Starbucks is Paying 4,000 College Tuitions (And It’s Helping Them Recruit, Big Time)
January 28, 2016
A lot of companies say they want to make the world a better place. Well, for the past nine months, Starbucks has been doing it by paying the college tuition of more than 4,000 of its employees.
In April, Starbucks CEO Howard Schultz announced the company’s new College Achievement Plan, which provides full tuition reimbursement at Arizona State University’s online college to any part-time or full-time U.S. Starbucks employee who doesn’t yet have a bachelor’s degree. The motivation behind the plan is to address an inequality in education in the United States, according to Starbucks Vice President of Global Talent Acquisition John Phillips.
“When it comes to college, the highest predictor of achieving a college degree in the Unites States is the zip code you came from,” Phillips said in an interview with LinkedIn. “And that’s not right.”
Nine months in, more than 4,000 Starbucks employees have enrolled in the program, and 44 have already graduated. Additionally, more people than ever before are applying for jobs at Starbucks, with roughly two-thirds of the barista applicants saying they are interested in the college program.
Of course, there are serious costs to the program as well – Starbucks predicts they will invest at least $250 million into it through 2025. But Phillips maintains that the positive branding that comes with a program like this offsets those costs.
“There is a direct connection between the way you treat your employees and customers choosing you as a brand,” Phillips said. “We want our customers to know and love our culture.
A brief overview of Starbucks’ College Achievement Program
Here are three noteworthy facts about Starbucks’ College Achievement Plan:
1. The program is a broader re-imagination off of an existing Starbucks college program
Starbucks launched a college reimbursement program in June 2014 and quickly found out that they needed to make changes. Originally, the plan would give partial reimbursement to U.S. Starbucks employees in their freshmen and sophomore years of online college, and then reimburse the full tuition in their junior and senior years. Reimbursement was scheduled to happen every six months.
The problem was there were a lot of Starbuck employees who had no or very few college credits, and therefore there was a great demand to extend the program so tuition would be fully reimbursed for employees in their freshmen and sophomore years as well. Additionally, six months was a long time for employees to wait for their reimbursement. So, in April of 2015, Starbucks decided to update the program after just a few months and reimburse full tuition, regardless of year, and offer faster tuition reimbursement – now at the end of each semester.
“We listened to our talent base and realized the original program wasn’t broad enough,” Phillips said. “So we decided to expand it.”
2. Enrollees can major in whatever they want, even if it has nothing to do with Starbucks
The company has worked with Arizona State University to build its own major around retail management, so an employee can graduate and then move up the ranks at Starbucks. But Starbucks will reimburse any courses toward any degree, even if it leads to a career that has nothing to do with their company.
“There are no strings attached to this program,” Phillips said. “You can graduate and leave Starbucks the next day, if you want.”
3. Enrollees get a success coach from ASU to help them graduate
The ultimate goal of the program is for it to produce 25,000 graduates by the year 2025. To make that happen, ASU provides each enrolled Starbucks employee a “success coach” to ensure their education stays on-track.
“It isn’t just getting you into the school,” Phillips said. “Once you are in, you actually have a coach doing one-on-one check-ins with you, so you take the right classes and get your needs covered.”
The costs-and-benefits of the program, from a recruiting perspective
The cost of the program is pretty straightforward. Starbucks predicts they will invest $250 million into it through 2025, which is a sizeable chunk, even for a company that’s gross revenues are around $4.5 billion a year.
However, there are a lot of benefits. Here are three that standout:
1. It is providing a free pathway to a college degree for thousands of people
Reports show that Americans with a college degree earn more than $1 million over their lifetime than an American without one. That often means financial independence for that person and their family and college degrees are, to many, a pathway to achieving a dream. To Phillips, that matters.
“One of the things the company is built off of is this balance between a for-profit company and shareholders and our impact on the world,” he said. “We really try to operate our company through a lens of humanity.”
Think about it this way: As mentioned, the ultimate goal is to get 25,000 graduates from this program by the year 2025. To put that in perspective, that’s an average of 2,777 graduates per year over the next nine years, or about what a decently sized university would graduate in that time.
The difference? The average college graduate leaves school today with $28,400 in debt in student loans, a figure that’ll likely continue to increase. The average Starbucks graduate, conversely, would have had their tuition completely reimbursed.
2. It helps build an employer brand that attracts and retains top talent at all levels
Phillips didn’t reveal Starbucks’ retention rate, but said it was markedly higher than the retail average and that it went up after this announcement (a sector which traditionally has among the highest turnover rates out there). Additionally, more people than ever before applied for jobs at Starbucks this year.
What’s interesting though is that Phillips said applications went up not just for barista positions after the program was announced, but for corporate positions as well. Generally, many of the applicants for those corporate positions already have a college degree, and therefore wouldn’t qualify for the program, and yet the program enticed them anyway.
“This is what people want to be part of,” Phillips said. “They want to be part of a company that does it the right way.”
3. That stronger employer brand will also help sales
According to the company’s own internal research, Phillips said one of the reasons people choose Starbucks is the way they treat their employees. For years, the company provided all of its employees – even part-timers – healthcare, something few other retailers did.
This college program is just another step in that direction. And while there are many factors to this besides just the college program, Starbucks gross revenues did jump by $740 million, or 18 percent, this year, from $3.82 billion in the 2014 fiscal year to $4.56 billion in the 2015 fiscal year.
“That’s something that more and more of our customers care about,” Phillips said. “They want to buy from a company they believe is doing the right thing.”
What this program means to recruiters
Starbucks positions itself as a mission-based company, with programs like its veterans hiring initiative and the fact that it provides healthcare to even part-time employees and now this college initiative. That’s a big reason why it’s able to consistently attract great talent who push the company forward, as people want to work for an organization that treats all their people well and does good in the world.
On top of that, their strong employer brand is helping their sales. Quite frankly, Starbucks has never been the cheapest option for coffee for a drive-through and they never tried to be. Instead, they rely on other aspects to compete.
Obviously, a big one is taste and their atmosphere. But another one of their competitive advantages is the way they treat their employees and their programs that legitimately make the world a better place.
All told, in many ways Starbucks is a shining example of the benefits of having a mission-based company. Along with helping the world, it also means attracting the very best talent and keeping them motivated.
Additionally, it helps sales, as people are more willing to spend money on companies they believe have good values. Overall, it is a win-win-win, which has allowed Starbucks to remain one of the most successful coffee houses in the world.
*Image from Starbucks
To receive blog posts like this one straight in your inbox, subscribe to the blog newsletter.