Moves of Uncommon Greatness in HR Outsourcing
Starbucks doesn't just grow high-quality whole bean coffees and sell them along with fresh, rich-brewed, Italian-style espresso beverages. Their main purpose is actually to "provide an uplifting experience that enriches people's daily lives," says Annette King, director, Benefits and Savings at Starbucks.
So when the coffee company decided to outsource its 401k record keeping services and its health and welfare administration functions, the bottom line goal was to ensure that the change would be seamless to the partners (employees) and store operations. "If something happens that causes our partners to come in to work agitated and upset, it would be harder for them to provide the Starbucks Experience to our customers," King explains.
As it turned out, their choice of Hewitt Associates as outsourcer turned out to achieve far more than they had originally planned.
Tipping the Balance
Starbucks' primary driver for outsourcing was to provide great Human Resource services to its partners. The August 1997 health and welfare administrative initiative included a major redesign of the company's benefits program - unbundling dental and vision plans from the medical plan, offering a greater variety of medical plans, adding dependent care reimbursement and some additional life insurance options.
"We knew we would be challenged to support as many options as we wanted to provide for our partners," recalls King. "And we wanted an outsourcer that could build benefit administration systems that would be able to support our growth in North America." Having doubled its partner count to 47,000 in three years and opening approximately two new stores every day, Starbucks knew it would be challenging to support the benefits administration systems internally.
Indeed, Starbucks strategy in choosing an outsourcer that would grow with them had been a wise move, for they outgrew the Flex system where Hewitt initially placed them faster than anticipated. Not only does Starbucks have a large headcount, but the demographics of the group also present some issues. King says partners move between states, between stores, and between hourly and salaried positions. Because the Flex system was not designed to handle the volume of transactions Starbucks was generating, the coffee company was moved to the outsourcer's Total Benefit Administration (TBA) system in June 2001.
"It was a dark and stormy night" - those immortal first sentence words of the novel being authored by Charles Schultz' cartoon character, Snoopy, are the perfect description for what happened when Starbucks began its transition from Hewitt's Flex system to TBA.
Conversion kick-off was in October, and the go-live date was planned for June 15. In between, two disasters struck. On Wednesday, February 28 at 10:55 a.m., a 6.8 earthquake hit Seattle. Starbucks networks were down from Wednesday through Sunday, and Hewitt's team of participant service associates took messages for Starbucks Benefits Department while Starbucks critical functions and phone lines were brought back on line. The team working on the conversion was unable to resume working in the building for three months. "We had a lot of water damage from broken water pipes and sprinkler heads that made its way down into our data center," recalls King. Their laptops sat in water for three days.
But a week later, the implementation team regrouped, poured the water out of their laptops, and decided to go ahead and try to meet the June go-live date. King says they lost no data but were "very challenged" in getting a good QA environment for testing. They ended up having to use a less-than-perfect testing environment.
But the team's troubles were not over.
On June 9 when the old Flex system had been shut down and the new system was being loaded, tropical storm Allison passed through Houston, where Hewitt was trying to accomplish the conversion. "It created an interesting working environment," says King. Amazingly, the systems stayed up, and the Hewitt team was able to kick off their work from their homes. Allison initially passed through Houston, circled back and struck a second time, doing most of the significant damage then. On the day between the first and second Allison go-rounds, King squeezed in a flight to Houston to do some final testing.
With two major natural disasters, it truly was amazing that they went live on time. "Now when we do our project plans, one of the risks is earthquake," King says. "And we learned that felt tip is not a good option because it bleeds when wet, so now we all use pencils." For the 35 Hewitt team members and the 12 people on the Starbucks team who celebrated the success of the conversion, their Starbucks t-shirts with "TBA Go-Live" embroidered on them is a special reminder of their relationship.
Just Say Yes Attitude
Starbucks does some unique things, so Hewitt's willingness to be flexible is a valuable component of the relationship. "They have gone way out of the box for us," King declares. "When we started the system conversion, they gave us a stack of "standards" for participation and communication statements. But we have a lot of variable text, and we created new ones. And they took a just-say-yes attitude."
"We'd say, 'if a partner enrolls in this plan, can we have this extra paragraph as a reminder of this particular provision?' They'd say, 'yes, we can do that.' We'd say, 'Can we have a special letter that goes to partners who change addresses after an open enrollment kit is cut, telling them that the kit was mailed to a different address and they need to call and request another one?' And Hewitt said, 'yes.' It's nonstandard, and they have demonstrated incredible flexibility with us," says King.
King comments that Hewitt's goal is to have Starbucks partners walking down the hall, saying, "We love Hewitt!" That desire to have a client "over the top" in their "satisfaction has been met" rating.
In building an outsourcing relationship, King believes it's critical to choose a partner that shares your values and culture. Invest in the people who can and will influence the success of the project, and insure an understanding of your culture and way of doing business, she advises. Invest time in communicating, and include rewards. Starbucks gives MUG awards for Moves of Uncommon Greatness. It's an internal award, but they gave one to Hewitt.
No one could have deserved it more.
Lessons from the Outsourcing Journal
- Outsourcing health and welfare benefits administration is an effective strategy for redesigning flexible benefits options for employees.
- Organizations that are growing quickly should choose a service provider that has systems capable of handling an ever-increasing number of transactions.
- A good relationship builder is to celebrate successes together.