
qualifications to carry out their role in Starbuck’s fast paced environment. To ensure
selecting the right employees Starbucks conduct interviews and psychological
testing. It has its advantages and disadvantages, therefore organization such as
Starbucks perform multiple approaches for qualification and requirement.

Second function is training and development. Development is linked to

employees’ retention when the organization offers its employees the chance to
develop themselves, retention rate would decrease. For Starbucks there are two
main elements important for the basics of employees’ performance, the first is the
capability to produce high quality cup of coffee, and the second is the ability to
interact with stockholders, colleagues, and customers. The first one benefits
Starbucks by ensuring the stability of services and products’ quality across the
network of franchises. Thus the reputation of Starbucks will be positively maintained
and employees will be employable across a range of franchises and as a result the
value of the company will increase. The second element which is performance it
assesses intangible that is relevant to perceived service level, customers, and
colleague interaction. Colleague interaction can be assessed through a variety of
measures such as 360-degree feedback, line manager observation and self-
reflection during a performance review. (Armstrong, 2009)
 Human Resource Management 2012

Third function is compensation, compensation includes health insurance,

retirement, sick leaves, paid vacations, and payment for injury an employee may
have during the job. With more than 8,000 employee Starbucks has one of the
lowest employee turnover in the industry, it lead us to clue that Starbucks offers it
employees an excellent compensation to reward the employees. Starbucks offers its
employees a benefit package that they call ‘Your Special Blend’ which includes
benefits such as health insurance, stock options and discounted stock purchase
programs, surprisingly it’s valid for workers who have worked more than ninety days.
Starbucks is upgrading their package to include a plan called ‘Partner Connection’
that helps employees with their health and fitness and link employees with shared
interests and hobbies. The most important compensation that Starbucks offers its
employees is a program called ‘Mission Review’, which allows employees to
communicate thoughts and feelings to management and receive answers to their
questions. (DeNisi & Griffin, 2008)

Forth function is health and safety, comes from the idea that employees
who work in safe environment and enjoy good health are more likely to be productive
and yield long-term benefits to organization. Safety involves protecting employees
from injuries caused by work-related accidents. Health refers to employees' freedom
from illness and their general physical and mental well being as defined by DeNisi &
Griffin, (2008). Some people think that since Starbucks is a shop that only deals with
selling beverages, sandwiches, and desserts it is a safe environment for employees,
it is not because Starbucks operates in dangerous cities that may get robbed,
dealing with hot beverages can increase the possibility of getting permanent burns.

Fifth function is employees and labor relations, which refers to the relationship
between the company and law created to protect the workforce. Most organizations
are required by law to recognize a union and bargain with it in good faith, if the firm’s
employees want the union to represent them. Most organizations including
Starbucks prefer to work in environment free from unions but since 2008 the
employees of Starbucks formed union demanding increased pay and raises because
of company’s profits at 2008 that worth’s 1.7 billion. (You Sigma, 2008)

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 Human Resource Management 2012

Starbucks HR strategic management

For Starbucks to reach their highest standard of quality it must combine
their strategic management with their human resources management to strength
their performance. Correspondingly, strengthen their position in the competitive
industry; it improved the performance of Starbucks employees and the quality of its
performance. Forster, (2008) mentioned that since 2008 Starbucks employees
started to express their dissatisfaction which rise the attention that the human
resource management is not performing as it is expected, that is why the strategic
management should be combined with human resource management. Because they
will work together to tackle such arising issues. As well as inventing ways to achieve
the organization goals and that will influence employees’ satisfaction. Starbucks
decision of outsourcing the HR functions aimed to decrease costs, effort and time
letting Starbucks staff busy with ensuring the highest quality of service and quality. It
also supports the global expansion as published by American Society for Training
and Development, (2007).

Starbucks has developed innovative work/life programs which increase the

commitment to the company’s culture and keep up the passion among employees.
Nonetheless, Starbucks reached more than 1,700 stores around the world because
of its philosophy and loyalty of its lovers as mentioned by Naomi, (1998). The
company expansion plan is made strategically so they don’t dilute their culture and
the contribution of individuals. Therefore, Starbucks created excellent benefits
packages that suit various employees with different preferences. Empowering
employees and recognizing their hard work with appreciation influence positively the
atmosphere of the company and encourage employees to work even more hard and
reap the ongoing benefits. Empowerment is crucial key of the organization strategy
for retaining good employees and increasing the productivity. Lashley, (2001) said
that Improved service quality allows the organization to gain competitive advantage,
can be achieved by the use of empowerment strategy of the human resource
management. That strategy helps the human resource management to address
issues regarding employment criteria.

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Conclusion
The process of making a cup of coffee is not as easy as it seems. It’s a
complex process blended with strategy, culture, and management. Planning to make
a global expansion must be managed strategically in order to be successful and
ended with desired results. Human resource department plays an important role in
the organization starting with recruiting and selecting the qualified individuals and
ending by managing relationships among employees and organization. We
concluded that some of the decisions might not work for the sake of the
organizations goals as what happened when Starbucks outsourced the HR functions
at 2007 and then withdraw it after several months. Such a decision should be made
strategically with a great attention to the details. Recognizing individual’s
achievement and rewarding them will benefits the organization in many aspects. One
of these benefits is gaining valuable reputation among competitors. Starbucks
human resource department manifest a considerable attention to each one of its
functions to support its goals and missions.

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 References list
Armstrong, M. (2009) A Handbook of Human Resource Management Practice (11th

Edition) – Kogan Page, London

Bradley, D., Hargis, M., (2011). Strategic human resource management in small and

growing firms: aligning valuable resources. Academy of Strategic Management

Journal, 10 (2), 105-125

Bratton, J. & Gold (2007). Work and organizational behavior. 2nd ed. Basingstoke:

Palgrave Macmillan.

Brown, D., Lakhani, B., Malmi, T., Stephen, T., (2008). Strategic human resource

management and knowledge workers. Management Research News, 31(9), 683-696

Forstor, J. (2008). Starbucks workers make demands. Red Orbit. Retrieved from

http://www.redorbit.com/news/business/1488969/starbucks_workers_make_demans/

IBS Center for Management Research Organization. (2005). Starbucks’ human resource

management policies and the growth challenge.

Krishnan, S.; Singh, M., (2011). Strategic human resource management: a three-stage

process model and its influencing factors. South Asian Journal of Management,

18(1), 60-82

Lashley, C. (2001). Empowerment: HR strategies for service excellence. Butterworth-

Heinemann, London.

Naomi, W. (1998). How Starbucks impassion workers to drive growth. Workforce, 77(8), 60

Singh, K. (2003). Strategic HR orientation and firm performance in India. International

Journal of Human Resource Management, 14(4), 530-543

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Starbucks outsource its HR functions. (2007). American Society Training and Development,

61(9), 17-17

Starbucks Union (2008).Starbucks Organization. Retrieved December 20, 2012 from

http://www.starbucksunion.org/about

You Sigma. (2008). Starbucks Rewards and Compensation. Retrieved December 20, 2012

From http://yousigma.com/benchmarking/starbucksrewardsandcompensation.html

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