Education, baristas and employee turnover

2014

That Howard Schultz guy is one smart cookie with his impressive decision to offer financial assistance to employees for online courses at Arizona State University. Even if employees don't take up his offer, I'd wager morale and workmanship will improve.

But first, some context. Work in the fast-food industry is mostly part time with few educational or pre-existing skills needed. The proportion of workers in the fast-food industry who are under age 20 is six times the rate for all workers. The work is considered unskilled, although specific training on food preparation, sanitation, and cash handling is taught after hire. (Incidentally, Starbucks considers its employees a step up from fast-food, and they might be, but I’d venture to say the source demographics are roughly the same.)

Fast-food work is generally considered to be front-line, meaning workers are in view of or have direct contact with customers. Fast-food restaurant owners look for potential employees who are neat and can exhibit natural rapport with customers. Room for advancement in the industry is typically limited to those workers with college degrees. Employment outlook is good, with a projection of 10% growth by 2018.

Training costs for fast-food workers in the U.S. are upwards of $10 billion per year (that's a lot of hamburgers). Top that with turnover rates of over 80% and sometimes over 100% and business leaders are hot, hot, hot, for change. But, most don't do anything. They plod along, developing more systems and training programs, ultimately giving employees one option: "I can quit this crummy job for another crummy job."

Should I Stay or Should I Go?

The stay/quit decision among workforce employees is a complicated, dissonant mix of factors. Often, the happiest day of a young worker's life is that very first job. However, something weird happens in a matter of months, sometimes days, changing those bright outlooks to dark stormy moods. The blame: boss behavior.

But, the mix of moods and morale is more complicated than whether the boss is nice or mean. Some of the blame goes to corporate policy and the message it sends to front line employees. In a place like Starbucks, corporate bosses know that quality service by front line employees is everything to success. Grouchy employees make for bad business.

Therefore, keeping employees happy is a pretty darn important goal. The objective of any service oriented company (I'd argue any company) is to create cultures that are friendly, supportive, collaborative, and productive. Sounds simple enough, but is it? I've written before that consistently positive behavior by bosses is all important. But what about changes far away in corporate offices, like the Starbucks decision to offer educational assistance?

An Optimality? Is it Possible?

The Starbucks decision is genius. It solves or prevents a number of problems. One, the mere offer alone is hope for a way out. The fast-food model isn't built around life-long servitude of workers plodding full time with overtime at $10/hour. In a perfect world, work in the fast food industry would be transitional (from one phase of life to another) with workers learning a future trade, studying for a degree, or returning from another career for extra spending money. To keep the workforce fresh and bright, the best operating model for fast-food consists of the right proportion of sustainability and turnover.

My contention, and I'm sure my opinion foes are loading up counter arguments now, optimal turnover for unskilled, front line, low pay jobs is about 25%. That means newly hired employees will stick around for roughly three to four years. With 25% turnover and assuming workers move on to trades and professional careers (not other fast-food outlets), the workforce stays fresh and relatively well trained. These types of unskilled jobs are perfect breeding grounds for workers to improve their plight, to learn skilled trades or earn college degrees.

Besides Hope, What Else Is There?

Starbucks’ education decision accomplishes three things besides hope for a better future. One, by offering educational reimbursement, they give workers a reason to stay employed while in school. And, it just so happens, a typical undergraduate degree takes about 4-5 years to complete. Voila, a turnover rate of roughly 25% magically appears.

The second benefit is a more educated, bright, enthusiastic, enlightened, thinking workforce. There's something different about those associates at Starbucks. They're friendly, seem to have some empowerment to make decisions, and know the product well. Howard is doing a lot of things right, like good training programs, benefits packages, and positive cultures.

Finally, if Starbucks gets a reputation for sending bright employees into professional and trade fields elsewhere, the incoming flow of new applicants will be that much more with-it than what might normally be seen without this program. Starbucks recruiters can choose from the best and brightest, partly because they prepare employees for life after Starbucks.

Why Education?

I’m guessing Howard and his advisors know the real truth of education and its relationship to business. Most majors really have nothing to do with coffee production and counter service businesses. I didn’t pop out of the University of California knowing much of anything about the entertainment industry. I was a psychology major, studying behavior and relationships. Sure, some obvious connections between my major and the entertainment industry exist. For example, understanding behavior is important to the art of leading others.

However, possibly more importantly, I learned to think critically, manipulate complicated systems, and manage bureaucracies. I learned intangible life/business skills through adding and dropping classes, knowing the best places to park my car, and sensing which professors to avoid. Possibly most important for business, I knew that to succeed I had to change my learning style to meet the demands of roughly 30-40 professors, those humans with a lot of power.

All these non-subject matter skills are what help me meander through this thing called business. Businesses today need thinking workers, those who know how to think critically and understand there are multiple paths to getting things done.

(And, how, you ask, do I know all this inside stuff about Starbucks? Well, my daughter worked there for a year until she packed up to study overseas. That's how I know, because I had my own undercover agent.)

“The challenge of the retail business is the human condition” [Howard Schultz]

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About The Author

Duane Dike
Duane Dike

Duane Dike is the manager of creative production for a large entertainment company in Southern California. He has a doctorate in management and organizational leadership and an MBA in management. He is a popular guest speaker for education and management groups on subjects related to innovation, leadership and thinking.