Starbucks: Employment relationship and the firms approach to intrinsic and extrinsic motivation of workers - Assignment Example

? Starbucks: Employment relationship and the firm’s approach to intrinsic and extrinsic motivation of workers Module Introduction In today’s competitive business environment, the term ‘employment relationship’ is of considerable importance because it is the central element affecting employee contributions to an organisation. Employment contract and employment relationship are two different concepts (Employment relationship 2011). To illustrate, “the employment relationship is defined as the organisation’s intention with regard to the inducements or rewards offered and the contributions expected from employees” (Petersitzke 2009, p.92). Generally, employment relationship reflects the relationship between employees and the organisation from an employer perspective. Since better employment relationship would assist an organisation to promote employee satisfaction and to reduce staff turnover rate, today top level managements particularly focus on establishing and maintaining improved employment relationship. In order to obtain desired outputs from employees and to foster employee involvement, managements use different employee motivation techniques, namely, intrinsic motivation and extrinsic motivation. This paper will analyse Starbuck’s employment relationship and the firm’s approach to intrinsic and extrinsic motivation of workers. A brief overview of Starbucks Starbucks Corporation is a US based coffeehouse chain headquartered at Washington. The company was founded by Jerry Baldwin, Gordon Bowker, and Zev Siegl in 1971. Currently, Starbucks is the world’s largest coffeehouse company having 20,366 stores across 61 countries. The company has strong presence in countries like US, Canada, Japan, UK, China, South Korea and Mexico. The organisation’s product lines include hot and cold beverage, full-leaf teams, whole-bean coffee, microground instant coffee, pastries, and snacks (Starbucks, CNN Money, n.d.). The company also maintains an entertainment division, through which it markets books, music and film. The company achieved explosive growth during 1990s and 2000s. At present, the overseas stores account for the nearly firm’s one third of total stores. The company announced hundreds of store closures in US since 2008 as part of downsizing the organisation and thereby improving its efficiency. According to Fortune 500 ranking, Starbucks was the 227th largest corporation in America in 2012 (ibid). Employment relationship of Starbucks While analysing Starbucks Corporation, it seems that the company performs better in terms of employee relationship. The company management believes that employees are the firm’s most valuable assets, and they are worth more than plenty of equipments and facilities. Starbucks management calls its human capital ‘partners’ rather than employees or workers as the management likes to maintain a direct and open relationship with its human elements. The Starbucks’ management officials say that the company does not want a third party to act on behalf of its employees. While going through the firm’s corporate history, it is clear that Starbucks’ management directly deals with its workers in a fair and respectful manner. In addition, the organisation believes that this strategy would assist the firm to provide its employees with a positive workplace or a feeling of being involved. The company management strongly holds the view that Starbuck’s success would not be possible without the valuable contributions its ‘partners’ make on a day-to-day basis; and hence, the company promotes itself as one of the progressive employers in the United States (Starbucks Newsroom 2009). In 2009, Starbucks Corporation was included in the ‘100 Best Companies to Work For’ list prepared by FORTUNE (ibid). It was the 11th time the organisation achieved this recognition. Treating employees with respect and dignity is one of the major guiding principles of the organisation (Starbucks Newsroom 2009). The company offers comprehensive health care packages to its employees working at least 20 hours per week. The company tries to deliver its health care packages very affordably in order to cover maximum eligible workers. As part of maintaining effective employment relationship, the company allows its employees to work in their flexible time. By the end of the year 2008, Starbucks introduced “Optimal Scheduling” programme in order to allow its employees to work more hours in regular work schedules (ibid). The company executives claim that this programme greatly assisted the firm’s ‘partners’ to obtain “more consistent and predictable weekly schedules” (ibid). Undoubtedly, this programme was extremely beneficial for the organisation to obtain exceptionally positive employee feedbacks. In addition, the organisation offers fairly competitive wages to its employees. The company’s top executives devote a notable amount of time to speak to employees and hence to understand their issues. This effective management approach greatly benefits the organisation and reduces worksite conflicts to a great extent. Starbucks’ management strongly believes that the element of motivation is particularly inevitable for enhancing employee productivity. In other words, the firm’s employment relationship is based on keeping employees always motivated. The firm’s employee motivation approach specifically focuses on maintaining a healthy work environment, treating its workers with respect and dignity, treating its personnel equitably, and challenging people to perform their best. The company employs intrinsic and extrinsic motivation tactics to influence its employees. Those motivational approaches are described in the following sections. Intrinsic motivation at Starbucks According to one definition, intrinsic motivation refers to motivating an employee using internal factors or “internal rewards such as recognition, responsibility, growth and advancement” (Silva 2009, p.15). Intrinsic motivation techniques particularly focus on elements of interests that exist within an employee rather than external pressures or rewards. Intrinsic motivation has been a central subject of study since 1970s. Researchers opine that employees who are intrinsically motivated would perform their tasks willingly and more productively. In a worksite environment, the tool of intrinsic motivation is used to influence employees to complete their job tasks for their own benefit. An intrinsically motivated employee would perform his tasks better without external encouragement or influence. Intrinsic motivation can have a long term influence on individuals. Starbucks Corporation greatly uses intrinsic motivation approach to influence its employees and thereby improve overall organisational productivity. In the words of Howard Schultz, the CEO of Starbuck, the key factor influencing the success of Starbucks is not its product offerings but employees. He adds that satisfied employees can contribute to the firm’s competitiveness and growth. The Starbucks management has framed some comprehensive training packages so as to meet ‘employees’ need to know’ and thereby motivate them intrinsically. Evidently, knowledge can be a strong tool of intrinsic motivation in a workplace context because every employee wishes to acquire more and more work-related knowledge in order to achieve their long-term career goals. Therefore, Starbucks’ management believes that better employee training would motivate workers intrinsically. As part of this strategy, the company provides its employees with an opportunity to learn something new. The organisation insists each participant should attend a minimum of 24 hours training. This training package is really comprehensive because it includes everything from the history of coffee to a seven-hour workshop programme called ‘Brewing the Perfect Cup at Home’ (Dess et al 2009, p.562). However, it must be noted that this particular technique may not influence employees who are not so interested in learning new things. Respect and dignity are two major intrinsic motivators employed by the Starbucks management. As discussed earlier, the company calls its employees partners with intent to reduce the gap between employees and employers. In addition, the management treats all employees equally or does not discriminate them on the basis of religion, politics, or sex. The Starbucks’ mangers co-work with the firm’s front line workers so as to maintain healthy and close relations with each and every employee. The company takes great efforts to eliminate discriminatory workplace practices and to promote the basic human rights of employees. In addition, the company management specifically emphasises the need of respecting employee’s personality and promoting employee dignity. Similarly, Starbucks’ management tries to motivate its employees intrinsically by listening to them carefully and fostering employee empowerment. From the view point of Williams et al (2011, p. 183), employee empowerment is a key tool of intrinsic motivation. When employees are allowed to obtain access to proper information and various organisational resources and to participate in decision making, they would get a strong feeling of empowerment, which in turn may drive intrinsic motivation (ibid). More precisely, employees would experience a feeling that they constitute an important part of the organisation (ibid). Starbucks maintains a well developed communication channel for its employees with an intent to enhance effective upward and downward flow of communication. The company management conducts a special purpose survey called ‘Partner View Survey’ once every two years in order to collect employee feedbacks regarding company operations. This practice assists the firm to identify the areas of improvement and the potential issues to which particular focus has to be paid. Starbucks’ employees are even allowed to suggest what policy would suit their interests. The company directors respect and examine all employee suggestions regardless of who makes those suggestions. The Starbucks’ management is of the view that the employee empowerment strategy would result in intrinsic motivation, which in turn would foster employee creativity and ultimately productivity. The company does not consider threat of punishment as an effective intrinsic motivation strategy because this practice may adversely affect employment relationship. Hence, the firm pays specific attention to opportunity-based intrinsic motivation of its employees. In short, the concept of intrinsic motivation is largely practiced by Starbucks to keep its employees motivated in the long term. Similarly, the company keeps a goal of public welfare as part of its corporate social responsibility. The company contributes a fixed percentage of its profits to finance public services. Through this practice, the company tries to improve the living standards of communities in which it operates. This practice assists the company to convince its employees that they are taking part in public work and hence contributing to public welfare. Possibly, this feeling would improve employee morale. Extrinsic motivation at Starbucks Extrinsic motivation is all about motivating a worker by means of various external factors. In the words of Ryan and Deci (2000), extrinsic motivation can be simply referred to “doing something because it leads to a separable outcome” (p.55). An extrinsically motivated employee would engage in job activities in order to attain a specific outcome. Evidently, extrinsic motivation comes from outside the employee, and it can be in the form of salary, incentives, promotion, and threat of punishments. It has been identified that monetary rewards are the best extrinsic motivators. In contrast to intrinsic motivation, extrinsic motivation has short term effects on employees. Like in the case of any other organisation, extrinsic motivation is a common form of motivation in Starbucks. ‘Fringe benefits’ is a major motivation technique used by Starbucks. Fringe benefits can be simply referred to a set of benefits offered to an employee by the employer, and they are exempt from taxation under given conditions. The Starbucks’ management holds the view that this method would benefit the organisation to improve employee loyalty, and the situation in turn would persuade the employees to stay longer with the company. Starbucks provides its benefits packages to both full-time and part-time employees. As Dess (2009) points out, Starbucks’ comprehensive benefits packages include “medical, dental, vision, and short-term disability insurance, as well as paid vacation, paid holidays, mental health/chemical dependency benefits, an employee assistance programme, a 401(k) savings plan, and a stock option plan” (p.562). The company also offers a dependent coverage to serve the interests of same-sex partners (ibid). In the view of Schultz (CEO), employees would not experience financial security or job satisfaction without these benefit packages. The CEO also claims that stock options and other benefit packages would promote employee loyalty and encourage workers to provide their customers with quality services. The company’s stock option plan named the Bean Stock Plan is very competent to discourage employee turnover (ibid p.562). This stock option plan was introduced in 1991. Starbucks is the only private company offering stock options to all employees unilaterally; and the company’s concerns for employee welfare have greatly assisted it to promote employee motivation (Dess 2009, p. 562). Starbucks strictly insists its overseas suppliers pay wages and other benefits that are competent to meet the needs of employees and their families (ibid). Pay for performance is another extrinsic motivation strategy adopted by Starbucks. Since this method directly links compensation to performance, Starbucks’ management believes that this motivational strategy would enhance employee productivity. The pay for performance motivational strategy has been proved to be effective at all levels of the Starbucks Corporation. In the organisation, this extrinsic motivational tool is considered as a potential way to achieve better financial outcomes. Evidently, the pay for performance strategy provides Starbucks employees with an opportunity to earn unlimited revenues. Psychologically, this tool can have a great influence on employee satisfaction and, ultimately, on employee performance. Currently, the pay for performance concept has become an integral part of Starbucks’ culture. Quality feedbacks and attractive tangible rewards are other major features of this motivational strategy. According to a study by Giga Information Group, the pay for performance strategy may assist an organisation to improve its employee retention rate up to 27% (Best practices in Performance Management, n.d.). The company officials argue that the firm’s extrinsic motivation strategies are helping them achieve their short term objectives. In short, the company maintains a set of comprehensive benefits packages with intent to influence its employees extrinsically. Recommendations Although Starbucks has designed a range of intrinsic as well extrinsic motivational strategies to influence employee performance, it seems that the firm has not addressed some potential areas of motivation. It is identified that the firm does not effectively use the tool of employee promotion to motivate its workers. In today’s business world, every employee may have a unique long term career development plan. Hence, they tend to choose companies that provide better career growth opportunities. Employees consider promotion as a better way to develop their career. Therefore, Starbucks cannot retain employee interests in the organisation unless it offers attractive job promotion opportunities to employees. Studies indicate a number of biases in Starbucks’ performance evaluation system. According to different studies, Recency effect, Halo and Horns effect, and biased subjective evaluation appear to be the major issues affecting the reliability and ethics of performance evaluation. It is also observed that lack of appraisal motivation is another pitfall of the firm’s performance measurement strategy. Since performance appraisal can be a key tool of intrinsic as well as extrinsic motivation, it is recommendable for Starbucks to abolish biases in its performance evaluation practices. In other words, the firm must consider performance appraisal as an effective strategy to motivate its employees. Conclusion From the above discussion, it is clear that Starbucks gives particular focus to employment relationship because the firm considers its employees as the most valuable asset. In addition, the organisation adopts a positive approach toward intrinsic and extrinsic motivation of employees. Training, respect and dignity, and employee empowerment are the major intrinsic motivators employed by the firm whereas a set of comprehensive benefits packages is used by the firm to motivate its employees extrinsically. The concept of intrinsic motivation would promote the productivity of Starbucks in the long run while the extrinsic motivation approaches may assist the firm to meet its short term objectives. By giving particular focus to employee promotions and performance appraisal techniques, the firm can further increase its competencies in employee motivation. In sum, Starbucks effectively deals with motivation, which is one of the key HR management functions. References Best practices in Performance Management. (n.d.) [online document] available at [accessed 23 Feb 2013]. Dess, et al. (2009) Strategic Management: Text & Cases. 3E. New Delhi: Tata McGraw-Hill Education. Employment relationship. (2011) Eurofund. [online] available at [accessed 23 Feb 2013]. Petersitzke, M. (2009) Supervisor Psychological Contract Management: Developing an Integrated Perspective on Managing Employee Perceptions of Obligations. Springer. Ryan, R.M & Deci, E. L. (2000) ‘Intrinsic and Extrinsic Motivations: Classic Definitions andNew Directions’. [online] available at [accessed 23 Feb 2013]. Starbucks. (n. d.) CNN Money. [online] available at [accessed 23 Feb 2013]. Starbucks Newsroom. (2009) ‘Facts About Starbucks and Our Partners (Employees)’. [online] available at [accessed 23 Feb 2013]. Silva, S. (2009) Does Empowerment Motivate Employees in the Hospitality Industry ( Sri-Lanka) to Increase Performance. GRIN Verlag. Williams, C. et al. (2011) MGMT. Canada: Cengage Learning. Read More