A Starbucks Moment for Nonprofits?
Wednesday, June 17th, 2009Up until the late 1980’s America’s service industry–its restaurants chains and fast food franchises—faced a seemingly impenetrable wall.
Historically, their average employee was a high school or college student, going through a rite of passage—their first job. His or her goals were simple: gain basic employment skills, earn some extra spending money and then move onto a career. As such, businesses seeking scale had to develop limited menus and simple preparation processes that would insure consistency of product based on the skill level and turnover rate of this cohort.
Up until 1988, hamburger chains such as McDonald’s and Burger King had taken this model about as far as it could go. Then came Starbucks, a company that took a calculated risk at a strategic moment in our country’s economic history which allowed them to smash through those barriers and redefine that business model.
In the late 80’s there was a legion of college graduates coming into a market still recovering from the collapse of the Savings and Loan industry. Starbucks’ new executive team, which had been brought on to take the relatively unknown, Seattle based coffee company national, keenly observed this and the broader zeitgeist of the times and seized upon an opportunity.
Seattle was not only Starbucks’ corporate headquarters; it was also the Mecca of the “grunge” culture that was exemplified by local based bands like Nirvana, Pearl Jam and Soundgarden. These million-record selling artists spoke to this underemployed generation and sent a musical message that rejected the “get rich quick” culture that was at the root of the recent economic blow-up, and promoted a lifestyle that espoused societal impact over individual income. Perhaps more importantly for Starbucks’ vision, these bands and their fans also drank coffee, and lots of it.
This is where the company made a brilliant set of decisions that created a model which, if modified, could offer the nonprofit sector a business example which might prove critical to its future economic growth and social vitality.
First, Starbucks planned on selling “to-go” products that were far superior to anything that was currently available in the fast food arena. As such, they knew they needed employees who could master their complicated coffee machines and deliver consistent, yet complex products. These “baristas” were the key to the elevation of the Starbucks brand, so executives made a decision to seek out America’s educated and available college graduates. By offering employment packages with salaries well above any of its competitors, and equally valuable health benefits (even for part-time employees), Starbucks was able to attract a hugely productive new workforce that had heretofore been unwilling to consider working in the “service” industry.
Secondly, Starbucks was an early adapter of cause related marketing. By focusing on fair trade practices and advertising their commitment to staff, the environment, and the global community, they gave employers and customers alike the opportunity to be part of something bigger than themselves. In short—Starbucks employees could make a solid living while also doing good. Of equal importance, consumers could help save the world by buying coffee.
Given these pledges, management knew their products–from triple soy lattes to fresh baked goods to specially made music CDs–would cost more, so they invested in a communications strategy that convinced customers that this would be an investment in themselves and the world.
In short order they elevated the value of once minimized “service” jobs; they convinced customers that paying $4.00 for coffee was a good value and forced their competitors to adapt.
But more than anything else, Starbucks was able to demonstrate that you could invest in talent and grow your business in an economy in which others stood still.
Flash forward to today. Many nonprofit organizations are laying off staff or freezing services. This is certainly understandable, as the current economic climate would suggest that growth is now all but impossible. But some nonprofits have been looking at the business model we have used for decades and are wondering….”Is this our Starbucks moment?”…a time where we move beyond the metaphorical fast food of charity and develop a more sustaining menu of philanthropy. Surprisingly, the opportunities are strikingly similar.
In just a few months, millions of students will be graduating from colleges and universities and trying to find work in an environment crippled by another economic meltdown.
Unlike their Generation X elders, who were at the forefront of the community service movement, this generation has been fully baptized, with most new graduates having 5-7 years of community service under their belts. Like members of the previous generation, they look at the jobs being offered by most nonprofits and, while intrigued by the opportunity to give back, they know that they would be hard pressed to pay back unrelenting student loans or afford rent in many urban cores on the salaries offered by most nonprofit organizations.
This is where forward thinking foundations and charitable organizations are now considering a seemingly counter intuitive push to raise traditional salaries and make strategic hires, with the goal of not just attracting bold new talent, but to elevate the entire concept of charity in America.
There are millions of people, in every corner of the globe who are not only looking for a new way to make a living; they are also looking for a new way to do commerce—and a new way to spend their money. All seem united in a keen desire, as lofty as it may seem, to create wealth without causing damage to the planet or heightening inequalities or injustice. In fact, many consumers now hope to actually turn the tide on poverty and mitigate inequity not with charity, but with commerce.
This could be a great moment for the nonprofit sector. If we can see this era of economic duress as an opportunity to attract new employees that can help us sell a new approach to creating a civil society, then this may be the year we finally move from selling the metaphoric empty calories of fast food, to a healthy, whole lifestyle where commerce and justice share equal seats at the table.
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