Are Starbucks’ benefits to part-time employees altruistic?

Are Starbucks’ benefits to part-time employees altruistic?

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Altruism is widely misunderstood. So is egoism. Many people believe altruism means benevolence and kindness and egoism ruthless exploitation of others for one’s own gain. They are wrong on both counts. Altruism, the most widely prescribed and accepted moral code, tells us to always put others’ interests ahead of our own. In other words, it asks us to sacrifice our interests for the sake of others. This is a moral code that, when practiced consistently, leads to death: first of the self-sacrificers themselves and eventually of those who collect the sacrifices. Egoism, on the other hand, advocates the pursuit of self-interest—which by definition is not predatory and excludes sacrificing others to oneself. It leads to our survival and flourishing.

            A recent Slate.com article “The Starbucks guide to world domination” by Rachael Larimore made me think about the altruism-egoism confusion. Larimore herself does not seem confused, but she suggests that Howard Schultz’s pioneering move in 1988 to extend benefits—and later, the stock program—to part-time employees was perceived as “good-hearted humanitarianism.” (Later she calls it “benevolence” herself.) Schultz credits his action on employee benefits as being a significant factor in Starbucks’ success, and Larimer describes it as “a well-reasoned business decision” that made possible Starbucks’ rapid expansion in the 1980s and 1990s. Both of them are right. No business can thrive on “good-hearted humanitarianism,” sacrificing itself for employees or for anyone else. On the principle of altruism, Starbucks should serve coffee for free to its customers.

            Starbucks has become a success—18,000 stores in 60 countries and $13 billion in sales—not because of altruism but because Howard Schultz and other executives have acted on the principle of self-interest, identifying what it requires. Larimer cites Schultz describing employee morale as terrible and the relationship between employees and management very poor when he took over the company and became CEO. Recognizing these facts and the importance of employees to his company’s success, Schultz had to move quickly.  He did not act on the principle of self-sacrifice but on the egoist principle of trade: trading value for value for mutual benefit. By offering benefits to part-time employees, Schultz was able to improve employee morale: employees started feeling appreciated again, became more committed to the company, and turnover declined. And Starbucks saved money—which made investment in further expansion possible. (Larimer reports that according to Schultz’s calculation, it cost one and half times as much to train a new employee than pay benefits to an existing one for a year).

            The common misunderstanding of egoism as exploitative is based on the idea that people’s interests inevitably conflict: employees want more compensation, employers want to pay the minimum; customers want lower prices and companies want to charge more to maximize their profits. However, there is no conflict between people’s rational interests. In providing benefits and a stock program for its employees, including part-timers, Starbucks does not compromise its interests. In return, the company gains the loyalty of its employees—and lower costs. It is a trade. Similarly, there is no conflict between the interests of Starbucks and its customers. Starbucks provides high-quality coffee and convenience at a price that customers are willing to pay. It’s a trade.

            Altruism has no place in business. Only by pursuing self-interest, trading value for value for mutual benefit, can business achieve long-term success. Starbucks is a shining example.

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3 Responses

  1. Good article.

    In this case he integrated – looked at total costs, rather than using a “bean counter” approach.

    Even without a business owner may decide on her judgement to do extra for employeers – that’s her choice. But neo-Marxists want to initiate force against business owners, because their denial of the human mind leads to a view of humans as unproductive (thus fixed-pie economics) and drive-to-the-bottom ethics. Of course we know that Marxism doesn’t provide good medical care – it can’t even feed people.

    PS: There are accountants who integrate instead of being bean-counters.

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Jaana Woiceshyn teaches business ethics and competitive strategy at the Haskayne School of Business, University of Calgary, Canada.

She has lectured and conducted seminars on business ethics to undergraduate, MBA and Executive MBA students, and to various corporate audiences for over 20 years both in Canada and abroad. Before earning her Ph.D. from the Wharton School of Business, University of Pennsylvania, she helped turn around a small business in Finland and worked for a consulting firm in Canada.

Jaana’s research on technological change and innovation, value creation by business, executive decision-making, and business ethics has been published in various academic and professional journals and books. “How to Be Profitable and Moral” is her first solo-authored book.

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