The chairman of coffee giant Starbucks has a vision about the future of business – and makes no beans about it. “The rules of engagement have changed,” says Harold Schultz. “Business has let us down and we are living in very fractured times. We as consumers – as customers, but mostly as people – need an emotional connection.”
The chief global strategist of Starbucks Coffee Co. spoke to business students and alumni last week at the Sauder School of Business at the University of British Columbia.
He was visiting Vancouver as a special guest speaker at a gala dinner celebrating the first two recipients of honourary fellows from the Sauder School of Business.
Vancouver was the first market for Starbucks Coffee stores outside Seattle, and Schultz was part of the team that opened the first location at the Seabus Terminal downtown.
Today, the $21-billion company operates nearly 9,000 stores in 35 countries around the world. On average, 35 million customers are served every week.
“There is nothing we do as a company that can not be emulated by any other business,” Schultz told the UBC students during an afternoon talk.
He added that the company has no secret except to follow its twin passions – to brew the best coffee possible and to maintain a “fanatical commitment” to the people who run the company.
“The most important discipline in our company is human resources,” he said. “And ironically, that is the discipline that most businesses address last.”
Schultz said his goal in building Starbucks was to create the first company in the United States to integrate comprehensive health insurance and equity in the form of stock options to every single employee. “Our focus has been on achieving a balance between profitability and a social conscience,” he said.
“We wanted to build a 100-storey skyscraper and we realized early on that we had to build the kind of foundation that would support a building that size. The foundation is the people – attracting and retaining the best people – people with like values.”
Sauder School of Business dean Daniel Muzyka noted that for the sixth year in a row, Starbucks has been voted one of the best place to work by Fortune magazine.
Schultz originally joined the company as director of operations in 1982, when the company had four stores. With the help of a group of investors, Schultz bought the company in 1987, when there were 100 employees in 11 stores. By 1992 the company went public with an offering valued at $200 million.
Customers represent a significant change in today’s market, noted Schultz, and now engage in what he calls a “cultural audit.”
“Customers of all kinds throughout the world are asking serious, important and relevant questions,” he said.
“Not, ‘What does that coffee taste like?’ or ‘Does that come in a different colour?’ Instead, they are asking questions about a company’s ethics and values.”
The company’s 2003 annual report, titled Living Our Values, outlines Starbucks’ view of corporate social responsibility – combined with tremendous profitability.
One way to maintain that profitability is diversifying, and Starbucks continues to break new ground. Schultz said that his company has recently launched a new music element to its business, branching into the successful production and sale of compilation CDs.
Beginning last month, 45 stores in Seattle, Wash., and Austin, Tex., will feature the Hear Music Media Bar, an in-store CD burning facility enabling customers to select and burn a CD from more than 200,000 musical choices.
In the audience for Schultz’s Vancouver address was Jennifer Cue, founder, chief operating officer and chief financial officer of Jones Soda Co.
Cue, also a graduate of UBC’s business program, market-tested her company’s premium soft drinks with Starbucks and has been supplying Jones Soda to Canadian Starbucks locations since 1999. Cue said her company has recently expanded even further. “In March of 2004, we launched our products into Starbucks stores across the U.S. market as well.”
After first opening her company and testing the financial waters here in B.C., Cue found that the business climate was more amenable in the U.S. and relocated her headquarters to Seattle.
“We moved to Seattle for a number of reasons – the financing was there, the banks were more willing to give us a chance, the population. We in B.C. kept being slapped with capital taxes that we couldn’t afford in our startup years,” she said, adding that her company still has a number of core Canadian employees.
Meanwhile, the first two recipients of honourary fellows from the Sauder School of Business were feted at the event.
Joe Houssian founded Vancouver-based Intrawest, now the world’s leading developer of village-centred resorts, including Whistler-Blackcomb.
Fellow honouree William Mercer will be granted his award posthumously.
Mercer founded his pension consulting business in Vancouver in 1945, and today Mercer Human Resources Consulting has more than 13,000 employees serving clients in 40 countries. Both graduated from UBC’s business faculty.
The Sauder School of Business, formerly known as the UBC faculty of business, is recognized internationally for its contributions to the transformation of business practices. It offers BComm, MBA, IMBA and PhD programs to students on full- and part-time bases.
(Karen Dyer can be reached at firstname.lastname@example.org)