Starbucks Approach to Human Resource Management - Case Study Example

Master of Business Administration Managing the Human Resource Assignment Part 1 Table of contents Topics Page # 1. Four key elements of Starbucks’ approach to Human Resource Management……………………………………………………3 i) Recommendations according to the current economic turmoil……………………………………………………………5 2. Challenges faced by the company in recruiting the right person......................................…………………………….. 7 i) Importance of hiring the right people …………………………………………….8 ii) Negative effect of hiring the wrong people…………………………………….. 9 3. Conclusion & Suggestion..……………………………………………………. 10 References Answer # 1 Four key elements of Starbucks’ approach to Human Resource Management In today’s cut throat competition scenario, no one wants to loose a competitive work force that is why each company keeps developing strategies to retain their employee The four basic elements that are make use of at Starbucks’ in order to retain and motivate their workforce in the best possible way are: i) Selection ii) Training iii) Compensation iv) Workplace culture Starting with the first key element that is selection, the goal of recruitment and selection is to obtain best workforce at a minimum cost. The company showed its full confidence on the employees to create companies’ image and with this strategy it makes them distinctive from its competitors. Michael, Armstrong (2003, p.395) says that, “there are three stages of recruitment and selection process: defining requirements- preparing job descriptions and specifications and deciding terms and conditions of employment, attracting candidates- reviewing and evaluating alternative sources of applicants inside and outside the company and advertising, selecting candidates.” Training is the second most significant element of human resource at Starbucks’ that provides the company with a competitive advantage in the retail business. The company has a team of experts for the training sessions, whose main job is to nurture the business and improve the customer service by providing the employees with the knowledge and skills they would need at the job for performing it effectively. Raymond, A.Noe (1999, pp.3-4) suggests that, ‘The goal of training is for employees to master the knowledge, skill and behaviors emphasized in training program and to apply them to their day-to-day activities.’ The company trains the new employees from so many different aspects but the most important amongst them are the three basic interpersonal skills which involve maintaining and enhancing self-esteem, listen and acknowledge and ask for help. Armstrong (1992) views that, ‘HRD as focused training and development for all employees which responds to individual and organizational requirements by improving performance and understanding.’ The managers and other non-frontline employees are trained for a longer period with different type because effective leadership is quite critical for building good quality teams and stronger organization. ‘Effective managers not only perform the basic management functions (planning, organizing, leading and controlling), but also good communicators help employees development and work collaboratively with employees.’ Raymond, A.Noe (1999, p.10). John Adair presented the functional model of leadership, which has three areas, where leadership function occurs, those areas are: task, team and individual. Generally, leadership skills are mostly used in these areas In most organizations, the formal leader meets some of the needs in these three areas. Another strong element of Starbucks, which makes the company outstands in the market of retail business, is the benefit programs which covered both the part-time workers as well as the full timers. The company’s chairman has presented a strong policy, which says that the employees are the partners of the firm and must be treated as a family. It designed a work/life balance program that took into consideration the physical, mental and spiritual well-being of the employees. George, P.Baker, Michael, C.Jensen & Kevin, J.Murphy (1988) suggested that, “One of the more important factors affecting organizational behavior is the internal incentive structure which includes the management of human resources in general and compensation policies in particular. A thorough understanding of internal incentives is critical to developing a viable theory of the firm.” Compensation of the employees is considered to be a very critical part in human resource management because the employer has to keep in mind the budget that is being allocated to a particular position and the employees wants to satisfy their expectations. Starbucks is providing the employees with the highest pay package among the industry of retail business, which means they are following the market lead policy. The fourth element is the work culture, which plays an imperative role in helping the company recruit and retain top employees and would also affect employees themselves. The culture of the organization can be predicted by its mission statement and Starbucks’ mission is to provide a great work environment and treat each other with respect and dignity, which clearly gives an idea that the company creates an environment that, is suitable for the employee to work in. The culture scenario is of “give and take” and both sides are considered equal. Recommendations according to the current economic turmoil Due to the prevailing conditions of the economy, it is getting tougher and tougher for the organizations, to survive in the market with maintaining the same amount profitability in their businesses. The company like Starbuck, which is providing the employees with every possible compensation and benefits in order to retain and motivate them, really needs to cut down their cost in few things. They should try to stimulate the employees with non-monetary rewards. Some cost effective measures should be taken involving less money and would help them to sustain in this financial crisis. Some recommendations are as follows: Expanding the duties and responsibilities of the current employees within the organization through job enlargement, would add variety to their job. Some layoffs have to be done in some areas like it is not necessary to conduct training programs with the panel in which the experts are not from the company but are called from outside. The cost could be cut down from here and outsiders can be replaced with the company trainers and experts. Firstly, because the professionals of the organization are more familiar about the company’s philosophy and acquainted with the employees, their strengths and weaknesses and the area in which they are needed to be trained. Secondly by enlarging their job, they would feel honored and try to fulfill their duties with dedication and commitment and for the trainers they would be at ease to share their problems and more importantly would build a relationship between them. McGregor, Douglas (1960) suggested that, ‘Job enlargement – broadening the scope of an employee job adds variety and opportunities to satisfy ego needs.’ In today’s economic pressure, it would become burdensome for Starbucks to provide every employee with all those benefits they have been providing for many years but now the financial conditions have changed. To keep this view the cutting off from the employee’s benefit would be a de-motivated factor for them, so downsize extra employees because the company is finding its human resource costs troublesome. The hours of childcare and elder care programs should be reduced. Benefit plans can not be reduced as they are the strength of any organization and especially at Starbucks, but when it starts effecting the profitability and total income of the company and they employees have to participate from their own side as the employees of the Starbucks argued, then some strategic measures should be taken. Answer # 2 Challenges faced by the company in recruiting the right person More and more companies are now taking the recruitment and selection process as a very critical practice and believe that the first step to success is to hire the most intellectual and motivated workforce from the market. Starbucks paid a considerable attention to the kind of people they hire. Organizations that view employee recruitment and selection as an organizational priority are the most successful in dealing with the uncertainties of a changing working environment and workforce. (McGlothin, 2002) As they have planned to take their business on an expansion mode in future so they need to be more professional in both the cases, firstly, to assign the hiring process to the recruiters who need to be very clear in the future or long term plans of the company, the organizational policies, values and culture. Must have involved in the decision-making and planning process before because increasingly managers and HR specialists are taking interest in hiring and are more focused on finding those people that could be great addition to their team and as in the time of economic turmoil the recruiters’ top priority should be accumulating those people who proves to be company’s strength. Secondly, the employee’s perspective is changing and they are more after the compensation policies then to become committed and loyal to the company, so the recruiters need to be very rigorous in practicing their hiring phase. The above point has been supported by (Diane, 1998) she says, ‘It is becoming apparent that the labor pool from which employers select new employees is changing at every level, from minimum wage and hourly paid workers right up the ranks to professionals and executives.’ 1. Importance of hiring the right people As the company Starbucks need to do a lot of hiring for its new projects that are waiting ahead to start with so it should be done with professionalism and accuracy. They have to hunt for the people who are motivated, can demonstrate team work and more importantly would turn out to be a leading light for the company, that spark should be present in the employee who can bring strength to the team. Martha (2005) state that, ‘Seek out and hire employees who are brimming with talent, energy, integrity, optimism and generosity.’ So hiring a right person is very important for the company because they are the people who would help the company to perform at its best and make it different from its competitors. It is an impossible task to take the company on a position where the Starbucks is standing, the market leader in the retail industry, to be there without the support of its workforce and they also understands that. Susan (2007) writes that, ‘You really have no chance of succeeding in your business without the right team. Your employees are your company and they can make or break your business over time.’ The employees could be trained on improving their skills, the changes that are being brought in the company but the intelligence and their aptitude of performing a task is impossible to develop. Bob (2006) says that, ‘People who are smart, sensible and wants to do a good job work out well. You can teach systems and train for skills. It is a lot harder to teach someone how to have a good attitude or common sense.’ 2. Negative effect of hiring the wrong people Making a selection decision should be a rigorous one because a wrong decision done by a recruiter would going to cost the over organization, so it is important to recruit a best candidate. Louis (1993) explained that, ‘Hiring the wrong candidate can result in problems ranging from difficult to disastrous and it can cost the organization untold sums of money, frustrate the supervisor and especially important, result in the loss of a better candidate. At best, it is a process that involves risk. The objective is to reduce the risks through use of good decision-making techniques.’ Hiring can not be done in a rushed or desperate manner. A wrong hire can affect badly not only the expense but also wastes the time which was spent in the process. The results can be costly and disturbing, just because of the mistaken selection. (Malcoln, 2001). Many retail companies are now waking up to the importance of retaining the workforce. So the importance of hiring a competitive person and making an appropriate decision is increasing day by day and it can save the recruiters and the company considerable pain down the road. So, Starbucks need to be more efficient and accurate in hiring practices. Cynthia (1996) states that, ‘Poor hiring decisions can cost thousands of dollars in advertising, interviewing, travel, training and administrative expenses. Then there is the time lost in the selection process, disruption to the work unit because of a position needing to be filled and the negative effects on productivity and morale when a new hire performs a job unsuccessful.’ Although it is not possible or is really hard to get an employee who is complete in every aspect skill, experience or education, but at least the recruiters can look for a person who is closer to their job specifications and description. Conclusion and Suggestion On concluding the whole discussion, after discussing point of views with reference to many articles, I would like to suggest that as the economy is going through a financial crisis especially the economy of Europe and US, and the company Starbucks wants to expand its business so it would be beneficial for them to cater Asian market with a different product which could be tea, because the Asians more likely to have tea. Their business could flourish in the Asian market which is not hit hard by the financial downturn. However despite the concerns about the company’s human resource challenges they could face in the future they are still leading the retail market and is successful. References Bob, Pritchett. 2006. Fire Someone Today. [Online] Available at: http://books.google.com.pk/books?id=yyfMUXxoLkC&pg=PA47&dq=importance+of+hiring+the+right+people [Accessed 22 May 2009]. Cynthia, Berryman. 1996. The managers’ desk. [Online] Available at: http://books.google.com.pk/books?id=OvdaIJAjmtQC&pg=PA269&dq=negative+effects+of+bad+hiring+employees+in+organization[Accessed 22 May 2009]. [Accessed 22 May 2009]. George, P.Baker, Michael, C.Jensen & Kevin, J.Murphy 1988, ‘Compensation & incentive: Practice vs theory’, The Journal of Finance, vol. 43, no. 3, p. 593. [Accessed 20 May 2009]. John, P.Wilson 1999, ‘HRD: Learning and training for individual and organizations’, p.29. [Accessed 19 May 2009]. Louis V. Imundo. 1993. Effective Supervisor's Handbook. [Online] Available at: http://books.google.com.pk/books?id=82Rix66cwkQC&pg=PA89&dq=disadvantages+of+hiring+wrong+employee. [Accessed 21 May 2009]. Michael, Armstrong. 2003, ‘A handbook of Human Resource Management’, vol. 9, p.395. [Accessed 22 May 2009]. Malcolm, Peel., Margaret. 2001. Readymade Interview Questions. [Online] Available at: http://books.google.com.pk/books?id=3sIPAchto_cC&printsec=frontcover. [Accessed 21 May 2009]. Martha, Stewart. 2005. The Martha rules: 10 essentials for achieving success as you start. [Online] Available at: http://books.google.com.pk/books?id=ZvMoMyVo8JcC&pg=PA129&dq=importance+of+hiring+the+right+people. [Accessed 22 May 2009]. Raymond, A.Noe 1999, ‘Employee training and development’, pp.3-4. [Accessed 19 May 2009]. Susan, Wilson., Michael. E. 2007. The Girls' Guide to Building a Million-Dollar. [Online] Available at: http://books.google.com.pk/books?id=RfUwDlLKNoUC&pg=PT106&dq=hiring+the+right+people+in+the+company. [Accessed 22 May 2009]. Read More