Starbucks

[2006]

Starbucks

[2006]

[While many people have a skewed social perspective of Starbucks, the organization is actually quite well established when it comes to social-awareness and societal involvement.]

The Complete Experience

PLANNING There are very few businesses that people encounter as frequently as Starbucks. With a retail store on practically every street corner you would be hard pressed to not find a convenient location to purchase a premium cup of coffee. If the management and the powers that be at Starbucks have their way then Starbucks will be much more then a name synonymous with a premium cup of coffee. Starbucks is an entire experience as it comes to coffee as anyone who has been into one of their stores can tell. From the plush chairs and svelte music, to their sponsorship of such movies as Akeelah and the Bee, Starbucks is creating an entire environment for people to experience and enjoy.

THE STARBUCKS ORGANIZATION

Organizational culture is something that is very important to Starbucks and is something that starts with their upper management. Jim Donald, the current CEO and president, describes himself as “fanatical about communicating.” He personally responds to 75% of his e-mails and records things that people say that he feels are important. He is a very forward thinking person and this is all evidenced by his constant time management and attention to details as minute as a fifteen minute period of someone’s day.

By paring down his meetings from one hour to forty-five minutes he has saved eight hours a week. According to the vice president of the beverage category, Starbucks could save $12 million if all of the executives performed like this. Jim Donald is one of the people in the limelight as far as Starbucks is concerned and he makes each and every individual within the organization feel like they are necessary. While visiting stores he will speak with his baristas and even go so far as to put on an apron and get behind the counter to assist them. Adherence to these policies demonstrate that he is concerned with saving money and increasing the bottom line but not at the expense of his employees.

GROWTH

Starbucks has always been a company concerned with growth and their planned ventures for the future will only exacerbate this. While Starbucks is known for its cup of coffee, they hope to be able to add to that image in the public eye. Most recently, Starbucks partnered with Lions Gate films to release Akeelah and the Bee and co-released Ray Charles “Genius Loves Company” album in their stores. Starbucks Chairman Howard Schultz has often talked about making the coffee stores a “third place” –an alternative to home and office where people can gather to relax or work. Starbucks has even hired Ken Lombard, one of the creators of the Magic Johnson theater chain as the head of their new entertainment division. Starbucks is branching out into other industries

and forging ties closer to Hollywood. Lombard does not feel that these ventures into the entertainment industry will dilute the Starbucks brand. Lombard believes selling music and movies support the core Starbucks mission and at the end of the day Starbucks is not a music or movie company; they are a coffee company.

BEING SOCIALLY CONSCIOUS

Starbucks is a $6.4 billion global company with 90,000 employees, 9,700 stores, and 33 million weekly customers. Howard Schultz, the chairman of Starbucks, comments that “People aren’t interested in how much you know, it’s how much you care.” This is something that rings true throughout the organization and especially in regards to Starbucks social consciousness. In a recent town hall meeting Schultz fielded a questions concerned with the fact that Starbucks is currently spending more on healthcare than on coffee, and the workforce is nervous about shrinking benefits. “We are not ever going to turn our backs on our employees,” he responded reassuringly. Some of the senior managers were also concerned with the technology department operations being outsourced. Schultz told the managers he would have an open conversation with them about the issue. Schultz is a genuine, caring leader who is concerned with the health and well-being of his employees. Starbucks continues to be one of the few companies that offers medical benefits to part-time employees, a trend they helped start in the late 1980’s.

ORGANIZING Culture & Growth

Starbucks success is mainly based on what is referred to as the “Starbucks Experience”, which CEO Howard Schultz describes as

“You get more than the finest coffee when you visit a Starbucks-you get great people, first-rate music and a comfortable and upbeat meeting place. “We establish the value of buying a product at Starbucks by our uncompromising quality and by building a personal relationship with each of our customers. Starbucks is rekindling America’s love affair with coffee, bringing romance and fresh flavor back to the brew.”

In effort to ensure that each and every person who walks into Starbucks has the same “Starbucks experience” all Starbucks partners receive the best training in the business. Before training even begins Starbucks starts to recruit. In screening possible new hires for positions they look for “passionate people who love coffee” Starbucks HR leaders search for a diverse workforce which represents the community.

Each barista hired receives at least 24 hours of training in the first two to four weeks. They are taught many aspects of the Starbucks operation including: The history of coffee and coffee knowledge, drink preparation, customer service and retail skills. All baristas were also taught how to properly weigh and label coffee beans and the proper standby time for each brewed coffee to maintain company standards. This will ensure that each cup of coffee served by Starbucks would be the same either in Seattle or Chicago.

Store level managers attend a much longer training session at the Starbucks Coffee School in San Francisco. The training for managers takes approximately eight to twelve weeks, it covers not only the above information that baristas are trained on but also includes details of store operations and procedures. The major goal of this intense training is to ingrain the principles, values and culture of Starbucks to the trainee.

To ensure that the “Starbucks Experience” is received by all customers even at the newest locations hiring and training begins at least eight weeks before the new store opens. Then a team of experienced managers and baristas is assembled for existing locations and are brought to the area to assist in the new

store opening and to conduct training on a one on one basis even after the formal training classes have ended.

Starbucks is also known for it’s ability to have an expansive reach when it comes to retail location. The reason Starbucks can reach so many outlets is due to it’s licensed stores. Starbucks receives a license fee and a royalty on sales on these locations. This has given Starbucks the ability to locate stores where they normally would not be able to, in places such as: airports, hotels, universities, hospitals, offices and even airlines. All managers and employees of the licensed stores receive the same training given to Starbucks partners to ensure company wide cohesiveness.

Social Responsibility At the very base of the company’s culture it roots itself within the community. Howard Shultz’s goal was to “build a company with soul, which included corporate responsibility. In 1997 the Starbucks Foundation was established. The foundation was one of the largest contributors to C.A.R.E. which provided health and education programs to third world countries most of which Starbucks purchased is coffee beans.

Starbucks is also committed to the environment. It has organized a “Green Team” of store managers from all regions that assist the community in environmental efforts to reduce, reuse and recycle waste. The team has introduced innovative ways to reuse some of the paper, plastic and cardboard the store uses. They have reused packing materials and have donated these materials to local schools for art projects.

DIRECTING Directing, or also known as leading, is the process of attempting to influence other people to attain organizational objectives (text pg. 26). The job of a manager is to motivate the people that are responsible for specific tasks to help them achieve their goals and thus the shared organizational goal. Directing cannot only be applied to individual situations but as well as in groups and teams. Directing has been and will continue to be a crucial part in the Starbucks organization. Starbucks is the #1 coffee retailer in the world with approximately 10,000 coffee shops spread across more than 30 countries. With already so many stores and a long-term expansion plan to grow to 15,000 US stores and 15,000 international stores, Starbucks must have a tactical plan to keep the morale consistent across the globe and motivate their employees to achieve common goals. There are a few key actions that Starbuck’s is taking to lead the community in social responsibility and the positive treatment of their employees.

There is a growing concern from people across the nation about health and fitness, especially for the children of today’s society. Studies show that the average American weight is increasing and obesity is prominent in this country more than any other. Not only is it what you eat, but also what you drink. Some Starbuck’s choices are very high in calories, fat, and caffeine; the Grande-size Bananas & Crème has 550 calories and 15 grams of fat. This beverage and others like Frappuccinos are very sweet and resemble milkshakes and 7-Eleven Slurpees that make them particularly appealing to children. Due to the high appeal to children, Starbuck’s reviews all of their marketing materials to avoid distributing ones that could be “inadvertently appealing to youth” (ProQuest). This is a longstanding policy of the company, which is becoming more difficult to stand by when the coffee shops are increasingly becoming popular among families. Despite the increasing popularity, Starbucks still does not campaign to children. They are also responding to the health concerns by offering lighter versions of many Frappuccinos and also introducing a new line of juice drinks that boasts fewer calories and no fat; customers can also order drinks without caffeine. By being aware of the consumers concerns, caring about the health of society, and taking action to protect consumers, Starbucks is leading the way for other companies to be socially responsible for the health of society. Another way in which Starbucks is leading society as well as their employees is through equal opportunity for people with disabilities. Starbucks is exerting a special effort in reaching out to people with disabilities both as their customers and as their employees. “This is a group that most businesses have not addressed…as I look at changes in demographics, it is one of the groups that are very important” (quote from

May Snowden, the vice president of global diversity; ProQuest). This effort is in its early stages, but Starbucks is actively recruiting disabled individuals, hiring them, and encouraging employees to support this change. Starbucks complies with the American With Disabilities Act, which orders equal access to jobs and services for the disabled. They have also joined the National Business Disability Council, which is sort of like the Monster.com for the disabled where Starbucks has access to many resumes for potential hire. Some actions that Starbucks has taken and is currently improving upon is that they (1) changed the labels on tables designated for wheelchairs to “For a customer with a disability” (2) lowered counters for wheel chair access (3) built handicapped accessible entrances and (4) train employees to work effectively with someone with a disability. The goal: to make its store more inviting to customers with disabilities, as well as their caretakers, family members and friends (ProQuest).

CONTROLLING Controls within organization are established at varying levels. Starbucks’ controls can be examined within the context of its culture, growth and social responsibility. These controls also provide the stores a competitive advantage.

Organizational Culture/Cultural Controls: Starbucks has a unique company and customer culture. In order to build and sustain that culture, certain ‘controls’

need to be put in place. Culture maybe defined as employee behaviors, norms, attitudes, language, and traditions of an organization. Cultural controls can help build and maintain certain company attributes. Certain companies may adopt “normative controls” which make customers want to behave in a certain manner in order to preserve their culture. To use normative controls effectively, companies need to create an environment in which customers care about the impact of their behavior on others. This forces employees and customers to behave in a way the company endorses. Starbucks has its own language, tradition, and attitude. The charm of Starbucks is how a customer orders a product. Customers choose among many permutations of sizes, flavors, and preparation techniques in its beverages. In the interests of filling orders accurately and efficiently, Starbucks trains its counter clerks to call out orders to beverage makers in a particular sequence. It is all the better when customers themselves can do so. Therefore, Starbucks attempts to teach customers its ordering protocol in at least two ways. It produces a “guide to ordering” pamphlet for customers to peruse, and it instructs clerks to repeat the order to the customer not in the way it was presented but in the correct way to control its culture.

Employees are educated on the nuances of coffee-making, such as aroma, body, acidity, and flavor. Starbucks rewards employees for completing the program, but that is not the only benefit. By creating more sophisticated, knowledgeable employees who are more engaged in the business, Starbucks sets itself apart from the competition in an increasingly crowded marketplace and maintains customer loyalty to those famous $5 cups of coffee.

Customers are willing to pay more for the Starbucks brand not only because of its gourmet appeal but also because of the positive associations and experiences they have in each retail store. Additionally, Starbucks’ hiring practices also ensure that the right people are hired and screened appropriately.

Growth/Growth Control: Starbucks has embarked on an aggressive growth culture. They open 10 new stores every day. Chairman Howard Schultz makes it his personal responsibility to ensure that the company is nimble, and has adequate information to grow successfully. He personally visits at least 30 to 40 stores a week, believes that a corporate leader must share unbridled enthusiasm with his employees. “I need to touch as many people as possible—I want to spend time with people,” he says. “That’s the single most important thing I’m doing.” Jim Donald, the CEO of Starbucks says, “I want to grow big and stay

small at the same time. We want to run the company just like we did when we were one store in Seattle.” This is a form of control. When employees know that their chairperson and CEO are dedicating personal time, they are inclined to more productive and ethical.

Human resources use some simple guidelines in screening candidates for new positions: “We want passionate people who love coffee… We are looking for a diverse workforce, which reflects our community. We want people who enjoy what they are doing and for who work is an extension of them.” Every barista hired is given at least 24 hours training in the first two to four weeks. Everyone is drilled in the Star Skills, three guidelines for on-the-job interpersonal relations: (1) maintain and enhance self-esteem, (2) listen and acknowledge, and (3) ask for help. There were rules to be memorized: milk must be steamed at least 150 degrees Fahrenheit but never more than 170 degrees; every espresso shot not pulled within 23 seconds must be tossed.

Management trainees attend classes for 8 to 12 weeks. Their training is much deeper, covering not only the information imparted to baristas but also the details of store operations, practices and procedures as set forth in the company’s operating manual, information systems, and the basics of managing people.

Social Responsibility/Social Control: The chairperson’s effort to “build a company with soul” included a broad-based program of corporate responsibility, orchestrated mainly through the Starbucks Foundation, set up in 1997. Starbucks was the largest corporate contributor in North America to CARE, a worldwide relief and development organization that sponsored health, education, and humanitarian aid programs in most of the Third World countries.

Starbucks had an Environmental Committee that looked for ways to reduce, reuse, and recycle waste, as well as contribute to local community environmental efforts. There was also a Green Team, consisting of store managers from all regions.

The Starbucks Foundation provides governance and direction for the $30 million that was spent on Community Investments in 2005. Some of the few ways they spend in are:


Cash contributions made at the corporate, regional and local level




In-kind donations of Starbucks products and resources




Partner volunteer and gift-matching programs




Adding premiums to some of their coffee contracts to fund social projects

Starbucks responded in a significant way to last year’s massive earthquake and tsunami and later to Hurricanes Katrina and Rita. Their first step was to ensure the safety of their partners in the affected areas and to help address their need for their basic necessities.

When they expanded in China—they established a steering committee comprising Starbucks executives, representatives of the Chinese Ministry of Education, the Soong Ching Ling Foundation, the All China Women’s Federation and local community organizations to launch the Starbucks China Education Project that supported educational programs in China.

The Starbucks foundation receives the majority of its funding from Starbucks Corporation as well as some private donations. The foundation is governed by a board of directors comprised of 14 Starbucks senior executives and is chaired by retired Starbucks president and CEO, Orin Smith. The foundation and the committees have structured ways of controlling the funds flow and ensuring its appropriate distribution.

Starbucks works with several organizations to make credit available to coffee growers, which enables them to postpone selling their crops until the price is

favorable. Starbucks works with EcoLogic Finance, a nonprofit lender to sustainable business in environmentally sensitive areas, to provide the financing needed for COCLA (Center de Cooperativas Agrarias Cafetaleras de Cuzco), a Fair Trade Certified that provides Starbucks with high-quality coffee, to purchase coffee from cooperative members. Through its multifaceted network, which includes extensive support from USAID, EcoLogic Finance bundled resources from the Calvert Social Investment Foundation and the Rudolf Steiner Foundation (RSF) to extend $1 million in credit to COCLA in 2005. Known as “pre-shipment trade credit,” the financing helps COCLA cover expenses during the six-month “cash gap” between the harvest and their receipt of payment for the crop. In the four years, since COCLA began receiving financing from EcoLogic Finance, membership has increased 60 percent and coffee production has expanded 30 percent. More than 90 percent of its production is now certified. Certified coffee price premiums enable COCLA to provide training to farmers, offer a micro-credit program, set-aside forestland for habitat preservation, and provide a viable alternative to growing cocoa, the basis for cocaine.

Conclusion: The control measures as outlined above are just an example of how Starbucks operates in order to ensure high levels of compliance and integrity while maintaining the quality of its products and services.