The Starbucks Experience

5 Principles for Turning Ordinary Into Extraordinary

Joseph A. Michelli
McGraw-Hill, 2006
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Recommendation
Starbucks executives claim that the company's customer-friendly, socially re-
sponsible policies amount to a new business model, and author Joseph A.
Michelli generally agrees. Certainly the company has been innovative and wildly
successful. Unfortunately, Michelli's decaffeinated, artificially sweetened ac-
count of Starbuck's retailing prowess often reads as though the writer is giving
a boost to the company's PR department – and the book cover design doesn't
help, with its Starbucks signature colors, logo (dutifully trademarked, as is every
mention of every cup of Frappucino) and inset of the brown, corrugated paper
the company uses for cupholders. Some of Michelli's examples of Starbucks'
caring policies are banal – opening early or providing a free cup of tea are not
major innovations, nor are they transferable examples. Yet the book usefully
illustrates how far good service and community relations can go. Each chapter
provides a readers' guide and sidebars about how to apply Starbucks principles
to your business. getAbstract recommends sipping it for applicable tips and in-
teresting stories.
In this Abstract, you will learn:
1. How Starbucks built a global brand;
2. How five key management and service principles contributed to its success;
and
3. Why Starbucks emphasizes social responsibility and environmentalism.
Take-Aways
 Founder Howard Schultz opened the first Starbucks in Seattle in 1971, offering
strong coffee, attractive store and product design, and a welcoming atmos-
phere.
 Each week about 35 million customers go to Starbucks.
 A $10,000 investment in Starbucks stock in 1992 would be worth $650,000
today.
 Starbucks’ first principle is "make it your own": Employees take pride in their
work.
 The second principle is "everything matters." Quality control is key.
 The third principle is "surprise and delight." Provide unexpected bonuses and
perks.
 The fourth principle is "embrace resistance." Critics are not enemies, they're
friends.
 The fifth principle is "leave your mark." Starbucks aims to make the world better
through socially and environmentally responsible policies.
 Employee morale is higher at companies that are involved in their communities.
 Starbucks uses a triple bottom line, measuring its social and environmental im-
pact as well as its profits.
Summary
More than Free Refills
In 1971, Starbucks Coffee, Tea and Spice opened in Seattle, where it attracted
customers by giving them more than the usual free refill on a 50-cent cup of
burnt coffee. Unlike other chains, it offered high-quality beans, careful prepara-
tion, attractive store and product design and "the charm and romance of a Eu-
ropean coffeehouse." Since then, the company has opened 11,000 stores in 37
countries. Some 35 million customers visit Starbucks weekly and some of its
best customers come in as often as 18 times per month. Today, Starbucks buys
about 4% of all the coffee sold worldwide.
Starbucks went public on the NASDAQ in 1992. The company has grown so
much that if you had invested $10,000 then, it would be worth $650,000 today
– and Starbucks continues to expand. It opens a new store somewhere in the
world every day of the year. Starbucks has 500 stores in Japan, including the
busiest Starbucks in the world, in Tokyo. In some places, it has opened stores
across the street from one another.
 “Starbucks is one of the truly exceptional American success stories, a company
that so dominates its market that there isn't even a close second.”

Every store is company-owned; none are franchised. Starbucks' successful

growth formula includes focusing on its employees, its products, the experience
of its customers and its relationship with local communities.

“Starbucks executives continue to respectfully and willingly share profits with

their people.”

The Starbucks Experience

Starbucks has become a top global brand by adhering to the following five key
principles:
1. "Make it your own" – Customize the experience.
2. "Everything matters" – Focus on every aspect of the job. Never, ever lose your
focus on your customer’s experience and point of view.
3. "Surprise and delight" – Do the unexpected to make buying a cup of coffee
enjoyable.
4. "Embrace resistance" – Learn from your mistakes.
5. "Leave your mark" – Do your job so that your customers remember you.

“Customers aren't looking for best friends; they just want a positive connection.”

The Partner Ethos

Two aspects of Starbucks' corporate culture are central to its success:

“True leaders show staff that their individual uniqueness gives them a special
way to connect with others.”

1. Employees are partners – Starbucks calls its employees "partners" and encour-
ages them to become involved in the company, and to contribute ideas about
building the business and improving the product.
2. Leaders transmit the culture – Managers are responsible for relaying Starbucks'
culture directly to employees.
From the beginning, Starbucks executives have believed in profit sharing. Be-
cause employees receive company stock, they feel a direct link between the
chain's profits and their own. In an unusual move, the company also offers med-
ical insurance to part-timers who work more than 20 hours a week. Many fast
food companies hire people part time, but few give them benefits. In another
 move that is rare in the food service industry, Starbucks gives unexpected $250
bonuses to hourly employees who met certain criteria.

“The more an employee knows about a product – its origins, its properties – the
greater the difference that employee can make in a customer's life.”

Partners receive extensive training in the company's products and service stan-
dards, including how to greet customers and shape their stores' atmosphere.
Starbucks spends more on worker training than on advertising – and the ex-
pense pays off in terms of employee retention and customer satisfaction. Al-
though the fast-food industry in general suffers from a high employee turnover
rate, Starbucks' rate for its 100,000 employees is 120% less than the industry
average. According to one industry publication, Starbucks workers have an
82% job satisfaction rate, compared to a 50% satisfaction rate for other fast-
food workers.

“Starbucks management makes a point of listening and responding to ideas and

suggestions from partners.”

A company Mission Review Committee handles employee concerns quickly

and efficiently. For example, an employee group asked the committee about
extending paid parental leave for those who adopt children. Within two weeks,
Starbucks enacted a two-week leave for new adoptive parents.

Principle One: "Make It Your Own"

Starbucks founder Howard Schultz is often quoted as saying that he is not in a
coffee business, but in a people business that serves coffee. Connecting with
customers and their communities is his main focus. Starbucks teaches this ap-
proach to its workers in a company pamphlet called the Green Apron Book,
which emphasizes these five principles:

“From the perspective of Starbucks’ management, few things affect the reputa-
tion of a business more than a resounding ‘Everything Matters’ approach to
quality.”

1. "Be welcoming" – One barista said she keeps note cards on her customers
including information about the drinks they like, their families and even the
names of their pets.
2. "Be genuine" – Partners must be active listeners and good observers. Noticing
that a new customer looked as though she was about to cry, a barista offered
 her a toffee nut latte, "Because who doesn't like that?" The next day she re-
ceived a thank you note and flowers from the customer, who said the barista's
kindness was literally a lifesaver.
3. "Be considerate" – On the corporate level, this means instituting environmen-
tally friendly policies such as using wind energy, reducing carbon dioxide emis-
sions and contributing to clean water projects globally. Partners join community
projects, such as tree planting.
4. "Be knowledgeable" – Partners learn about coffee through tastings, internal
publications and classes. The store gives each one a pound of coffee every
week to ensure that they use the product they sell. Some partners become
"Coffee Masters" by completing a three-month program of special training and
testing.
5. "Be involved" – When the staff at one store realized that they had many deaf
customers, they decided to take lessons in American Sign Language. At other
stores, employees have suggested redesigns that improve the work flow.

“While great leaders spend most of their time looking at big-picture, strategic
opportunities, they cannot overlook the systems and training necessary to en-
sure the quality of every aspect of the company's products, services and
processes.”

Principle Two: "Everything Matters"

Retail businesses rise or fall on the details. Therefore, Starbucks focuses on
every aspect of its business, including image, employee concerns, product
quality, customer experiences and the company's reputation.
In 1991, Starbucks created an in-house architecture group to design its stores.
This unit oversees lighting, furniture, fixtures, artwork, music, aromas, colors,
the menu boards and the shapes of the counters. The company has different
designs to suit different locations, depending on traffic patterns and other re-
quirements: Some are sleek and modern, while others match the local architec-
ture. Starbucks uses store design to build its brand. One enthusiastic customer
claims, "Starbucks could very well operate without even selling coffee. They
could charge an entrance fee and offer nothing else but a room and mellow Bob
Marley music softly playing in the background, and people would still come."

“In essence, the Starbucks management approach teaches that quality busi-
ness relationships are essential to long-term growth and survival.”

Cleanliness is a large part of the customer experience, and all Starbucks stores
post cleanliness checklists and follow certain cleaning routines. At least one
worker must come out from behind the counter every 10 minutes to check the
environment, a requirement that one barista said she particularly liked: "It gives
us a chance...to make sure everything is clean and orderly, and we become
more involved with our customers."

“Whereas many corporate executives dread dealing with complaints, Star-

bucks’ management actually invites dissenters in for problem-solving discus-
sions.”

Clean restrooms are particularly important to Starbucks; said one customer

from New York City, where public restrooms are rare: "Trust me, no matter what
the music, the flavor of the day or the wireless availability, Starbucks' success
is all thanks to the free and clean toilets."
Starbucks pays attention to packaging. When the company noticed that cus-
tomers often asked for double cups so they could carry their coffee without
burning their fingers, it spent two years developing an environmentally friendly
cup sleeve out of recycled paper. The company also introduced a takeout cup
that uses recycled materials.

“We all seem to be waiting for the new wrinkle, the twist, the unexpected magi-
cal prize at the bottom of the sticky box.”

Furthermore, Starbucks discovered a way to package coffee so it still tastes

fresh for up to six weeks. This both reduced waste and enabled the company
to ship its coffee around the world.

“The trick for management is to get employees to see the bigger picture and
understand that small components of their day-to-day tasks can actually have
a transformational impact on customers.”

Principle Three: "Surprise and Delight"

People love surprises. When the Rueckheim brothers introduced Cracker Jack
candy-covered popcorn at the World's Columbian Exposition in Chicago in the
late 1800s, the snack was reasonably popular. But sales skyrocketed when they
advertised that every box held a secret prize. Psychologists note that pre-
dictability provides security and safety, but the unexpected reduces boredom.
People in today's culture have developed an appetite for the exceptional and
the spectacular. Many companies try to avoid surprising their customers, but
Starbucks uses surprises to build customer and employee loyalty.
For example, the company shipped its ice cream to 6,000 locations by Federal
Express to celebrate National Ice Cream Month. Since Starbucks ice cream is
sold only in supermarkets, being able to get it for free at Starbucks stores was
a novel treat. Starbucks has given away books by poets who live in coffee-
producing areas. In some places, Starbucks stores post signs noting which
products are kosher, while in others it displays the work of local artists – de-
pending on what the community responds to and needs.

Principle Four: "Embrace Resistance"

You can't please everyone. Starbucks copes with criticism and problems by
addressing mistakes and working to prevent them from happening again. It
takes responsibility for lapses in quality control and makes changes when nec-
essary. The company worked closely with some of its critics to develop coffee-
buying guidelines that call for good working conditions for farmers and that min-
imize pollution. Because it buys so much coffee, Starbucks has become a
global force and must concern itself with conditions in the developing countries
that produce coffee.
Because they are on the front lines, Starbucks store managers are the first to
hear most criticism. For example, the first Starbucks store in Beijing, China, was
the target of significant public opposition. Within a few months, government of-
ficials wanted to revoke its lease. After a series of meetings, the manager al-
tered the store configuration to allow more people to sit down to drink their cof-
fee, rather than ordering drinks to go. (In the U.S. 80% of Starbucks customers
order drinks for take-out.) To emphasize its community involvement, the com-
pany donated $5 million to a Chinese educational fund.

Principle Five: "Leave Your Mark"

To carry out its stated principles of social responsibility and community involve-
ment, Starbucks requires managers to have transparent dealings with vendors,
open communication with partners and high standards for product providers.
Corporate policies mandate environmentalism, volunteerism and philanthropy.
The company's mission statement says it will be an innovative change agent
and that it will develop flexible solutions to problems. It acknowledges the im-
portance of meeting its fiscal responsibilities and treating its employees well.
As a socially responsible company, Starbucks uses a triple bottom line: Its an-
nual report measures social and environmental impact as well as financial re-
sults. The senior vice president of corporate social responsibility works with the
board and the company's foundation to find ways to contribute to the commu-
nities where its stores are located.
Meanwhile, Starbucks' philanthropic activities contribute to its low turnover rate.
Studies have found that employee morale is three times higher in companies
that have a high level of community involvement. Employees who work together
on charitable projects build team spirit, and deepen their connections to their
communities, to each other and to Starbucks.
About the Author
Joseph A. Michelli is the founder of a training, consulting and keynote presen-
tation company. He hosts a daily radio show in Colorado.