Starbucks Company: Organizational Behavior

Organizational behavior both internally and externally affects the success of a company. Starbucks has been one of the most successful businesses in the United States and now all over the world. Howard Schultz, the man who created Starbucks has “managed to transform a commodity into an upscale cultural phenomenon.” (Moon & Quelch, 2006, p. 2) The company started small and has been growing incessantly ever since the launch. Expanding and maintaining success hasn’t been an easy task. The Starbucks success process starts at the very core of the organization: its culture. The culture, the blood supply to all aspects of the business is the success factor. The culture establishes employee empowerment and motivation. The “partners” are valued and get the utmost attention from the company. Henceforth, the employees deliver the cultural experience of Starbucks to the final consumer.

Organizational behavior both internally and externally affects the success of a company. Starbucks has been one of the most successful businesses in the United States and now all over the world. Howard Schultz, the man who created Starbucks has “managed to transform a commodity into an upscale cultural phenomenon.” (Moon & Quelch, 2006, p. 2) The company started small and has been growing incessantly ever since the launch. Expanding and maintaining success hasn’t been an easy task. The Starbucks success process starts at the very core of the organization: its culture. The culture, the blood supply to all aspects of the business is the success factor. The culture establishes employee empowerment and motivation. The “partners” are valued and get the utmost attention from the company. Henceforth, the employees deliver the cultural experience of Starbucks to the final consumer.

“You can’t help but appreciate a company that routinely begins meetings with a coffee tasting. Or a corporate work setting where traditional conference rooms are replaced by parks resembling contemporary Euro-style cafes, where associates pour themselves a double tall latte, easy on the foam, and sit on a cozy couch alongside their “partners” and colleagues.” (Weiss, 1998) Starbucks has risen from number 47 (Moor & Quelch, 2006, p. 4) in the “100 best companies to work for in America” in 2006 to number 7 best company to work for in America in 2008 according to Fortune Magazines 2008 list. How Starbucks has achieved that status begins with the very core of the company’s philosophy, the mission statement: “Provide a great work environment and treat each other with respect and dignity.” (cited in Weiss, 1998)

Starbucks understands how organizational behavior affects an organization’s performance. The company has built and maintained good employee relationships, providing stock options and medical, dental, and vision coverage for all workers, including part-timers. Friendly and well-trained employees, in turn, treat their customers well.”(Robbins, 2001, p.10) Even the youngest group of workers that are usually teenagers or people in their early twenties receive benefits such as stock options and health insurance. (Moon & Quelch, 2006, p.4) By offering a “special blend of employee benefits,” Starbucks hopes to achieve bottom-line results while being humanistic. (Weiss, 1998)

All 134, 013 United States employees and all 134,013 worldwide employees are called “partners”. The benefits include onsite child health care, onsite fitness center, a subsidized gym membership, a job sharing program, an option for a compressed work week, telecommuting, and employment of a diverse workforce which includes 66% women and 35% minorities while protecting them with a nondiscrimination policy that includes sexual orientations. (100 Best Companies to Work For, 2008)

Schultz, the founder of Starbucks believes that “partner satisfaction leads to customer satisfaction.” (Moon & Quelch, 2006, p.4) The company is always on the lookout why “partner” related problems occur and try to diagnose the matter appropriately. More often than not they have found that inexperience sometimes poses a challenge in completing a job efficiently. Therefore Starbucks looks to promote people from within the organization to increase stability and decrease employee turnover rate. (Moon & Quelch, 2006, p.4) “About 70% of the company’s store managers were ex-baristas, and about 60% of its district managers were ex-store managers. In fact, upon being hired, all senior executives had to train and succeed as baristas before being allowed to assume their positions in corporate headquarters.” (Moon & Quelch, 2006, p.4)

The most important aspect of keeping a “partner” in the company for a long time, especially a “barista” (hourly wage, behind the counter employees) has to do with providing the best customer service. Taking care of employee needs creates employee satisfaction; once an employee is satisfied he or she delivers better customer service. This concept is embedded in Starbucks organizational behavior because they know humans are not machines and that they have to be motivated in order to perform well. Motivating employees and listening to them satisfies employees. One of Starbucks brand components is “customer intimacy.” The company wants a barista to stay in the company and in one specific area so he or she can recognize customers. “Our most loyal customers visit us as often as 18 times a month, so it could be something as simple as recognizing you and knowing your drink or customizing your drink just the way you like it.” (Moon & Quelch, 2006, p.3) This is extremely important in keeping the Starbucks tradition alive and my personal experience can serve as an example:

Before the “Java chip frap” Starbucks had the “Chocolate brownie.” There were three Starbucks in a one mile radius from where I lived: one across the street, one in Barnes and Nobles, and one in the grocery store. Since I made a lot of visits to the grocery store it became the stop for getting my daily dose of Starbucks. I like the kind of frappuccino that has big chunks of anything inside that get suctioned up through the straw. Basically, I like to chew and sip. The standard procedure of concocting a chocolate brownie frappuccino venti is taking a standard amount of chocolate brownie and blending it with the rest of the ingredients for a standard amount of time. But who likes standards?

So, I told the barista to add a little more chocolate brownie and keep ‘em a little chunky, in other words, easy on the blending. After two visits he perfected my non standard request and each time I would come in after that he would remember what I want and how I want it. Each time I went out with my friends and visited a different Starbucks I wasn’t satisfied with the blending and chose to stick to cheesecake. Moral of the story, I never knew that satisfying the customer in the best way possible was actually a brand element of Starbucks until I started researching on it. One thing I know that the barista who served me for about a year with absolute perfection, must have had to be motivated in some sort of way to deliver so efficiently. To round off, my experience reverberates Weiss’s observation, “Much of the company’s ambiance–what makes its coffee experience particularly special–is its enthusiastic staff. Starbucks has discovered that when partners are actively involved in the company, the customer benefits and the bottom-line grows.” (1996)

When company policy is being formulated all the subordinates of a company pitch in. The Board of Directors, the marketing manager, the public relations head, and in Starbucks case, all “partners” including “baristas” contribute to the innovation process. To stay motivated in the work place an employee, even at the bottom of hierarchy, needs to feel like he or she is an actual functioning and contributing factor to the company’s success. People stay motivated if they are included in the big decisions of the company and the company benefits too and such is the case at Starbucks. “The idea of a cold, coffee blended beverage, such as a Frappuccino Registered Trademark blended drink, was the collective brainchild of a few partners. And when one of the store managers began experimenting with customized in-store music tapes, the idea evolved into Starbucks branded CDs… That sense of contribution has translated into retention.” (cited in Weiss, 1996) Therefore, “Some “baristas,” or espresso drink makers, have been with Starbucks seven or more years, which is particularly unusual for part-timers whose ranks annually turn over 300 percent at more conventional restaurants.” (Weiss, 1996)

Motivating employees is an important aspect delivering customer service but managing all aspects of human resources leads to keeping employees satisfied and keep on growing the business. At Starbucks, “Human resources’ challenge is to ensure that the company’s partner-based values survive its ambitious expansion into the new millennium. Therefore, HR takes stock in being a democratic operation, inviting ideas and solutions, and sharing in the rewards. To nurture open communications and innovative thinking, several Partner Relations mechanisms exist.” (Weiss, 1996)

Starbucks implements a “Mission Review” that allows employees to make inquires about anything they like and leave comments pertaining to how they feel, how the company has aided that positive or negative feeling, and how it can retain or improve it. Each “partner” receives an answer and none of the queries are overlooked. (Weiss, 1996) Communication is the key in all relationships and Starbucks is a firm believer. Everyday relationships often don’t work out because people keep their frustrations built up inside. Husbands and wives, mothers and daughters, fathers and sons, brothers and sisters, girlfriends and boyfriends, and employees and employers have the same kind of relationship. One can make the other angry, upset, dissatisfied, under-appreciated and without the expression of these emotions each relationship is bound to fail. Therefore encouraging people at Starbucks to communicate freely and not build up any frustrations inside that might prove to be toxic later has helped the company keep its employees.

“Open Forums are regularly held to examine performance, recognize achievements, plus look at the future. It’s also another opportunity for partners to freely question upper management.” (Weiss, 1996) This has helped Starbucks greatly because it was one of the first company’s who broke the barriers of a formal environment where a person at the bottom of the hierarchy could never reach the people at the top of the hierarchy. “In fact, upon being hired, all senior executives had to train and succeed as baristas before being allowed to assume their positions in corporate headquarters.” (Moon & Quelch, 2006, p. 4)

“Three years ago, human resources began examining how it could become more attuned to its partners. For instance, some employees who started with the company when they were m college are now buying homes and managing the realities of child-care and eldercare issues. Starbucks has responded by providing flexible work schedules as part of the work/life program” (Weiss, 1996) This program allows workers create flexible work schedules that fit in with their needs so their personal lives do not affect their work lives and they can perform efficiently. The human resources department also started a online employee support system that is accessible twenty-four hours a day, all over the world, to all employees. (Weiss, 1996)

Starbucks continuously conducts studies through its human resource and research and development department to find out how to improve employee performance and other methods of making the organization more successful. They conducted a study which revealed that people who have low stress levels are the most innovative and perform the best at work. These working solutions looked at the stress causing factors at different life stages and developed a strategy to assist each “partner” in each of their battles at their specific life stage. “Working Solutions’ style of caring and support complements our work/life program, and helps ensure the quality our partners deserve… And, as a company, we see a high rate of return.” (cited in Weiss, 1996) They not only help their employees but people related to the employees as well by providing advice concerning medical issues and other problems. (Weiss, 1996)

As Starbucks pursues its coffee quest, the social and personal climate of the company continues to evolve. HR strives to stay abreast of its partners’ needs and life-stages by periodically conducting opinion surveys. Its mission is to respond accordingly with effective work/life solutions. Starbucks provides on-site services that motivate a healthy mentality and allow for management of daily and extraordinary life demands. The company invites creative and innovative thinking through open communications, as well as established criteria for awards and recognition. (Weiss, 1996)

Schultz mission concerning people since day one has been to “establish the kind of company that gave people an opportunity for equity (ownership) and for comprehensive health insurance, among other things… You can empower people with money and responsibility, but what about the person?” (cited in Weiss, 1996) The question raised by the CEO is an interesting one and he seems to understand that rewarding the customer and giving them incentives is not always they answer to employee efficiency. According to Alfie Kohn rewards don’t work. He points out that a high pay does not necessarily mean better performance and according to surveys pay only ranked at number 5 of what people look for in a job. He theorizes that since good deeds get rewarded the bad deeds get punishment. Whenever a negative aspect in the work force exists such as being punished for a wrongdoing it kills the important lesson of learning from your mistakes and growing. (1993)

According to Janet Rae-Dupree a growth mindset is necessary to succeed in any aspect of life and if rewards become the incentive, relationships are ruptured because people try to follow a standard procedure to impress and earn (like in a strict British or religious school) and stop taking risks and lack creativity. (2008) Starbucks understands that managing human resources effectively is based on motivation, communication and making the person feel that he or she matters. Henceforth, to “Protect the unified and innovative company culture in the wake of global expansion. Ensure that people feel valued, inspired and serve as a vital link in the growth process, while maintaining the highest commitment to quality coffee and service” Starbucks created “a special blend of employee benefits and innovative work/life programs.” (Weiss, 1996)

Starbucks was inspired by Howard Schultz trip to Italy where “he became fascinated with Milan’s coffee culture, in particular, the role the neighborhood espresso bars in Italians’ everyday social lives.” (Moon & Quelch, 2006, p.2) A culture has to be experienced and Starbucks as recreated every bit of Italy’s culture into mainstream America so everyone can experience it. To deliver a satisfying experience, an out of this world experience, an experience you would want to revisit maintaining organizational culture is the most important key. Starbucks has successfully been motivating its employees and tackling all the human resource aspects efficiently. The company keeps on growing and the numbers of employees keep on increasing and that is when maintaining organizational culture becomes a challenge. Donald, one of the Starbucks CEO’s said “We (are) going 100 miles an hour, we’re growing at 20 percent a year. We’ve got to be able to reach into this organization and say, ‘How’s it going?’ and ‘Good job!’ If any company doesn’t have the time to talk to people on the front lines, then you might as well close it up, because it’s not going anywhere.” (cited in Weber, 2005)

According to Schultz, Starbucks success is not only derived from delivering experience to the customer. The organizational culture starts from the employee. He says, “We’re profitable because of the value system of our company…American companies have failed to realize that there’s tremendous value in inspiring people to share a common purpose of self-esteem, self-respect and appreciation.” (cited in Weiss, 1996) The experience that is created for the customers comes from the employee culture. Lately though Starbucks has been losing customers and the stock has been falling. To eradicate this problem Schultz recently discussed the new innovative ideas that will enhance the experience for the customer by going “back to the roots” at the annual shareholder meeting. “The initiatives are intended to restore an authentic coffeehouse experience to the stores and, in turn, re-energize an ailing stock that has lost half its value in the last 15 months.”

(Stone, 2008, p.1) Schultz commented that “We somehow evolved from a culture of entrepreneurship, creativity and innovation to a culture of, in a way, mediocrity and bureaucracy.” (cited in Stone, 2008, p.1) Schultz pointed out his mistakes and promised to bounce back and grow like Starbucks always does. The essence of the culture at Starbucks is to face challenges in the best spirit, never give up, stick to the roots, and come back bigger and better. This idea of growth is embedded in their culture and a shareholder recently commented, “I’m glad Howard is back at the helm. Starbucks is his heart…I have every confidence he will turn the company around so this stock can take our family on our 50th wedding anniversary trip next year.” (cited in Stone, 2008, p.2) The culture of an organization is its life support. The culture is the heart and it pumps blood to each department, each employee, and the customers. After an analysis of work ethic, the CEO’s ideologies, and the mission and vision statements, it can clearly be said that Starbucks belongs to the “BE POSITIVE” blood group.

Starbucks organizational behavior practices are commendable when it comes to keeping the organizational culture alive, motivating employees and carrying out the best human resource practices. Starbucks understands that employees have to be motivated to satisfy customers. Henceforth, the organization has created many employee help programs that are easy to access. Starbucks also gives a lot of benefits to its employees and treats them like partners and is the 7th best place to have a job in America. Howard Schultz understands that people are important assets of the company and that they cannot be bought with rewards. He invites individuals who can grow, innovate, and encourages open communication to strengthen employee-employer relationships. Starbucks has met many challenges on the way to success but it has fought back each time and has come back bigger and better.

References

100 Best Companies to Work For 2008. Web.

Kohn, Alfie (1993). Why Incentives Plan Do Not Work? Harvard Business Review, Web.

Moon, Y. & Quelch, J. (2006). Starbucks: delivering customer service. Harvard Business Review.

Rae-Dupree, Janet (July 6, 2006). If You’re Open to Growth, You Tend to Grow. New York Times.

Robbins, S. P. (2001). Organizational behavior. Upper Saddle River, N.J.: Prentice Hall.

Weber, G. (2005, February). Preserving the COUNTER CULTURE. (Cover story). Workforce Management, 84(2), 28-34.

Weiss, N. (1998, August). How Starbucks impassions workers to drive growth. Workforce, 77(8), 60.

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