Starbucks case study_final
- 1. CASE STUDY MEASURING THE BUSINESS VALUE OF CORPORATE PHILANTHROPY STARBUCKS FALL 2004 BACKGROUND Starbucks opened its first café in 1971 and today operates more than 7,000 stores in 34 countries. The Starbucks Foundation was created in 1997 with proceeds from the sale of founder Howard Schultz’s book, Pour Your Heart into It: How Starbucks Built a Company One Cup at a Time. Starbucks makes charitable contributions through the Foundation and/or a direct giving program in communities in which it operates and in countries where its coffee is sourced. In 2003 contributions of cash and product exceeded $11 million. The foundation’s original focus was literacy, but as the company grew so did its giving— organically and exponentially. By 2003 Lauren Moore, director of giving, realized it would be wise to step back and make sure that the general direction and specific activities of The Starbucks Foundation and giving program continued to make sense. As well, Moore believed that Starbucks’ philanthropic work was contributing to the good of the community and the company, but there was no tangible evidence for the latter. Starbucks had long been interested in measurement and metrics, but Moore recognized their elusiveness in corporate philanthropy. So her interest was piqued when she attended the Council on Foundations’ 2003 Corporate Grantmaker Summit and heard Frank Walker, chairman of Walker Information, describe the measurement process his company developed for the Council. The process would enable Starbucks to measure stakeholder perceptions and the business value of its own work and to benchmark results with others in Walker Information’s database. THE PROCESS After consulting Walker, Moore decided to measure customer and employee perceptions of The Starbucks Foundation and the corporate giving program. These stakeholder groups were chosen because corporate focus groups conducted in 2000 revealed that customers believed the company needed to be relevant in its own communities and in the larger world and that employees knew little about what the company was doing outside of their immediate neighborhoods. Both groups said communication was important but that “patting-yourself-on-the-back, self-serving promotion” was unacceptable. It was time to test whether—and how—knowledge and perceptions about Starbucks’ community involvement activities had changed in the past three years. Flexibility at Starbucks gave Moore the latitude she needed to move forward on the measurement process without internal wrangling. Starbucks’ human resources and market research teams joined her as key partners: market research assisted with the survey’s customized questions, connecting with customers and presenting results; human resources helped with the employee survey. The project leaders were Moore and Cathie Bachy, Starbucks Foundation program manager. Council on Foundations 1 December 2004
- 2. Employees The employee survey was conducted during a national meeting of store managers and store operations teams. Employees completed the survey in a special booth set up in an exhibit area. Incentives were offered, including t-shirts and raffles; the top prize was the ability to sponsor a $5,000 Make Your Mark (Starbucks’employee volunteer program) project. Employees who participated in the survey included store managers, district managers, regional directors and headquarters executives and partners. A total of 6,500 employees attended the meeting, and almost 700 completed the survey. Customers A random selection of Starbucks customers was drawn from an online database representing consumers in the top 100 U.S. markets. 2,696 panelists were invited to answer the questionnaire; 587 qualifying customers (visited a Starbucks location within the past month) did so. A subset of customers in the greater Seattle area was also surveyed; 114 out of 218 qualifying customers completed the survey. THE FINDINGS Results were consistent with findings to date in other companies: customers and employees with a high Corporate Philanthropy Index (CPI) score are more likely to have attitudes and engage in behaviors that will benefit the company than are employees with a low CPI score. For instance: Employee Survey High CPI Low CPI • Recommend Starbucks to others 98% 77% • Expect to be working at the 91% 85% company in two years Even more striking were some of the differences in customer opinion and behavior: Customer Survey High CPI Low CPI • Recommend Starbucks to others 93% 61% • Plan to continue to do business 98% 71% with the company Both groups were interested in Starbucks’ philanthropic activity and both still believed that communicating its community involvement was important as long as the information didn’t appear to be self-serving. Moore learned that store visibility is an important communications venue as long as that communication is selective and restrained; neither group wanted to be inundated with information. The survey also revealed that what stakeholders know with respect to community involvement is not always what they consider the best fit for the company. And they learned the importance of sticking with some things over time. According to Moore, Starbucks would often abandon the old for Council on Foundations 2 December 2004
- 3. the new and exciting, but they now realize it takes time for people to become familiar and associate programs with the company. Starbucks’ market research team used Walker’s report to prepare a PowerPoint presentation of the survey results for foundation and corporate executives and Starbucks employees. They translated it into “Starbucks language,” a tactic that added internal credibility. THE COMPANY’S RESPONSE The survey results helped add validity to Starbucks’ philanthropic work. Because of these findings, Starbucks is reworking the entire focus and programming of the foundation. Components will be added and regional grant programs will be changed. Details will be communicated during 2005. Moore said she expects increased funding for the foundation in coming years, funding that because of the measurement process the foundation is favorably positioned to receive—and the staff to invest. WHAT STARBUCKS RECOMMONDS TO OTHERS CONSIDERING MEASURMENT Recognize up front the time and work the process requires.1 A dedicated team on the ground is essential. For Starbucks, it was a six- to eight-month process from start to finish; Moore predicts that without strong leadership, it would have taken longer. THE BOTTOM LINE “In a landscape with few metrics, this measurement tool is tremendously helpful,” said Moore. “It’s a multilayered process, and the depth of the results will make them valuable for a long time.” ACKNOWLEDGEMENTS Thank you to Starbucks for allowing us this inside look at its measurement process. Special thanks to Lauren Moore for her candor, time and assistance. 1 Editors note: Two delays common to this measurement process are finding a usable database of stakeholders from which to draw the survey sample and getting the permissions necessary to use the database after it has been identified. Council on Foundations 3 December 2004