How Starbucks is doubling down on improving employee morale

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This is the tale of two Starbucks companies: While the Seattle coffeehouse chain generated record revenues in the third quarter of 2022, Starbucks is also in the midst of a plan to reinvent business amid growing tensions between employees. Interim CEO Howard Schultz is introducing a number of changes to address the company’s discontent ahead of the handover to a new, unnamed CEO in 2023.

During the third quarter earnings call ending July 3, Schultz admitted that many of the “problems and challenges” facing the company are “self-induced” and he will outline a five-pillar plan to move from forward with a “deep sense of urgency” for change. While specific plan details won’t be available until Starbucks Investor Day this fall, the pillars individually address retail integration, from a renewed focus on employees, redesigned store operations, personalized customer interactions and working to give everyone a voice.

“We were at a time when Starbucks leaders needed to step into the shoes of our partners and show great empathy and compassion for them,” Schultz said Tuesday. “And we needed to address our partner’s concerns urgently. What started as informal partner meetings quickly turned into focused co-creation sessions, where partners and Starbucks leaders collaborated on how best to reinvent the next Starbucks.

Some changes already underway include pay accelerations for all employees, increased investment in in-store training, and a new digital employee engagement platform. Starbucks is also rolling out a new universal employee tipping and recognition platform by the end of the fiscal year.

“Our partners shared how difficult it had become to meet customer demand and how insufficient training left new partners unprepared for their roles, challenging partner and customer experiences,” Schultz added. . “[…] Sometimes I was overwhelmed by what I heard: challenges, fears, the desire for emotional and financial security, and a sense of belonging and purpose. »

More information on the new employee initiatives will be provided at the Investor Meeting in September, along with more information on how Starbucks plans to participate in Web3 and the Metaverse. Starbucks has been notably absent from the discussion among many large restaurant chains about Web3 technology, but the coffee chain is soon making strides:

“We have been working on a very exciting new digital initiative that builds on our existing industry-leading digital cloud,” Schultz said. “[…] We believe this new Web3-based digital initiative will allow us to build on Starbucks Rewards’ current engagement model, while introducing new methods of emotionally engaging customers, expanding our third-party digital community, and offering a wider set of rewards.

Additionally, Starbucks’ growth momentum this quarter is tied to the continued success of its cold beverages, which now account for approximately 75% of total beverage sales year-round. The iced espresso category, introduced last year, is the fastest growing category on the Starbucks menu and is creating an increase in new times of the day, such as mid-afternoon, especially for customers of Generation Z.

For a more in-depth look at Starbucks’ third quarter by the numbers, check out NRN’s analysis here.

Contact Joanna at [email protected]

Find her on Twitter: @JoannaFantozzi

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