John Kelly: Why Starbucks wants you to finish college
Two thousand workers are enrolled so far in a program from Arizona State University and the world's biggest "people company that happens to serve coffee."
In June 2014, Starbucks announced the College Achievement Plan (CAP), a unique partnership with Arizona State University, aimed at helping its employees (who Starbucks calls “partners”) complete their education. U.S. employees could choose from nearly 50 online degree programs with full tuition reimbursement for juniors and seniors and significant tuition assistance for freshmen and sophomores.
Earlier this month, Starbucks expanded the benefit to offer 100 percent tuition coverage for all four years and committed to investing $250 million to help 25,000 of its employees graduate by 2025. Along with Starbucks’s commitment to hire returning U.S. veterans and offer health insurance and stock equity to its part-time employees, this program is one of the company’s latest employee-focused initiatives that addresses larger societal challenges.
Mark Lee and Derek Bothereau sat down with John Kelly, senior vice president of global responsibility and public policy, in his office at Starbucks HQ in Seattle to learn more about CAP.
Derek Bothereau: When the Starbucks College Achievement Plan was announced, it received a great deal of recognition for being a generous employment benefit that also addressed the issue of college accessibility and affordability head-on. Why did you decide to launch this program?
John Kelly: We started with feedback from our partners who are, on average, 24 years old. What we found is that an astonishing 70 percent of our partners had only partially completed a college degree, in large part due to skyrocketing tuition costs. What's happening in our stores is a reflection of what is happening across the country.
When we were looking at the next way we could invest in the partner experience, we asked our 135,000 U.S. partners what benefit Starbucks could offer that would be most meaningful to them. We learned that the vast majority wanted to complete a college degree but couldn’t because of the financial challenges that were standing in their way.
We all know the difference that a degree can make in terms of future economic security, so that's why we turned to higher education and specifically college completion as our focus. It is one of the answers to [Starbucks chairman and CEO] Howard Schultz asking shareholders, “What is the role and responsibility of a public, for-profit company?”
Bothereau: What drove you to take action when you did? Why now?
Kelly: At a time when faith in government is at an all-time low, for many people the American dream of a college education, a home and a career is further and further out of reach.
Bothereau: How did you sell the rest of the business on actually launching CAP and affording the costs?
Kelly: Once you realize there's a need, you have to ask yourself: Can you afford this? If you're Howard Schultz, the question is, how can you afford not to? When he first offered health insurance to part-time employees in 1988, everyone said, “You can't possibly do that; you'll break the company.”
It has turned out to be one of the best parts of Starbucks because people are here for more than just the wage. They're here for a career and they want to know the company they work for puts them ahead of profits.
Our model is, “Don't let the affordability question stop you because this is an investment in our people, not an expense.” We just have to ask ourselves, how do we do this?
Bothereau: How did you decide to turn to Arizona State University as the degree-granting institution?
Kelly: We're obviously not experts in higher education. We started looking for a university partner who could do this in an innovative, scalable way and who shared our values around the affordability and accessibility of higher education. We eventually found the right partner in Arizona State University.
Bothereau: Were your employees surprised when you launched the program? What was the reaction as they found out the offer?
Kelly: With nearly 2,000 partners successfully enrolled in the program, the response from our partners has been overwhelmingly positive. The people who are most surprised are policy makers and other educators who can't quite believe we're making this investment with no commitment for partners to remain at Starbucks. Nobody's ever done this before to this scale. We didn't know exactly how many people would enroll, but with three-quarters of our partners not having their bachelor’s degrees, we anticipated it would be in the thousands.
Mark Lee: How is the program doing thus far? What's been the biggest surprise, or what have you learned that you didn't expect?
Kelly: It's a complex and difficult decision to return to school. The person might have a child at home. They might have a spouse that's out of work. They are balancing work. They have a partially completed college education. The decision to do the work, as innovative and as available as it is through ASU, is still a major commitment. You have to keep a certain grade point average. You have to maintain the rigor of the classroom.
It has only been 10 months since the program began. We have roughly 2,000 people who are now enrolled. That's 2,000 people who are now on their way towards a college education without debt and with no obligation. And, we’ve committed to investing $250 million to graduate 25,000 partners by 2025, many of which we hope will be “opportunity youth,” a population of nearly 6 million disconnected youth ages 16 to 24 who are not working or in school. With the right skills and training, this audience of youth represents a huge, untapped talent pool for American businesses.
The day that you graduate from Arizona State University and you get your degree from Arizona State University, you can go and do something else. There's no commitment to stay at Starbucks. We hope they will, but there is no commitment because we believe that this is our commitment to them, not their commitment to us.
Lee: How does the College Achievement Program fit into the broader mission and values of Starbucks?
Kelly: We have 300,000 mostly young people working in our stores. They are the essential ingredients to our success. The more we do for them, the higher this company will be able to perform. Demonstrating that a company can step up and provide a benefit that in other parts of the world is provided by the government — or isn't provided at all — is part of our commitment to putting partners first.
In various books that Howard has written, he’s said that we're not a coffee company. We're a people company that happens to serve coffee. At least in my tenure here, it's very clear to me that the filter by which we make decisions is based on that partner in the store, that young person. Are they proud of what we are saying, or doing, or promising? If we inspire them, we'll get that inspiration in return.
Bothereau: The White House recently unveiled the “America's College Promise” proposal to make two years of community college tuition free and “as universal as high school.” How do you see Starbucks interacting with those who are trying to solve this problem from legislative or other angles?
Kelly: The big idea here is not for Starbucks and ASU to do this together; rather it's to create a model for other large enterprises and universities to do whatever is relevant for their organization and workforce. If we can demonstrate our success in a convincing and compelling way, we hope others will follow.
There are two things that the U.S. Federal Government can do to incentivize employers: lift caps on taxable benefits and make sure that Pell Grants are accessible and affordable as they have been. This is your quintessential public-private partnership. We're just saying, “Let's stop counting on the public part of that partnership and private companies need to do more.”
Bothereau: What’s the biggest challenge? Is retention rate where you expect it to be?
We'll have more empirical data in a few months. Retention rate is still very high. According to ASU, 90 percent of our partners are moving forward in the program, which is incredible. So far, those who have decided to enroll are sticking with it. We just want more people to enroll.
The biggest challenge we have is the same problem at most major enterprises around benefits. It is simply getting young people to be aware of the benefits that are available to them. That could be affordable health insurance, education benefits or equity in the company in the form of stocks.
It's just getting in front of young people and asking them to consider this option. When you have 135,000 of them, you have to do that at scale. We're still in the process of just making sure that all of our people are aware that we’re offering this program to them.
Bothereau: What advice would you give to companies that are considering something like this? Where would you start?
Kelly: As much as we would love to inspire and encourage other companies to do it, we're also modest enough to know we can't speak for others or know other people's businesses.
You have to work with the employees on their schedules. You have to find a partner who is willing to innovate, accommodate and understand your business and the needs of these working partners. Start with a premise that if you do the right things for your people, they will do the right things for you. They will stick around and they will be better employees. They will be better at customer service because they have a good deal. If you take care of your people, everything takes care of itself. Obviously, it’s the Starbucks way to say, “Invest in your people. It's worth it.”