Pour Your Heart Into It (17 page)

Yet, strangely, the agency discovered that fewer than 10 percent of the people they observed in our stores at any given time actually ever talked to anybody. Most customers waited silently in line and spoke only to the cashier to order a drink. But somehow, just being in a Starbucks store, they felt they were out in the world, in a safe place yet away from the familiar faces they saw every day.

In America, we are in danger of losing the kind of casual social interaction that is part of the daily routine for many Europeans. In the 1990s, coffee bars became a central component of the American social scene in part because they fulfilled the need for a nonthreatening gathering spot, a “third place” outside of work and home. Ray Oldenburg, a Florida sociology professor, wrote most eloquently of this need in his book,
The Great Good Place
(1989).

Oldenburg’s thesis is that people need informal public places where they can gather, put aside the concerns of work and home, relax, and talk. Germany’s beer gardens, England’s pubs, and French and Viennese cafés created this outlet in people’s lives, providing a neutral ground where all are equal and conversation is the main activity. America once had such spots, in its taverns, barber shops, and beauty parlors. But with suburbanization, they are vanishing, replaced by the self-containment of suburban homes. As Oldenburg observes:

Without such places, the urban area fails to nourish the kinds of relationships and the diversity of human contact that are the essence of the city. Deprived of these settings, people remain lonely within their crowds.

However well they seem to have stepped into the role, though, Starbucks stores are not yet the ideal Third Place. We don’t have a lot of seating, and customers don’t often get to know people they meet there. Most just grab their coffee and depart. Still, Americans are so hungry for a community that some of our customers began gathering in our stores, making appointments with friends, holding meetings, striking up conversations with other regulars. Once we understood the powerful need for a Third Place, we were able to respond by building larger stores, with more seating. In some stores, we hire a jazz band to play on weekend nights.

While my original idea was to provide a quick, stand-up, to-go service in downtown office locations, Starbucks’ fastest growing stores today are in urban or suburban residential neighborhoods. People don’t just drop by to pick up a half-pound of decaf on their way to the supermarket, as we first anticipated. They come for the atmosphere and the camaraderie.

The generation of people in their twenties figured this out before the sociologists. As teenagers, they had no safe place to hang out except shopping malls. Now that they are older, some find that bars are too noisy and raucous and threatening for companionship. So they hang out in cafés and coffee bars. The music is quiet enough to allow conversation. The places are well-lit. No one is carded, and no one is drunk. Sometimes a group will gather at a Starbucks before heading off to a movie or other entertainment; sometimes they just meet to talk.

The atmosphere obviously works for romance, as well. We’ve received dozens of letters from couples who met at Starbucks, whether during the morning rush or in the lazy evening hours. One couple even wanted to get married at a Starbucks store.

Other trends of the 1990s also nourish the growth of such gathering places. More and more people are working from home offices, telecommuting by phone and fax and modem with distant offices. They go to coffee stores for the human interaction they need on a regular basis. As the Internet becomes increasingly widely used, people spend more time sitting in front of their computers. There’s no interactive relationship with anything but that box. Is it mere coincidence that coffee bars became popular at the same time as the Internet was growing? Many cities, like Seattle, have cybercafés, gathering places for people who love coffee, computers, and socializing.

Back in 1987, none of us could foresee these social trends, and how our stores would accommodate them. What we did, though, was to appeal to the sophistication and wisdom and better nature of our potential customers, providing them the kind of music and atmosphere that we liked for ourselves.

People didn’t know they needed a safe, comfortable, neighborhood gathering place. They didn’t know they would like Italian espresso drinks. But when we gave it to them, the fervor of their response overwhelmed us.

That’s why our expansion—gutsy as it was—succeeded even better than we imagined.

Big opportunities lie in the creation of something new. But that innovation has to be relevant and inspiring, or it will burst into color and fade away as quickly as fireworks.

CHAPTER 9
People Are Not a Line Item

Wealth is the means and people are the
ends. All our material riches will avail us
little if we do not use them to expand
the opportunities of our people.

—J
OHN
F. K
ENNEDY,
S
TATE
OF
THE
U
NION
,
J
ANUARY 1962

A L
ESSON
OF
L
OSS

Throughout 1987 my father’s lung cancer grew worse. I kept in frequent touch by phone and flew back to New York whenever I could. My mother was by now spending every day with him in the hospital, having given up her job as a receptionist, and relied on the support of my brother, sister, and me.

Then one day, in early January 1988, I received an urgent call from my mother. I had been expecting it for five years, but you can never be prepared for the tenseness of heart that clamps you at a moment like that. I took the first plane to New York and, fortunately, arrived in time to see my dad the day before he died. I sat next to his hospital bed, my hand on his, and tried to think of the way we were twenty years earlier, when he taught me to hit a baseball or throw a football.

So many emotions were battling in my head at that time that I couldn’t think straight. The regrets I had always had about my dad’s life struggles were now mixed with grief and loss; the fantasies I’d had of how he might have lived his life clashed with the dreams of my own that were coming true; the anguished look in his eyes helped me comprehend the significance of all the years he had worked for us and all the lives that now depended on me. On that last day, nothing in my life mattered in comparison to the pain he was suffering.

One of the terrible tragedies, for me, was the fact that my father passed away before he could witness what I achieved. On his last visit to Seattle, I had taken him to the first Il Giornale store, when it was still under construction. But now I could never show him the growing, thriving enterprise that was Starbucks. If he could have watched the company grow, he wouldn’t have believed it.

Soon after his death, I spent some time with a good friend who has known me since childhood. He was then working in Germany, where I had gone for a trade show. We talked for hours one night over beers, and I discussed my confused feelings about my father.

“If your dad had been successful,” he said, “maybe you wouldn’t have had as much drive as you have.”

My friend was probably right. Part of what has always driven me is fear of failure, for I know too well the face of self-defeat.

I finally came to terms with my bitterness and learned to respect the memory of what my dad was, instead of regretting what he was not. He did the best he could. He passed away before I was able to tell him I understood that. That’s one of the great losses of my life. It was wrong of me to blame him for failing to overcome circumstances beyond his control. But it was also wrong that in America, land of dreams, a hard-working man like him couldn’t find a niche where he would be treated with dignity.

It was a strange but fitting coincidence that during my dad’s final months, my major preoccupation at work was building trust with the employees of Starbucks. I saw on some of their faces the same doubts about the intentions of management that my father had expressed so often to me. People felt undervalued and uncertain about their future, and at times they directed their anger at me, as he had.

But I was no longer a helpless kid. I was in a position to do something about the insecurity and lack of respect that seemed to be becoming far too commonplace in much of American business.

Within a year, I did.

T
HE
P
AYOFF
OF A
C
OSTLY
H
EALTH
P
LAN

It’s an ironic fact that, while retail and restaurant businesses live or die on customer service, their employees have among the lowest pay and worst benefits of any industry. These people are not only the heart and soul but also the public face of the company. Every dollar earned passes through their hands.

In a store or restaurant, the customer’s experience is vital: One bad encounter, and you’ve lost a customer for life. If the fate of your business is in the hands of a twenty-year-old part-time worker who goes to college or pursues acting on the side, can you afford to treat him or her as expendable?

From the beginning of my management of Starbucks, I wanted it to be the employer of choice, the company everybody wanted to work for. By paying more than the going wage in restaurants and retail stores, and by offering benefits that weren’t available elsewhere, I hoped that Starbucks would attract people who were well-educated and eager to communicate our passion for coffee. To my thinking, a generous benefits package was a key competitive advantage. So many service-oriented companies have the opposite view, regarding benefits for entry-level people as a cost to be minimized, not an opportunity to attract and reward good people.

I wanted to win the race. But I also wanted to make sure that when we got to the finish line, no one was left behind. If a small group of white-collar managers and shareholders won at the expense of employees, that wouldn’t be a victory at all. We had to be in a position where we all reached the tape together.

After my dad died, I wanted to make a gesture to Starbucks’ employees that would cement the trust we were building. Ideally, I would have liked to be able to make them all owners of the company, but I knew that, in the short term, we would be losing money while we invested in the future. For a few years, at least, there would be no profits to share.

So I needed to come up with another way to reward them. One of the requests employees had made to the original owners had been health benefits for part-time workers. They were turned down. The symbolism wasn’t lost on me.

I decided to recommend to the board of directors that we expand our health-care coverage to include part-timers who worked as little as twenty hours a week.

In the late 1980s, employer generosity was hopelessly out of fashion. Corporate raiders and soaring health-care costs had forced many American executives to reduce benefits. Under the prevailing mantra of “maximizing shareholder value,” CEOs were applauded by Wall Street if they cut costs and laid off thousands. Companies that did value their employees above shareholders were mocked as paternalistic and uncompetitive. They were encouraged to become more hard-nosed, to cut bloated payrolls, and to become lean and mean. White-collar workers, too, were learning the hard way that loyalty didn’t pay.

At the same time, health-care bills were soaring to unmanageable heights. The cost of medical care rose far faster than the consumer price index, especially during the late 1980s. Few companies covered part-time workers at all, and those who did restricted benefits to those working at least thirty hours a week. Most executives were actively looking for ways to contain their medical insurance expenses.

Starbucks went the other direction: Instead of cutting health-care benefits, we found a way to increase ours.

I saw my plan not as a generous optional benefit but as a core strategy: Treat people like family, and they will be loyal and give their all. Stand by people, and they will stand by you. It’s the oldest formula in business, one that is second nature to many family-run firms. Yet by the late 1980s, it seemed to be forgotten.

When I first presented this plan, Starbucks’ directors were skeptical. I was proposing to raise expenses at a time when Starbucks was struggling to stay afloat. How could we afford to expand health-care coverage when we couldn’t even make a profit?

At that time, our board members were all big individual investors, or their representatives, and few of them had experience managing and motivating large numbers of people. “How can you be so extravagant toward employees—with our money?” they asked. “How can you possibly justify the cost?”