Reference no: EM131754567

Starbuck recently made headlines by announcing a program to help employees earn college degrees. Starbucks employees who work at least 20 hours a week and enroll Arizona State University’s online bachelor’s degree program are eligible for 100% tuition coverage through graduation. Employees can choose from among more than 50 undergraduate programs at ASU; courses need not be job related, and employees need not stay at the company after graduating.

This employee benefit maybe costly. Tuition for ASU’s online program can run from 3,000 to 10,000. Starbucks estimates that of its 135,000 part-time and full-time employees in the United States, about 70% are enrolled in college or want to pursue a degree. (Another one-fourth already have a degree.) Before the announcement, Starbucks had offered eligible employed about $1,000 a year in tuition assistance.

Starbuck’s believe the expense is worthwhile because this benefit supports a strategy of employee retention. The value of the benefit entices employees to stay, and the company hopes that even graduates who move to jobs elsewhere will promote Starbucks as a great place to work. The benefit differentiates Starbucks from its competitors. In a recent survey by the Society for Human Resource Management, just 54% of employers offer undergraduate tuition assistance. Furthermore, many of those programs require that employees is practical, potentially saving more than Starbucks spends on tuition reimbursement, but it may also reflect a sense of social responsibility. CEO Howard Schultz has expressed concern about “the fracturing of the American dream” and positioned tuition reimbursement as a way of taking action.

Reaction to the program included praise for a benefit that is both important and flexible in that employees can fit online courses around their work schedules. Some note that completion rates for online course are not very high, but Starbucks arrangement with ASU online tuition is high relative to national averages for in-state college tuition.

Tuition reimbursement is just want one component of Starbucks’ benefits package designed to build employee loyalty. After three months, employees become eligible to enroll in health insurance, dental and vision plans, and 401(k) retirement plan. Hourly workers start earning paid vacation after a year of continuous employment. More unusual benefits include free beverages during breaks, a pound of coffee beans (or the equivalent in other beverages) to take home each week, and annual stock options.

1) Discuss how well you think Starbucks tuition reimbursement program meets the criteria for selecting employee benefits (organization objective, employees’ expectation and values, and benefit cost).

2) If you had been advising Starbuck, would you have recommended that it introduce the tuition reimbursement plan or instead use the same budget to raise hourly worker’s wages? Why?