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Strategic Partners

9 July 2008

Starbucks to lay off 12,000 workers

Communicators at the coffee shop chain have their work cut out.

by Annie Waite, Global Editor, the Internal Comms Hub

Starbucks announced earlier this month that it will close 600 US coffee shops and eliminate as many as 12,000 jobs – the most in its history – amounting to 7% of its workforce worldwide.

Job search begins
CEO Howard Schultz (pictured) informed employees that the cuts will include full- and part-time employees and the changes are likely to take place over the next 9 months.

In a statement released alongside the closure announcements, Starbucks said it "expects to place many of the affected partners (employees) into available positions at nearby Starbucks stores".

Praise from the top
“Throughout the history of the company, we have always aspired to put our people first. This makes our decision to close stores difficult, because it is disrupting the lives of the people who have worked so hard to deliver superior service to our customers,” Schultz said.

“We sincerely thank each one of them and are very proud of their many contributions to the company. At the same time, we recognize that it is necessary to make decisions that will ... enable us to enter into fiscal 2009 focused on enhancing operating efficiency, improving customer satisfaction and ensuring long-term value for our partners, customers and shareholders,” Schultz continued.

Effects of economic downturn
Stores earmarked for closure are those locations identified by Starbucks as unprofitable at the store level and "not projected to provide acceptable returns in the foreseeable future".

In common with other businesses particularly in the US, Starbucks' sales and earnings have declined in recent months as consumers cut back on luxuries, such as coffee and other refreshments. An increase in milk and gas prices has also affected activity.

Communicating layoffs, restructuring and downsizing
Other victims of economic downturn include workers at IAG in Australia which has just revealed a major set of redundancies.

If you're facing a similar situation and need advice about how to communicate layoffs and major change, check out Melcrum's new report looking at how to communicate during economic downturn, or the July 22 forthcoming webinar on the topic. (Melcrum member discounts apply.)

Why confidentiality is important
There are various steps in planning layoff communication and maintaining confidentiality throughout the process is vital.
• Stock market requirements: As layoff announcements usually increase the share price, there's a risk of insider trading. In some countries, once a certain percentage of employees know of the downsizing then the market has to be informed. If there's a leak, your organization may have to announce early which will have considerable impact on investor and media relations.
• Customer relationships: Once a rumor reaches your customers, you enter into damage control as customers hold back or cancel orders.
• Key employee retention: Once rumors start circulating, some of your most valued employees are likely to leave once headhunters and competitors make their approaches.

Extracted from the Communicating during economic downturn report.

In the Communicating layoffs, restructuring and downsizing chapter of the Communicating during economic downturn report, the author, and CEO of Workwise Communications, Aniko Czinege warns of the problems communicators can face when layoff announcements have to be made.

"Be prepared that your team and colleagues may feel betrayed when they realize that you knew about the plans beforehand. When you're first briefed about forthcoming layoffs, you'll probably need some time to absorb the information," says Czinege.

Public communication procedures
Starbucks' external communication efforts around the closures include directing affected customers to the Starbucks Store Locator on its website. Customers can also contact Starbucks Customer Relations online.

Pete Bocian, chief financial officer, also hosted a conference call on July 1 to discuss the announcement, available now as an audio webcast. Schultz also released another statement yesterday, posted on the Starbucks website.

Forthcoming announcements
On July 30, Starbucks is due to release its third quarter fiscal 2008 earnings followed by a conference call and webcast, at which time the company will provide additional comments and again address the impact of the store closures.

Photo: Business Week

Have your say
Do you admire the way Starbucks has handled the layoff announcements? What steps have you taken in your organization to ensure employees hear of layoffs before the media?

Perhaps you've been the victim of a leaked announcement and had to put together a swift communications action plan? How else do you work with your company's other functions and PR department, to ensure adequate communications during difficult times?

Other recommendations:

Communicating during economic downturn: Melcrum report

IAG poised to announce "Big Bang" restructure

Pecha Kucha: Still PowerPoint – just not resulting in death

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