Starbucks Gets It

Howard Schultz, CEO of Starbucks was featured in the December issue of Fortune as the 2011 Businessperson of the Year. Schultz joined what was then called Starbucks Coffee, Tea and Spices in 1982 as its marketing leader when there were only four stores in the Seattle area. He developed a vision to model the stores after the many small espresso bars he saw across Italy, essentially selling not just coffee but the experience and environment. While skeptics laughed at him, he was easily able to sell coffee at a price greater than his competition, and create a new coffee (and tea) culture in the U.S.

IStock Photo

But to me, more significant than the success of his business are his business values.  Starbucks provides health care and equity grants to all employees who work more than 20 hours each week, and rebuffs investors who try to persuade him to reduce such coverage. To him, it’s just doing the “right thing for it’s own sake”.  He’s concerned about his entire supply chain, and through Starbucks Foundation he has given to people in third world countries to better their standard of living. He believes “there needs to be a balance between commerce and social responsibility…The companies that are authentic about it will wind up as the companies that make more money.”

Which brings me to the question….

Should companies make money to do good, or do good to make money?

In other words, what should come first, profits or giving? Obviously you can’t give unless you have a profit resource from which to draw, but where’s the primary focus?

Companies generally strive to increase profits by discovering and tapping into new markets, developing and marketing new products, increasing market penetration and price. Profits may be funneled back into research and development or growth strategies. Employee compensation and benefits are set at a thin margin of what is necessary to remain competitive, retain employees, and to reward the most valuable ones. Suppliers are challenged to provide high quality and service at low prices; and shareholders pressure boards of directors to increase their return on investment. Somewhere along the way, companies may recognize a sense of social responsibility to give to worthy causes, but doing so is a result of their successes, because their overriding purpose is to increase profits.

Instead, what if companies existed to give? What if their overriding purpose of making money was to give to worthy causes? Would this level of social responsibility form the basis for greater customer loyalty, employee pride, or supplier quality? Would they make more money because they’re giving more money away?

Howard Schultz also said “…If your sole goal is to maximize profit, you’re on a collision course with time.” Witness some of the companies that have imploded in the past decade, ceasing to exist largely due to the decisions of a management team that became embroiled in unsavory tactics to accumulate more money and exert more control over others; failing to follow proper accounting rules, guidelines and procedures; exuding an arrogance that their continued existence was guaranteed. Some would consider this a “reap what you sow” result.

So do customers like Starbucks because they enjoy the product, the purchase experience, and sense of community, or because of their business values? I admittedly simply enjoy the environment and the product (especially chai tea with soy). I wasn’t aware of their level of corporate benevolence until I read the article. But now as I reflect on my purchase experience, I can see how their values come through in the environment of their stores. Their baristas even seem to have a greater cachet than the normal fast food store servers.

The Answer

So here’s my answer to the question….do both. Obviously companies cannot exist or give without making a profit, but given the choice of existing primarily to make a profit, versus being profitable to help others, the latter brings greater benefits to the company and its stakeholders. Companies who care about their employees, care about others too. Employees who feel good about their company’s giving, share a part in it as well. This drives greater commitment and trust, stronger relationships, and overall benefits society….which all contribute to increased revenues. Again, you reap what you sow.

“Give away your life, you’ll find life given back, but not merely given back—given back with bonus and blessing. Giving, not getting, is the way. Generosity begets generosity.” (Luke 6:38 The Message Bible)

To read the Fortune article on Howard Schultz click here.

Copyright 2012 Priscilla Archangel