A study of leadership and motivation in Starbucks.

Q1) In a published statement, the CEO of Starbucks said, “if they had faith in me and my motives they wouldn’t need a union” (Seattle Times 2.1.2007). What does this tell you about the CEO’s view of leadership? Making reference to appropriate models of leadership, provide a critical evaluation of the leadership approach and style in Starbucks.

Leadership is a concept that is difficult to define and is subject to a number of interpretations. The CEO’s statement suggests a number of assumptions about what he believes leadership is. Firstly, the CEO talks of leadership in terms of a person, using the words ‘me’ and ‘my motives’. Leadership however is often thought of as more than a person, rather being an interactive process, a series of relationships.

Leaders’ actions and behaviours prompt responses that can affect their ability to lead in the future. Therefore it is important to consider the context in which leaders operate so that they can lead in a manner that brings out the best in their employees (Bolman and Deal, 2008 in Gallos and Heifetz, 2008). Furthermore as this quote is from a person of formal authority, the CEO, it also implies his belief is that leadership only concerns those in similar positions of power. This is a somewhat blinker ed view of leadership and ignores the important concept of followership, which concerns the attitude and behaviour of those being led. Ineffective matches between leadership and follower styles have been linked to stress, conflict and decreased performance levels (Sperry, 2002). Employees are therefore a particularly important group to consider at Starbucks. A leader cannot lead without the respect and commitment of followers and attempts to express authority will likely be met with hostility: “ People choose to obey authority so long as they believe the authority is legitimate ” (Bolman and Deal, 2003:337). It is vital that Starbucks has leaders that can motivate and commit employees so as to ensure they continue to provide customers with the ‘Starbucks experience’, a core source of competitive advantage. Some employees at Starbucks have considered trade union representation, probably as a reaction to perceived leadership failures. Leaders need to be able to listen to employees and instigate a system of management in which they can feel valued, committed and influential . As Benis and Nanus (1985) noted, effective “l eadership is not so much the exercise of power as the empowerment of others. Leaders lead by inspiring rather than ordering …” (Benis and Nanus, 1985 as cited in Sadler, 2003:8). Perhaps employees have lost faith in the CEO and their motives because leadership at Starbucks appears to punish leadership challenges and expressions of innovativeness. Grint (2005) suggests that it is healthy for leadership to be contested: “Leadership…is not just a theoretical arena but one with critical implications for us all ” (Grint, 2005 as cited in Jackson, 2005:1324). Leadership is therefore a subjective term and the CEO’s comments provide a limited and somewhat precarious insight into leadership and organisations are urged to consider the term in the context of their own organisation at its various levels.

To examine Starbucks’ particular approach to leadership it is first important to mark the differences by contrasting the term with management. Benis and Nanus (1985) write, “Managers are people who do things right, and leaders are people who do the right thing” (Benis and Nanus, 1985 as cited in Weller and Weller, 2002:29). Kotter (1990) identifies three dimensions to contrast between leadership and management: e nvisioning, aligning people and motivating and inspiring (Kotter, 1990 as cited in Chell, 2001: 190). Envisioning concerns creating an achievable vision and strategy that is concerned with the future rather than the day-to-day priorities of management. Leaders must be able to scan and respond to changes in the environment. Whilst Starbucks has a clear strategy guided by its mission statement, the leadership has failed to adequately plan and respond to changes. Leadership requires the ability to set clear goals to drive organisational change. This involves the ability to view change as a long- term process (Banutu-Gomez and Banutu-Gomez, 2007). Starbucks’ vision could be described as lacking goals for implementation and the inability to see the process of change over a long- term period. The group has expanded enormously and yet its leadership strategy and approach has changed little. Starbucks wants to retain its small company culture in an organisation that is clearly anything but small. These incompatib le goals may have caused the view by some that Starbucks is not as ‘people friendly’ as it could be.

Kotter uses alignment to describe leaders’ responsibility to create a shared vision and culture, help others to grow and reduce boundaries. Starbucks’ vision is generally shared, but it is the implementation that is beginning to cause problems. It could be argued that the shared culture is under threat and there is danger of an “us and them” culture emerging. Vision should be built by asking all parts of the organisation what they want to achieve, not just management and shareholders (Gallos and Schei n, 2006). Starbucks has failed to adequately address the employees’ views of vision. This might cause serious problems with the organisational culture in the near future if Starbucks fails to address employee concerns and make them feel an important part of the vision.

Kotter also argues that leaders should create relationships that inspire, motivate and support employees across the organisation. This is a particular problem area in Starbucks as indicated by the CEO’s admission that employees do not have faith in him.

In terms of personal qualities Kott er argues leaders should believe that what they are doing will benefit the entire organisation. The CEO and other leaders identified in the case study clearly believe this. However, leaders should also be able to recognise their weaknesses and the contribution that others can make and should encourage and reward this. Although Starbucks has a number of human resource policies to allow for contributions such as new recipes like the Frappuccino and gives rewards such as the MUG, it has also punished or ignored responses that challenge the leadership and conformed norms. Consequently not all employees feel the leaders are doing what benefits the entire organisation.

Finally, Kott er says leaders should create changes, often radical, rather than maintaining stability. This is a particular criticism of Starbucks. The leadership has not sufficiently planned or taken action to initiate change and create an organisation best adapted to its current market. The CEO’s attitude demonstrates a desire to preserve stability and could threaten the longer- term success of the group. This is particularly important during difficult periods such as the current recession. Leaders should, by their very title, be drivers of change and innovation. It is not enough to simply react to change (Kouzes and Posner, 2006). Leadership at Starbucks should therefore be reviewed so as to promote change and preserve the ‘Starbucks experience’ and long- term success.

Q2) “Motivated and committed human resources were the key to success”. 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 used a number of ways to gain commitment and motivation from its employees. In order to embark on its strategy for mass expansion, it was vital to provide employees with attractive employment so as to attract and retain high quality staff. Examples of the ways in which Starbucks motivated included relatively high wages, health, dental and vision insurance, stock options, fitness programmes, child and elderly care, flexible working options and employee social groups, training and development, employee surveys and feedback, equality, rewards and discounts, encouragement of innovativeness and a degree of self- managed teams. During the early stages of the organisation’s growth this strategy appeared very successful. Employee turnover was less than one-third of the retail industry average and absenteeism was low. Employee satisfaction and retention were at high levels. However, as the company’s expansion policy grew and other retail companies realised the importance of employee satisfaction, these strategies have appeared to be less effective. Starbucks must therefore review its motivation and commitment policies.

There are a number of specific actions the group can take, but two general directions are suggested. Firstly the group could continue its current HR strategies and gain commitment and motivation by emphasising the negative outcomes of poor levels of performance. One way in which this could be achieved would be by relating performance and pay, supported by the use of appraisal systems to measure performance and distribute rewards or punishments correspondingly. Goal theory supports this view of motivation stating that specific, challenging goals and feedback increases motivation (Armstrong and Stevens, 2005:75). However, this approach can be criticised. Kohn (1993) believes that money achieves only temporary compliance rather than commitment and destroys cooperation by forcing people to compete for rewards (Kohn, 1993 as cited in Cornelius, 2001). Needs theory would also cit e this approach: “It is quite true that man lives by bread alone – when there is no bread. But what happens to man’s desires when there is plenty of bread and his belly is chronically filled?” (Maslow, 1945 as cited in Crainer, 2006:165). Given that employees are currently used to a system that is supportive rather than punishing , instigating this approach would likely be counterproductive and further lower levels of motivation and commitment. Furthermore, it would be costly, requiring sophisticated levels of measurement and enforcement such as the appraisal system. Starbucks needs to minimise cost as concerns already exist and could a ffect sustainable competitiveness.

Another more effective approach might therefore be to further develop the human resource programme and demonstrate Starbucks’ commitment to its employees’ welfare. The fact that some employees have been trying to gain union representation suggests that they desire a more formal and powerful source with which to express themselves. This could be explained through expectancy theory which promotes the view that behaviour results from the expectation that a specific behaviour will lead to a certain performance and set of rewards (Buchanan and Huczynski, 2006 :252).

Starbucks could increase employee involvement/empowerment as a substitute for union representation. This term has many interpretations but can be classified as “…a gradual but radical delegation of control to employees closest to the process…It involves the transfer of ownership of a task or situation to an individual or group, with the willingness to accept it ” (Milner and Walsh, 2002:71) . There are varying degrees of empowerment and Starbucks has made small progress in this area. As Daft (1998) acknowledges, empowerment is prevalent in many organisations but to varying extents. This can range from giving employees input, but with management retaining overall power, or giving employees almost complete power in decision making and innovativeness. Starbucks may wish to consider developing empowerment further moving beyond employees’ participation in decisions to giving them actual decision making power. It is suggested that this could simultaneously reduce costs through delayering of management and increase motivation, commitment and innovativeness. It could also add competitive advantage by creating differentiated stores each offering slightly unique products and types of service.

Whatever the approach Starbucks takes it must be one that addresses both employee concerns and increasing staffing costs. It should also aim to provide a high level of customer service and increase profitability. It is important these aims are given immediate priority, particularly given the current world economic climate: “An economic downturn increases employees’ feelings of insecurity which will in turn impact on an individual’s motivation – a key factor in the performance and productivity ” (Anon, 2002:98). Over 700 stores have already been closed (Leroux, 2008:1) and management must take action to prevent further episodes occurring and ensure that the brand can continue to grow. Although the group has other avenues of revenue generation, the Starbucks stores provide a vital source of income, are the most recognisable aspect of the brand and have a great effect on customer perceptions of the group. Not addressing employee concerns could directly impact on the in-store experience and tempt customers away to its competitors. This could begin a downward spiral for the group and provide an opportunity for others to succeed. Leadership will have failed.

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