Starbucks is making big changes.
Despite coming off a near record earnings year, the company is dealing with dissatisfied employees, many of whom have been pushing for unionization. This is just one of the challenges that has brought Howard Schultz back as chief executive, a position he returned to just a few months ago.
In a letter to employees, Schultz admitted that the company is not currently satisfying the needs and expectations of either employees or customers.
“Today, we find ourselves in a position where we must modernize and transform the Starbucks experience in our stores and recreate an environment that is relevant, welcoming and safe, and where we uplift one another with dignity, respect and kindness,” wrote Schultz.
“We need to reinvent Starbucks for the future.”
Schultz’s letter reveals five steps to its reinvention strategy, most of which appear to be typical PR speak. Interestingly, though, much of Schultz’s letter focuses on just one of those steps, namely, redesigning the company’s partnership with employees.
According to Schultz, Starbucks is using direct feedback from employees–in the form of stories, experiences, and ideas–to “inspire a set of principles for a new partnership at Starbucks.”
While Schultz’s ability to deliver on what he’s promising remains to be seen, done right, this would be an example of an excellent strategy that has a foundation in emotional intelligence: It involves something called the IKEA effect.
What is the IKEA effect? And what lessons can business owners learn from it?
(If you find value in the lessons in this article, you might be interested in my full emotional intelligence course — which includes 20 rules that will help you develop your emotional intelligence. Check out the course here.)
How Starbucks Is Using the IKEA Effect
The term “Ikea effect” first appeared in a research paper published by Harvard Business School. The paper highlighted a study in which two sets of subjects were asked to price a set of IKEA self-storage boxes. The first group had built the boxes themselves, while the second group simply examined the furniture before coming up with a price.
The result? The persons who built the boxes themselves placed significantly higher value to the finished product, leading to the authors’ conclusion:
“When people imbue products with their own labor, their effort can increase their valuation.” In other words, when you build something yourself, you value it more.
Well, just as customers place greater value on furniture that they assemble themselves, your team will find more value on solutions that they had a hand in creating.
As just one example of this, Starbucks recently made the decision to close 16 stores in cities across the country, citing “a high volume of challenging incidents that make it difficult to create a safe and welcoming environment,” as reported by the Washington Post. In a separate statement, Starbucks senior vice presidents Debbie Stroud and Denise Nelsen cited employee feedback regarding challenges such as personal safety, racism, a growing mental health crisis, and rising drug use.
“Your input directly shapes our policies, programs and benefits to ensure you feel more supported and empowered,” wrote Stroud and Nelsen.
In his letter, Schultz mentions other ways the company plans to use employee feedback to rekindle its relationship with them.
“We built this company on the power of partner ideas and voice,” Schultz writes. “Our Reinvention must even more deeply…share accountability in building a shared future and benefit all of us when the company succeeds. We aim to be a wholly new kind of company in our industry, setting a new standard.”
What will that new standard include, exactly?
Several years ago, Starbucks set itself apart from other retailers with the benefits it offered even part-time employees, including a stock equity reward program. Will we see dramatic improvements to that program, or something similar?
I guess time will tell: Schultz says that in the weeks ahead, the company will provide “greater clarity” around new resources and programs.
Regardless, employers can take a lesson from Starbucks proposed strategy.
When listening happens, learning begins. So, give your employees a forum to share their challenges, needs, and even wants. Doing so will allow you to better identify problems and solutions.
Further, remember that employees will place more value on solutions they personally contributed to. Do this right, and you’ll also use the IKEA effect to deepen the relationship with your people, and deepen their sense of ownership in the business.