“Challenge the status quo through the lens of our values. This is our rallying cry.” --Pat O’Dea, Peet’s Coffee & Tea CEO, 2011 Annual Report

Wednesday, November 14, 2012

Peet's Coffee & A Living Wage Pt. 3: Why should Peet's be different?

We have established that Peet's is financially able to pay every employee a living wage. It is clear to us that it would ultimately benefit the company's bottom line to invest in its people. But if the retail/service industry in general is slow to recognize the financial benefits of such investment, why should Peet's be any different from Walmart, or McDonald's?

Two words: Peet's' values. CEO Pat O'Dea once said that what makes Peet's great is that we continue to "challenge the status quo through the lens of our values."

What is the status quo for the Peet's workforce? For 80% of us, it is less than a living wage, fluctuating weekly hours, no sick days, no option to work full time, and unpaid promotions.

So how do Peet's values fit with the status quo? Peet's speaks of its mandatory-part-time minimum-wage retail workforce (80% of its total employee base) using these words: most knowledgeable in the industry, valued members, coffee and tea experts, committed to continuous learning and professional growth, the face of our business, ambassadors for the brand, skilled baristas...and the list goes on and on.

Peet's speaks in no uncertain terms of its fundamental business values: sustainability, community, prosperity, health, integrity, social responsibility, etc. At the Peet's website you can read about initiatives to build essential infrastructure in coffee-growing communities, U.S. partners growing mushrooms on recycled Peet's coffee grounds, and the annual holiday charity fundraising drive at retail stores. One quick glance and you will believe, as many of us did before we worked here, that Peet's is the most socially responsible billion dollar corporation around.

Of course we support every positive outgrowth of Peet's values. But Peet's fails to pay a living wage to those who serve daily as the face of the business. There is nothing sustainable, healthy, or socially responsible about denying 80% of your workforce even a modest living as a result of their hard work.

There is evidence that Peet's did once embrace a more sustainable labor model. Long-term employees speak nostalgically of a Peet's much more closely aligned with its values. For example, just ten years ago retail employees received paid sick leave, as evidenced by this illuminating quote directly from the current Peet's payroll manual:
"Peet's provides Retail staff hired on or before January 31, 2003 and all SMs and ASMs sick time to encourage rest and to recuperate when they are ill, without losing pay."
Somehow around January of 2003 Peet's decided that retail staff are no longer in need of rest and recuperation when ill, or perhaps that they are no longer in need of protection from lost pay.

This fall, Peet's transfers to private ownership under German conglomerate Joh. A. Benckiser Group. Will Peet's' management use this significant transition to revisit Peet's' values, reinstate abandoned employee benefits, begin paying a living wage, and set an example as industry leaders?

Peet's Coffee & A Living Wage 5-part series:
1. Can they afford it?

2. What about the bottom line?
3. Why should Peet's be different than any other retailer?
4. Whatever happened to the dignity of work?
5. Living wage Q&A

Saturday, November 10, 2012

Peet's Coffee & A Living Wage Pt. 2: What about the bottom line?

Now that we've established that Peet's can pay a living wage, we ask, why would Peet's want to?

Let's set ethics and values aside and explore the most obvious incentive: profit.

What if Peet's, in many other ways an industry leader, is merely following the dictates of a dead-end, unsustainable model of labor management already being cast aside by savvier companies?

We believe that it is. In the last decade, Peet's has bought more and more into the "labor as an expense" business model. Relegating labor to an expense to be minimized is the short-sighted approach of a management team blatantly ignoring the crucial variable of human decision-making at all levels of a company. Peet's is not alone in this; it has fallen prey to the same fallacy as much of the American retail sector.

M.I.T. Professor Zeynep Ton explains in the Harvard Business Review:
Even in low-cost retail, it takes a lot of human effort and judgment to get the right product to the right location at the right time and to make an efficient transaction. It's the low-paid employee, not the inventory-management software, who notices that a shelf looks messy or that some of the products are in the wrong place. It's the low-paid employee who notices that some of the lettuce has gone bad or that there are still signs up for last week's promotion. It's the low-paid cashier who can tell the difference between serrano peppers and jalapeno peppers during checkout. It's the low-paid employee who notices that there are too many customers waiting in the checkout and offers to open an additional cash register. 
When retailers don't invest in human capital, operational execution suffers and the company pays with lower sales and lower profits than it could have had.
'Why "Good Jobs" Are Good For Retailers.' Harvard Business Review

Professor Ton's extensive research in the field of operations management includes an in-depth study of four highly successful retailers (including Costco and Trader Joe's), all of whom budget labor as a significantly higher percentage of operating costs than do their less successful competitors. Ton shows in great detail how labor-as-investment is good business practice.  

Read Zeynep Ton's fascinating study in the Harvard Business Review. You will have to sign in (free) to read the full article, but it's well worth it.

To those of us who work in the retail and service sector, this is no surprise. Depressed wages and utter lack of performance incentives create high employee turnover, as frustrated employees move laterally to jobs that pay just slightly more, or even just offer any change of pace. High turnover rates cost the company in training hours, as well as expensive errors, unnecessary waste, and missed sales due to inexperienced workers. Long-term, high-performing employees find themselves on an understaffed sales floor training new employees while simultaneously performing all their normal job functions. All of the above exacerbates stress levels and compromises customer service. Morale weakens, turnover increases, and what Zeynep Ton calls "Retailing's Vicious Cycle" ensues (see graphic above). And it's terrible for business.

Which begs this question from James Surowiecki, in his New Yorker article "The More the Merrier":
If investing in employees yields such big dividends, why don’t more retailers do it? Partly, it’s a matter of incentives: store managers are typically evaluated on their payroll costs. Moreover, the benefits of keeping payroll costs low are immediate and easy to see, whereas the benefits of hiring more people are long-term and harder to track.
Essentially, there is no profit-based excuse for under-investing in your people. But publicly-traded corporate America is evaluated by its shareholders four times a year, and management from top to bottom is incentivized to boost quarterly profits at all costs, even at the expense of long-term gains. Short-term, easily quantifiable advances are too tempting, so short-sighted managerial decisions abound. Genuinely motivating and empowering every employee in the company to contribute the best they have? Absolutely common sense, but also such an integrated part of success that it's difficult to isolate and measure, except through an extensive independent research study like the one mentioned above.

Peet's knows better than to follow Retailing's Vicious Cycle. Its management team needs only to revisit its own definition of the value of "Prosperity" to realize that Peet's already believes in a living wage:

We believe in the principle of abundance; as we grow, we create exciting careers for our people, thriving local communities, and healthy, fulfilling lives for our global partners.
-Peet's Coffee & Tea

Which introduces our next post: "Why should Peet's be any different than any other retailer?" 

Peet's Coffee & A Living Wage 5-part series:
1. Can they afford it?

2. What about the bottom line?
3. Why should Peet's be different than any other retailer?
4. Whatever happened to the dignity of work?
5. Living wage Q&A

Tuesday, November 6, 2012

Peet's Coffee & A Living Wage Pt. 1: Can they afford it?

This begins the five-part series "Peet's Coffee & A Living Wage."

"Can the company afford to pay you a living wage?"

This is a common question among small business owners in particular. Struggling in an economy evolved to favor and protect large corporations, small business owners nevertheless tend to extend much misplaced empathy toward their gigantic competitors. For a small business owner, especially in the first few years of her company's existence, it can be a very real challenge to pay even highly contributing employees a living wage. Independent coffee shop owners, in particular, may see the Peet's Workers Group living wage campaign as an indictment of their own minimum wage pay scale.

It is crucial to differentiate immediately between Peet's Coffee & Tea and the mom-and-pop coffee shop around the corner. We in PWG are intimately acquainted with small business owners, and most of us have worked for or participated in running small businesses ourselves. We know the story. You pay your employees minimum wage, treat them like family, let them eat free meals at the shop, and at the end of the year you're lucky to break even. You employ high school students, college students, people without dependents, people who live with their parents, people whose partners earn a "real" income, people who receive government assistance. People who are otherwise subsidized, so they can manage to scrape by on less than a living wage. You wish you could pay them more, that you could pay yourself more, but you can't. Yet.

When your company is traded at $70/share, has 3700 employees, 200 stores, 175 licensed partners, a booming grocery business, executive officers paid in the millions, and a market cap around $1,000,000,000, you will be able to pay each of your employees a living wage.

When PWG asked our friends further up the corporate ladder the question, "can Peet's afford to pay us a living wage?" they just laughed. A quick glance at the numbers was more than enough to say, of course they can afford it.

The problem with asking "can they?" is that for those of us with limited corporate accounting knowledge, the question precipitates an overly simplistic "bottom line" analysis: figure out the total cost per year of increasing each employee's salary to a living wage. Then take the company's net profit, subtract the added labor cost, and see what's left.

We did this, and yes, the company could give every retail worker in the country a $3/hour raise and still net $8 million a year in pure profit. The equation looked like this: 3000 retail level employees x 1000 hours/year average due to part timers x $3/hour = $9,000,000 subtracted from about $17,000,000 net profit each of the last couple years = $8,000,000 net profit left.

Peet's' stock more than doubled in the last 5 years.
Corporate accountants will tell you that increasing labor spending is not a simple subtraction of money from the bottom line. The answer to "can Peet's?" is, there is no question they can. But in order to do so they must first recognize the dignity of their employees as a clear priority, revisiting their own value of "prosperity." They must then reallocate money within the company to accommodate this prioritization. New store openings may slow. Equity may not accrue at a rate that facilitates stocks doubling in value every five years (see chart). Expansion and shareholder profits, in other words, could potentially be less dramatic than they have been.

At least at first.

Because actually our math is still too simplistic. It is based on the short-sighted business philosophy that labor is an expense, rather than an investment. Which leads us to our second post in this series: What about the bottom line?

Peet's Coffee & A Living Wage 5-part series:
1. Can they afford it?
2. What about the bottom line?
3. Why should Peet's be different than any other retailer?
4. Whatever happened to the dignity of work?
5. Living wage Q&A

Wednesday, October 3, 2012

Happy One Month Anniversary

It seems like an appropriate time to give credit to the bloggers and journalists we know of who have written about Peet's Workers Group since we sent our letter on Labor Day, one month ago:

September 6
Has Peet's coffee Starbucked itself?
Retired public school teacher, CPS teachers’ advocate, and loyal Peet's customer Fred Klonsky 

September 12
At Peet's and everywhere: United and working for a living
Writer, educator, activist, and member of the Franciscan Sisters of Perpetual Adoration, Sister Julia Walsh

September 14
Chicago Peet's Employees are Organizing -- 
Could the East Bay Be Next?
East Bay Express Staff Writer and Web Editor Ellen Cushing 
Ellen was nominated for the prestigious James Beard Foundation award for journalism excellence for her article "How Peet's Starbucked Itself", from September 2011.

September 18
CTU votes to suspend strike. A wheel inside a wheel.
Fred again, delivering an update about the gathering of supporters outside the meeting.

September 20
Grande Activism with Academia on the Side
Journalist and Loyola graduate student in Social Work and Women and Gender Studies, Natalie Beck
Download the PDF. It's on page 10.

September 25
Peet's Coffee Chicago: We Deserve a Living Wage!
House the Homeless newsletter editor Katie McCaskey

Friday, September 21, 2012


So what happens when employees organize? According to existing labor law, it's illegal to fire them for doing so. But according to PWG's lawyer, it's not illegal to fire management for letting them.

Our store manager, David Bloom, received the districtwide "Manager of the Quarter" award for the second quarter of 2012. This is not an employee-nominated award. It is bestowed solely by Peet's corporate: Mr. Bloom's bosses. Mr. Bloom received this award some weeks before Peet's Workers Group made their presence known to the company.

Three days ago, in a mandatory all-store meeting, Peet's corporate leadership team members blatantly ignored PWG's formal proposals for a living wage and sick days. That same leadership team then scapegoated our store manager in a transparent attempt to divert attention away from the real issues and towards store operational issues of no relevance to PWG's letter.

Today a memo in our back room states, "[e]ffective immediately David Bloom is no longer employed with Peet's Coffee and Tea."

This is one of several bullet points on a list of actions being taken to "improve our operations and the store environment." Yet prior to PWG's public appearance, corporate's view of our store's operations under Mr. Bloom was so positive that they felt he deserved an award for his performance.

Sources say that Mr. Bloom worked a full shift yesterday, went home, and was made to return for a meeting with the leadership team later in the day, at which meeting he was fired.

Wednesday, September 19, 2012

A Very Peculiar Meeting

The question on the tip of everyone's tongue is obvious: "Did you get it? What exactly did Peet's have to say about a living wage and sick days?"

First, let's set the stage.

This meeting was no routine occurrence. In the 4+ years certain PWG members have worked at Peet's Chicago, no one recalls a regional director ever coming to visit our store, let alone closing the store down 2 hours early to have a meeting with the entire staff. Here are the preceding events, in chronological order.

September 3: PWG sent the Labor Day Letter via email to district management, cc'ing HR and CEO Pat O'Dea.

September 5: The district manager visited our store and pulled certain letter-signers aside individually, telling each of us that she had received the letter and forwarded it to the appropriate people, and that Sam Ferreira was the person who would come to Chicago to respond to our letter, in person, the week of September 16th, and that we could choose to meet with him with the whole store present, or with only PWG and any interested parties.

She then posted a signed letter, from Mr. Ferreira to our store, in which he stated, "I recently spoke to [district manager's name], who shared with me some team member concerns that had recently been expressed to her. I would like to take the opportunity at the all-store meeting to speak to these concerns..."

The district manager also encouraged us to email her with any further questions we might have concerning the meeting.

September 7: PWG sent an email to the district manager with polite inquiries about the specifics of the meeting. It has not been answered.

September 11: The meeting date was set for September 18th, a day one letter signer could not attend, and written into the store schedule as a mandatory store meeting for all other employees.

September 13: Sensing a distinct shift in tone, PWG employed Peet's' Open Door Policy and sent an email to Mr. Ferreira, cc'ing HR, asking the same questions about the meeting as our September 7th email had. It has not been answered.

"The purpose of our Open Door Policy is to encourage open communication, feedback, and discussion about any matter of importance to an employee. Our Open Door Policy means that employees are free to talk with any manager at any time."

PWG began to suspect that no one in the corporate structure at Peet's above our district manager was willing to address PWG as a group, or respond to us at our group's email address, and that in the meantime the district manager had presumably been instructed not to do so anymore either.

In light of these actions, perhaps what transpired at the meeting was not that surprising.

September 18, 7:00 PM: Mandatory All-Store Meeting
Accompanying Mr. Ferreira at the meeting were an HR representative and our soon-to-be new district manager. All tables were moved aside and chairs were arranged in a circle in the center of the store. A hearty hello was delivered by the affable Mr. Ferreira, and the meeting commenced.

We went around the circle and gave our name, time with the company, and favorite tea or coffee, as Mr. Ferreira took notes.

Next, Mr. Ferreira shared some of his personal history, and spoke about his respect for the vision and mission of the company. He also congratulated the staff on our high performance levels, as demonstrated in the numbers and witnessed by him and his associates that day in the store.

His enthusiastic and specific praise was reminiscent of a line from the training workbook given to all new retail employees:

"Your job is one of the most important at Peet's."

After the affirmation portion of the meeting, Mr. Ferreira introduced the bait-and-switch of the evening. To our surprise, he began addressing a list of store-level, operational concerns we had brought to our store manager over a month prior. He promised, with much solemnity, that these issues would be addressed and taken seriously, because they were, indeed, of great importance to the company.

As he re-stated his commitment to making sure rules in the store were being followed, it became clear that Mr. Ferreira had lied when he said he would address the concerns brought to the district manager. Instead, he and his team suggested that our store seemed "divided," and invented an issue of "low morale," which he then tried to pin on local management. It soon became clear that the team's plan was simply never to address the Labor Day Letter and instead scapegoat our manager, despite the fact that every employee in the room was interested only in Peet's official response to the proposals in the Letter.

Meanwhile, outside the store, loyal Peet's customers, striking Chicago school teachers, former Peet's employees, and other supporters had gathered just after the beginning of the meeting. They stood silently facing us for a long minute before taping nearly 200 signs to the windows and doors, covering the front of the store. The signs remained on the store for over two hours as the meeting dragged tensely on.

After the leadership team from California refused to answer yet another question, one employee rose from his seat and walked to the window to read the words on the sign to the gathered assembly.

"We support Peet's Coffee & Tea as industry leaders, and we support them paying their employees a living wage."

The only acknowledgement the leadership team gave to the supporters outside was to express disappointment that we had taken our concerns "outside the store." Various employees then brought up the Letter and requested that the official response from Peet's corporate be delivered in this meeting, or that another meeting be set up to discuss the Letter and its proposals later in the week. Both requests were met with evasive reponses and attempts to redirect the questioners into later "individual meetings."

As the meeting drew to a close, an employee asked, one last time, if there would be any possibility of discussing the letter. Mr. Ferreira replied, again, that he wanted "to talk to individuals, about issues that affect[ed] the store," to which a different employee angrily responded, "These issues affect all of us!"

That frustrated statement sums up the tone of the store at the end of the meeting. There was disappointment on behalf of the employees, and some felt disrespected, but the palpable tension from the most awkward parts of the last two hours was gone from the air. As the group broke up, there was a collective sense that the employees of Peet's Coffee and Tea Store 403 had just been given the run-around--another group of workers bullied by a billion-dollar corporation.

Some employees stayed inside after the meeting, helping rearrange the tables and chairs, and some stepped outside for a breath of fresh air. Mr. Ferreira stayed inside, but the rest of his team immediately rushed outside to begin taking down the wallpaper of support that covered the front of the store.

Rumor has it that more than a couple customers stopped by the coffee shop that evening and, while surprised to find it closed early, were even more shocked to read the papers on the windows. Hopefully those customers seek out more information, and maybe they'll find this article.

To those readers out there who support the campaign:
              Spread the word!

Tuesday, September 18, 2012

This is the Big Day!

Our Regional Director of Store Operations, Sam Ferreira, will arrive at the Chicago Peet's Store at 7:00 p.m. tonight to conduct a one-hour meeting with all the store's employees, to address the proposals in Peet's Workers Group's Labor Day Letter in person.

We hope as Peet's corporate has considered our proposals for a living wage, paid promotions, and sick days, they have done so in the spirit of these words from CEO Pat O'Dea, as he recently congratulated us on our pending purchase by private German investor Joh. A. Benckiser for approximately $1,000,000,000:

"You should be immensely proud that you have built Peet's into such a valuable company by focusing on doing things the right way. This is our value of prosperity, belief in the principle of abundance, that as we grow we enrich the lives of all those we touch, from the farmer growing our coffee, to our own people scooping or delivering it, to the Peet's shareholder who entrusted us with their hard earned money. You've done well."   

---Pat O'Dea

Sounds like the words of a company ready to lead the industry in paying a living wage!

Wednesday, September 5, 2012

Peet's Corporate is Coming to Town

The response to our letter arrived today. District management visited us to deliver a signed memo from Regional Director of Store Operations Sam Ferreira, stating that he will arrive at our store the week of September 16 to hold a meeting with the employees and address our concerns.

We look forward to it!

Monday, September 3, 2012

Workplace Dignity Essentials: What We're Asking For

Okay, here's the readable version of our Labor Day letter to Peet's' management, with some helpful highlighting of what we're asking for:

Labor Day 2012

This is the letter that starts it all! Peet's Workers Group's formal request for a living wage and other workplace dignity essentials was delivered today to district management, HR, and our CEO.

See next post for a readable version!
"Peet's' failure to pay a living wage to the majority of its employees directly undermines its stated vision and mission to 'inspire our people.'"

Peet's Coffee & Tea is slated to return to private ownership this fall in a stock buy-out of nearly $1,000,000,000.

Last year our CEO's total compensation was more than $1,600,000.

Most of our store's retail employees are hired at a starting wage of $8.50/hour, 25 cents above the Illinois minimum wage. Yearly raises for high-performing employees average 25 cents/hour, barely a cost-of-living increase.

How does a company with Peet's' values not pay its 3000+ retail employees a living wage?