Starbucks: A business analysis

Introduction:

Starbucks started in 1971 when three friends started coffee business, and their main objective was to sell coffee beans and equipment. Howard Schultz joined the company in 1982 and turned it into becoming an international brand. Schultz’s main goal and vision as CEO was to make people realize that buying a cup of coffee in Starbucks is lifetime experience. Under Schultz leadership Starbucks has achieved number of milestones. Schultz received an International Humanitarian Award in 1996 from Care for his vision and leadership developing in an innovative partnership between Starbucks and Care to support people in coffee originating countries.

Schultz view of leadership:

Howard Schultz’s statement “If they had faith in me and my motives they wouldn’t need a union” reflects his powerful communication skills as a leader. He knows how to build emotional connection with the staff. The heart of leadership is trust. Without trust you cannot lead. Exemplary leaders are devoted to building relationships based on mutual respect and caring. Watson (1983). The mark of a successful leader is his ability to forecast the business trends and stay ahead of his competitors (Luthans 1998). That means leadership involves skills and abilities that are useful whether one is in the executive position or frontline. However union signifies group of a workforce in certain businesses who form a link between an employer and unionized employees in which terms and condition of employment are determined. It also helps to improve the conditions at workplace and negotiate with employers on issues of wages, medical reimbursement or sickness. When employees and employers are not able to come to one decision then trade union negotiate with employer to reach to an agreement and the union members must follow that (Booth, 1995). In February 2007 Schultz says in one of letter to Starbucks employees “My focus is on you ‘the partners who have made Starbucks such a trusted presence around the world. And my focus is on preserving the trust that we have built with our customers and each other over the years. I want you to know that you can be proud of the company we all work for and that you can continue to trust the foundation it’s built upon”

Schultz had trust in his employees as he had build up strong relationship with them in Starbucks by understand their desires. Schultz leadership has developed a good teamwork and integration of the individual and groups and goal. Schultz’s leadership approach makes staff feel like partners. That is why frontline staff in the stores are so welcoming and passionate. He gave his employees protection, dignity, empowerment and a good working environment. That is why Schultz says that Starbucks doesn’t need a union because he is doing everything for the employees what usually a union does.

Approaches to Leadership:

There are many ways of looking at leadership and many interpretations of its meaning. Leadership might be based on function of personality or, it can be seen as a behavioura3 category (Vecchio, 2000) . It may also be viewed in terms of the role of the leaders and their ability to achieve effective performance from others. The relationship between leaders and management is that management is more usually viewed as getting work done though other people to achieve organizational objectives (Worsfold, 1989), where as leaders are more concerned with the attention to communicating with motivating, encouraging and involving people (Hunt, 1986).

There are so many theories and models of leadership like Traits approach, the functional approach, Leadership as behavioral category, Style approach, Contingency models, and Transformational Leadership.

Here I would like to discuss Transformational leadership with regard to leadership approach and style in Starbucks. In recent years increasing business competitiveness and the need for the most effective use of human resources are needed. The transformational leadership’s view focuses on idealized influence, inspirational motivation, intellectual stimulation and individual consideration (Bass, 1985). According to Bass transformational leaders motivates followers to do more than what they are expected and the extent of transformation is measured in terms of leader’s effects on followers. It emphasizes on generating a vision for the organization, creating a feeling of justice, loyalty and trust.

Idealized Influence: symbolizes the capability of building confidence in the leader and values the leader by his followers. As Starbucks is an employee-focused company, Schultz has taken a great care in recruiting partners and promotes the existing partners. Schultz made himself as example for the employees to follow him.

Inspirational Motivation: is the behaviour of the leader, respect and admiration of followers. Leadership in Starbucks has ensured that high wages, benefits, stock plans and positive working environment are one of the reasons to maintain motivation among the staff.

Intellectual Stimulation: leaders who solicit new and novel approaches for performance to work, creative problem solutions. Schultz invested in training and development of the employees. Starbucks appreciated feedback from the employees and they felt empowered and encouraged. Starbucks’ one of the most thriving innovations came from the employees “Frappuccino” a popular cold coffee.

Individual Consideration: true leaders are those who listen to their followers and give special consideration to their needs and wants. Starbucks leadership provided parent group day care for their children, health insurance and work life balance.

Leadership Styles:

In order to get the best results from the employees, leaders need to encourage and be co-operative to the employees (Bonnington,1988) .According to Adair (2003) Leadership style is the way in which the functions of leadership are carried out . Three main classification of leadership style are autocratic style, democratic style and laissez-faire (genuine )style (Belbin,1993).

Here I would like to discuss democratic style of leadership with regard to leadership style in Starbucks. In democratic style, the functions of leadership are shared with the members of the group. The group members have a greater say in decision making (Useem, 2001).

Starbucks leadership team is among the best when it comes to global market. Schultz looked for employees who are team player and have passion to work for Starbucks. Schultz took care of employees and treated them with respect. He has created a unique culture in Starbucks in which entrepreneurship and empowerment, quality and service define values of leadership. Schultz gave more power to employees in decision making and also flexibility to choose their own working hours. He honoured the feedback from the employees in Starbucks therefore I can say that Schultz had democratic style of leadership in Starbucks

Conclusion:

I would summarize by saying that Starbucks is the most flourishing coffee shop in the world and with Schultz leadership and vision Starbucks still continue expand. Starbucks take great care in recruitment and selection and trains them intensively. Schultz believes that it is important for Starbucks respect all the employees and motives them. Starbucks enjoys the democratic style of leadership.

References:

Adair, J (2003). The Inspirational Leader : How to Motivate, Encourage and Achieve Success, Kogan

Bass, B.M. (1985) , B.M. Leadership and Performance Beyond Expectations, Free Press .

Belbin, R.M(1993). Team Roles at Work, Butterworth Heinemann.

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Booth, A.L (1995). The Economics of The Trade Union, Cambridge University Press.

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Luthans.F. (1998) Organizational Behavior, Boston, MA. McGraw-Hill

Useem, M. ‘How to Groom Leaders of the Future’ in Pickford, J.(ed) Financial Times Mastering Management,p.297

Vecchio, R. P. Organizational Behavior: Core Concepts, Fourth edition, Dryden Press.

Watson C M, ‘ Leadership(1983), Management and the Seven Keys’, Business.

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Q4. ‘Motivated and committed human resources were the key to successes. What strategies has Starbucks used in order to gain the motivation and commitment of its employees? With reference to appropriate theories and models, provide a reasoned discussion of how the company can ensure the levels of motivation and commitment that it needs to succeed in the future?

Starbucks has more than 3,300 locations all over the world and serves coffee to its coffee lovers every day. It has the history of tremendous growth and success. In addition to the sales of coffee and coffee beans, the company enjoys the remarkable repute as a progressive employer. Starbucks is known for its friendly policies and motivational programs. The employees who are constantly in contact with the customers are the frontline staff. Hence Starbucks motivates, trains and rewards employees turning them into a committed and motivated workforce. The foundation of the company’s mission statement are five guiding principals and one of these principal is to provide great work and treat each other with respect and dignity.

Strategies of motivation:

According to the case study, motivated and committed human resources are the key to success in Starbucks. Howard Shultz believes that success of Starbucks is not coffee but employees and feels honoured about the value about the Starbucks employees. That is why it is essential to have intensive training policy for the better performance in the company (Michelli,2006). Starbucks offers an interactive structure that encourages employees to commit themselves into their job so they can motivate partners to satisfy themselves and also achieve a new level of performance. Starbucks use strategies to motivate employees and in order to gain the commitment. Starbuck’s motivational strategies programs for its employees are:

Selecting the right people

Investment in training and development

Work life balance

Employee ownership

Feedback system

Non capitalization job tittles

Flexibility

Mission review program

Parameters of success in Starbucks:

Due to Starbucks motivational strategies Starbucks continues to expand geographically. Starbucks has more than 15,000 stores all over the world (www.starbucks.com). Starbucks employees are highly trained and have good customer service skills. Starbucks is ranked as the 16th “Best company to work for” in America by Fortune magazine. Starbucks has low turnover of employees as their need were taken care of and they are motive and committed towards work. Starbucks has changed a concept of coffee into ‘Starbucks Experience’ It has resulted the customers to come back approximately 18 times a month.

Theoretical Framework:

There are several motivation theories that have helped organizations to figure out how employees can be motivated. Motivation is “the internal process that activates, guide and maintain behaviour” (Baron, 1991). Robertson and Smith (1985) agree that ‘motivation is psychological concept related to the strength and direction of human behaviour.

According to research, motivations theories can offer guidance to anyone with an interest in motivational issues. These do not give a definite answer to all the motivation questions but it provides a framework. There are many variables such as moods, financial circumstances etc that work together to create a situation and a person concerned to fully understand why variables result in particular behaviours Gorman (2003).

Vroom expectancy theory:

The expectancy theory of Victor Vroom deals with motivation and management. Vroom’s theory is based on idea that employee effort will lead to performance and performance will lead to rewards. Rewards may be either positive or negative. Employees will be highly motivated if the reward is positive and negative rewards lead to less motivated employees (Vroom, 1964). According to research motivation develops commitment among employees. Developing a stronger commitment and the motivation allows you to be well recognizing in the market and gain market share.

According to Starbucks case study Starbucks hire right people by having right people. Starbucks implement intensive training program for each employee before starting their job. Starbucks recognizes the efforts made by the employees in order to get high performance. To gain high performance rewards are offered by Starbucks to their employees in open forum such as Warm Regards, the Mug Award and the “Spirit of Starbucks Award”. Other benefits like training and development, flexible timings partner connection, equality etc are offered in order to motivate and gain commitment. Rewards develop motivation and Starbucks offers rewards and benefits to motivate their employees.

Sustaining motivation and commitment:

To sustain the level of motivation and commitment in future, Starbucks treats its employees well. Starbucks offers opportunity to all full and part time employees to receive stock option, healthcare benefits, sick pay and bean stock etc. Starbucks continues with building programmes that address to personal life and needs of its partner. Starbucks carries out regular surveys of its partners to measure their needs and take action with suitable work life solution.

Starbucks transforms the behaviours and opinion of overall coffee consumer. Starbucks is not only of the fastest growing company but it is also an excellent business model with high profit performance and low turnover. According to the case study, it is obvious that motivation is the key factor of Starbucks’ strategy. A good relationship between Starbucks’ employees maintains a high quality performance. Starbucks have great responsibility towards their staff. Their decisions affects directly or indirectly on employees desire and interests and overall ability to love what they do for living. Employees would have many reasons to stay with Starbucks if the staff are motivated. To ensure the levels of motivation and commitment that Starbucks needs to succeed in the future, the company should introduce more benefits and training programs to motivate employees. Long term service recognition awards should be offered which would increase performance and commitment. Variations in benefits to employees can give opportunity to Starbucks employees to stay motivated and committed such as giving them an opportunity to win a holiday if one has been employee of the month for 3 months.

References:

Baron R.A. (1991) ‘Motivation in work settings: reflections on the core of organizational research ‘. Motivation and Emotion. Vol.15, No.1.pp1-8

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