Call for tender: Creating competitive advantge through effective people

management at Café Espresso

1 Introduction

1.1 Who We Are:

Cafe Espresso is one of the main players in the UK ‘coffee house’ industry. We have
more than 550 stores (bars) in the UK, and employ around 3800 staff. Our company was
founded in Shoreditch in the late 1980s by Stephen Lester who bought five retail sites in
London and began to create his vision for a premium, continental-style cafe in Britain. By
the late 1990s Cafe Espresso was named the 18th fastest growing company in the UK by a
top business magazine. In 1999 we joined the London Stock Exchange and became a
publicly listed coffee house company in the UK.

2. Purpose of Contract:

2.1 Background:
The coffee industry has been particularly robust, with coffee shops making up one of the
fastest growing parts of the restaurant business, with a 7% annual growth rate. World coffee
production is estimated at 110 - 120 million bags per year. However, the coffee house
business is also very competitive and the number of coffee bars in the high street has
increased significantly in recent years. Coffee bars are constantly looking for innovative
ways of achieving sustainable competitive advantage to remain ahead of their rivals.

Since 2005 however Cafe Espresso has been losing its market share to rival competitors who
have copied Cafe Espresso’s business model and poached key staff to deliver it. The loss of
market share has forced us to rethink our strategy. In 2013 Stephen Lester, who founded our
company, retired and a new chief executive (CE), Marcus Mitchel, was appointed to turn the
business around. Marcus is dedicated to making Cafe Espresso one of the top coffee houses
on the British high street once again.

2.2 Marcus Mitchel’s Research Findings :

In reviewing Cafe Espresso’s current strategy, Marcus embarked on a fact finding tour of the
organisation’s coffee bars. He met with our staff and customers in order to get a feel for the

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nature of the business, and visited some of our rival coffee houses to gain an understanding of
their source of competitive advantage. His review identified customers who are mainly loyal
to the brand of Cafe Espresso but have enticed away by the experience, the variety of coffee
and level of customer service offered by competitors.

Marcus’ review of human resources found a high level of staff turnover, which he has partly
attributed to low pay (the minimum wage offered) and the high percentage of employees on
short term contracts. Students make up around 34% of employees at Café Espresso, with
almost 65% of these being international students. Recruitment is predominantly done
through word-of-mouth, in-store posters and through an existing scheme where employees
are offered high street vouchers if they successfully recommend a new member of staff.
Selection is based on past work experience and interviews are carried informally in-store by
store managers. Performance appraisals take place on an annual basis. These are undertaken
by the store manager and are typically done during breaks. Information from the appraisals is
used to make decisions about whether or not to renew contracts. Store managers are not
appraised but receive financial incentives for stores which meet sales targets. These rewards
are given to store managers at the top ten percent of stores. In some cases, store managers
have chosen to distribute these rewards amongst staff but this is not a formal policy and there
is no clear basis for who receives a bonus.

The recent loss of market share and high employee turnover appears to have led to low
morale amongst remaining staff, who feel that Cafe Espresso bars are failing to keep up with
trends in the market, in particular, with a rise in the importance of good customer service.
The CE review of competitors supports this, as he identified the significance of the ‘coffee
drinking experience’ which is delivered through appropriate decor, ambiance, variety in the
range of products, but most importantly of all, the barista or coffee seller. Increasingly key
competitors are also taking social responsibility seriously and Marcus thinks that it is
essential that we are seen to be adopting a fair and ethical approach to business. Currently,
Café Espresso adheres to all legislative requirements when employing staff regrading pay and
working conditions.

2.3 Objectives:

Marcus Mitchel wants to relaunch Cafe Espresso’s business strength with a new vision: ‘To
be the number one coffee house of choice in Britain’ and identified the following mission:

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‘Experience Cafe Espresso, we won’t just sell coffee we provide customers with an
unforgettable experience’. This is encapsulated in his value statement: ‘Nowhere else makes
you feel this good’ which he believes should apply to staff as well as customers.

To achieve his vision Marcus wants to create a unique atmosphere in his coffee shops. He
wants the coffee houses to be a friendly place, with high levels of customer service, that have
a ‘buzz’ about them, and is quoted as saying ‘I want Cafe Espresso to be a place where you
feel comfortable meeting your friends and family, working on your laptop, or just somewhere
to relax and read the paper. However he also hopes that each coffee house to be different and
reflect the local community.

He is convinced that the success of coffee bars lies not just in selling coffee as a produce, but
in selling a unique ‘coffee house experience’. Marcus feels that one of the most important
things that would make Cafe Espresso unique is its people. He wants staff to have a warm
and positive outlook on life and to be people who genuinely enjoy working directly with
people and have a passion for coffee. He recognises that Cafe Espresso’s human resources
are crucial to the success of his overall strategy, and that the baristas (coffee sellers) are
critical to the selling of the coffee house experience. Nevertheless, he is aware that that HR
will face a difficult task as the coffee house industry is traditionally renowned for low pay
(minimum wage being the norm), and high employee turnover (50-100% being the norm).

Marcus has identified the following priorities:

Customer service

 Commitment to excellence
 Customers are valued
 The coffee bars to reflect the neighbourhood and be a part of it
 Sell the barista experience

People

 Diversify and individuality valued

 Knowledge and talent encouraged and retained
 Pride, warmth and enthusiasm valued
 Reward to retain
 To have fun at work and to get to know our regulars

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Systems

 Customer feedback
 Learning, development and talent management
 Performance management
 Compensation and benefits

Stephen Lester attended a management conference where the benefits of partnership models,
such as those adopted by John Lewis and the Cooperative Group were highlighted. Stephen
passed on the idea to Marcus that this could be an interesting route to developing a more
effective HR strategy.

Last week Marcus Mitchel sent out a staff survey which was completed by 46% of staff.
Results from the survey indicated dissatisfaction in the following areas:

 Performance reviews
 Employee voice
 Performance management shift pattern
 Support from mangers

3. What We Are Seeking:

We are seeking an HR consultancy to support us in tackling the issues raised by Marcus

Mitchel in his fact-finding review to promote the new business priorities through a new
strategic approach to HR, as well as to increase competitive advantage, especially
around enhancing the customer experience.

We require all consultancies to provide a clear summary of their strategic approach and
to outline HR plans. They should also outline key indicators of success, as well as
specific time-frames and cost considerations.

4. Tender requirements:

Each tender will be subject to scrutiny from an internal team – we require those interested to
submit details of the following to support a 20 minute summary of your tender:

1. EXECUTIVE SUMMARY (Max 150 words: does not count)

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This section should summarise the key points of your proposal including;
 Brief summary of the clients requirement
 Summary of what you propose
 Principal strengths of your company/proposal
 Budget and time estimates or quotation

2. Introduction (Max 150 words)

Description of customers business and principle issues or requirements.

3. Consultant Credentials (bullet pointed max. 150 words)

Company or consultant description, targeted at this particular requirement. Evidence of past
projects completed.

4. Project Details (Max. 500 words)

This may require several sections depending on the scope of the project. Try to keep
paragraphs to a reasonable length (no more than a third of a page long) and don’t go in for
too many levels of sub-heading, any more than 3 levels of heading is very difficult to read.
Use bulleted or number lists and tables to set points out clearly.

5. COST ESTIMATE (tabulated)

Set out a detailed estimate for effort, timescales, costs etc. broken down so the client can see
what each part of the project will cost. If there are any unknown factors that might increase
costs state these here.

Each tender will be assessed against the following criteria:

1) Do the consultants clearly outline the organizational problem that is at hand?

a. Have they fully understood the issues faced by the organisation?
b. Have they identified the client’s requirements? (30%)
2) Have the consultants identified their own relevant strengths and experiences? (20%)
3) Have the consultants presented meaningful findings and recommendations based on the
literature and organizational/ industry research? (30%)
4) Have the consultants effectively presented their work to the clients? (20%)

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