Sector insight: Coffee beings

Coffee bars are fast eclipsing pubs on UK high streets, but who looks after the ‘baristas’ who sell us our daily espresso? Georgina Fuller grills the HR directors and their policies.


It is difficult to remember a time when coffee houses did not monopolise every high street in the UK, from the ubiquitous Starbucks to Italian-styled Caffè Nero.


More than two billion cups of coffee are consumed worldwide every day, according to the British Coffee Association.


It is no wonder, then, that the major coffee chains collectively make up one of the UK’s fastest-growing employer groups.


It is a challenge to find the right level of skills in such a rapidly expanding business. The salaries are low – they tend to hover around minimum wage level – and staff turnover is high.


In addition, coffee chains tend to rely heavily on international labour – Caffè Nero alone employs staff from 66 nationalities.


In response to these challenges, the three major players – Starbucks, Caffè Nero and Costa Coffee – are working hard to improve retention through training and performance-related bonuses.


With an estimated 35 million people visiting a Starbucks store each week, and Caffè Nero’s massive expansion plans, the coffee house trend looks set to continue.

Caffè Nero


Factfile


Caffè Nero was founded in 1997 and has 250 stores across the UK. Around 90 people work in the head office in central London and the company employs 2,500 people in total. The average age is 25.


The head of HR, Steve Carpenter, reports to the managing director. The HR function consists of six training professionals, two recruiters and two employee relations professionals, all of whom report to Carpenter.


The standard rate for staff under the age of 22 is £5.05 per hour, but Carpenter says it is not unusual for managers to earn up to £19,000 per annum.

Recruitment


Recruitment will be the most significant challenge for Caffè Nero over the next few years as it begins a significant growth programme, according to Carpenter.


It plans to take on an additional 900 employees to staff an extra 100 stores. Carpenter says the company will focus more on opening cafés in rural areas and also the North East, where there is a relative dearth of stores in comparison to the South East.


All of the information about the London vacancies is currently held centrally. The only recruitment method for the 80 or so stores is via a ‘drop in’ centre in central London, where applicants are given a basic screening test.


Regional store managers, however, do their own recruitment, almost entirely through window advertising. They occasionally advertise in local papers if they are struggling, but Carpenter believes window advertising to be the most effective recruitment method.

Retention


A high turnover of staff is one of the negatives of managing HR for a coffee chain. “Most people see working in a café as a short-term job rather than a career,” Carpenter explains. “The downside is that we often don’t get the commitment, and people don’t stick around for very long.”


The early morning starts (some stores open as early as 6:30am), low pay (minimum wage for under 22s) and 12-hour days can all act as deterrents.


Carpenter is realistic about reducing turnover levels. “We intend to focus more on several key people in each store, and move them through the career path rather than say we’re going to reduce our turnover levels by a certain amount,” he says.


Caffè Nero tries hard to promote a friendly, relaxed feel in each of its stores and focuses on developing people internally. Around one-third of the store managers (35%) started as ‘baristas’ (coffee makers) and it is hoping to increase this proportion in the next few years.


Free lunches, unlimited hot and cold drinks and a large budget for social events are also added incentives.

Training and development


All staff get a one-week induction programme, consisting of both classroom and on-the-job training. New starters spend two days in the classroom learning about the company and two days in a store. All head-office staff spend two days on the shop floor observing how the baristas work and how the stores are run and an additional refresher day once a year.

Performance management


All Caffè Nero staff have six-monthly appraisals with their managers.


The company also encourages a comprehensive performance management process, where store managers are reviewed by everyone in the business and baristas are reviewed by their peers.


Well-performing stores are eligible for performance-related bonuses and a share in the profits.

Costa Coffee


Factfile


In 1971, two Italian brothers, Sergio and Bruno Costa, started a wholesale operation supplying roasted coffee to caterers and specialist Italian coffee shops. Seven years later, they opened their first London store and, by 2000, Costa Coffee was serving about 3.7 million cups a day.


In 1995, Costa was acquired by hospitality company Whitbread and, in 2005, it was named the fastest-growing brand by research company YouGov. Costa Coffee now has more than 500 stores across the globe and operates franchises in Waterstones bookstores, WHSmith and Marriott Hotels.


The HR function operates as a shared service with the Whitbread Centre for Excellence. Maria Horn, HR director, has a team of nine and reports to the managing director. The HR team is responsible for reward, employment policy, training and management development. It also oversees brand standards and internal communications. ‘Team members’ are paid above the minimum wage and there is a broad pay spectrum for store managers (known as ‘team leaders’).

Recruitment


Costa uses a range of different recruitment methods, including window advertising, coffee mornings and word of mouth. Vacancies for the support centre and wholesale operation are advertised on the company website, and store managers are responsible for their own recruitment.
Horn also tries to boost diversity levels by targeting specific markets. It does this by using job centres, but Horn admits the company could better synchronise the programme. “We are working to change our recruitment process and develop our brand in the employment market,” she says.


Retention


Horn estimates that the current level of staff turnover is about 73%, but points out that this has been reduced from a 100% turnover just 18 months ago. “We are dealing with a very transient workforce, with lots of international students,” she says.


Costa runs a range of incentive programmes to help retain staff and, as with Caffè Nero, aims to promote a close-knit, family-like atmosphere in each store.


“We run incentives throughout the year for our team members and management populations, where teams and individuals are awarded money for staff parties. There are more personal incentives for high-performing managers – for example, they could win a trip to Italy,” Horn says.

Training and development


Costa Coffee aims to promote at least 60% of its staff internally, and managers are measured using a balanced scorecard approach.


Store managers are responsible for their own induction programmes and each store is assigned its own learning and development manager to provide training support.


The team leaders use a workbook method to train team members in how to deal with day-to-day issues, such as managing queues.


Costa is keen to provide employees with a clear career path.


“We have development plans and training to enable people to move from team member to assistant manager and store manager roles,” Horn says.


Costa is also developing a talent management programme to help people understand where they fit into the company structure and focus more on staff development.

Performance management


All managers at Costa Coffee have formal appraisals twice a year in addition to one-to-one appraisals. However, this does not extend to every team member.


Horn says Costa is addressing this issue. “We will be working over this coming year to introduce a more consistent approach across our whole business to ensure all team members are aware of how they are doing and we are aware of their development needs and personal aspirations,” she says.

Starbucks


Factfile


Starbucks, the bellwether of the coffee market, opened its first store in Seattle, US, in 1971. Its name comes from a character in Herman Melville’s novel Moby Dick. The current chairman, Howard Schultz, joined the company in 1982 after being inspired by a business trip to Italy.
Starbucks now has more than 6,000 stores across the globe, 500 of which are in the UK and Ireland. The coffee giant employs 7,100 staff in UK and Ireland and there are 150 staff in its UK head office in London.


Starbucks staff are known as ‘partners’ and the HR function is called ‘partner resources’. Starbucks has centralised its UK HR function, which is 12-strong and is based in the company’s support centre in London.


Partner resources incorporates learning and development, talent management and compensation and benefits. It also encompasses Starbucks’ payroll operation, which employs around 30 staff.


According to Gordon Lyle, UK HR director at Starbucks, compensation and benefits is one of HR’s most important roles in the company. Starbucks pays baristas above the minimum wage and offers a broad pay spectrum for store managers.

Recruitment


Lyle claims the company tries to recruit internally as much as possible.


“We always strive to recruit internally, either through internal promotions, or by recruiting people from the field,” he explains. Starbucks also partners with recruitment agencies on specific projects.


Within the stores, many of the staff have been recruited through window advertising, according to Lyle, and at least half of all staff started as a Starbucks customer.


“A huge number of our partners have grown to understand our market and approach through being a customer,” Lyle explains.
Store managers interview job candidates and take full responsibility for recruitment. If successful at interview, Starbucks invites candidates to come in for a half-day trial.

Retention


Starbucks’ turnover rates are impressively low for the sector at 15%, compared with a median average of 30% within the coffee industry, according to the Chartered Institute of Personnel and Development’s annual Recruitment, Retention, and Turnover survey.


The company offers a range of benefits that, Lyle believes, are key to its retention success. These include the Bean Stock programme – a Starbucks share option scheme offered to all employees – and a partner discount programme, which entitles staff to a 30% discount in its stores.


Lyle says the Bean Stock scheme has a direct impact on employee engagement levels. “Bean Stock is a great way for our partners to have a personal connection to Starbucks’ growth and a means of sharing in the financial rewards of the company’s success,” he says.


Lyle estimates that more than 5,000 of the 7,100 UK workers have benefited from the Bean Stock. “It is much more than just a stock option programme – it represents who we are as a business and it is why we call ourselves partners.”


Starbucks also carries out a bi-annual engagement survey, known as Partner View.

Training and development


All Starbucks partners, regardless of their rank, are encouraged to spend time in stores when they first join the company. Lyle says he spent three months on the shop floor when he first started.


New recruits also spend a day at the central learning centre in London, learning about the company and the coffee industry. They also take part in the ‘coffee master’ programme, enabling them to become a ‘Starbucks coffee ambassador’. Starbucks also operates a ‘buddy system’, where new starters are paired with an experienced barista or supervisor for practical training sessions.


A similar scheme is in operation for new store managers, who have access to ‘manager coach mentors’, who have been trained internally to provide support to Starbucks’ new managers.


Store managers also have the opportunity to become trainers or classroom coaches.

Performance management


Shift supervisors and store managers are reviewed annually. According to Lyle, the review process is very thorough.


“The performance review takes into consideration partner performance in both technical skills (doing their job) and behavioural skills,” he says.

Coffee nuggets




  • Coffee house culture in the UK is thought to have come about in the 1600s, when the first coffee house opened in Oxford. By 1663, there were an estimated 82 coffee houses in London.


  • Costa Coffee was the first of the chains to hit the high street, opening its first London store in 1978. Caffè Nero and Starbucks did not burst on to the scene until 20 years later.


  • Coffee is the second most valuable commodity in the world after oil, with global retail sales estimated to be £39.2bn.


  • A total of 6.7 million tonnes of coffee were produced annually in 1998-2000, forecast to rise to seven million tonnes annually by 2010.

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