Starbucks Corporation: Case Study in Motivation and Teamwork
Because of rapid globalization over recent years, the competition around the world becomes more intense, especially for the service industry with the similar products. The most critical point for business to success is not only the quality of
products they supply, but the atmosphere of cooperating and the amount from yield of teamwork in retail sales. The employees who always touch with customers and can realize what customers really need are first-line staffs. Therefore, it turns to be essential for companies to motivate, reward and train their employees to be the best quality personnel.
Starbucks Corporation, the most famous chain of retail coffee shops in the world, mainly benefits from roasting, selling special coffee beans and various kind of coffee or tea drinks. It owns about 4000 branches in the whole world. Moreover, it has been one of the rapidest growing corporations in America as well. The reasons of why Starbucks is worldwide popular are not only the quality of coffee, but also its customer service and cosy environment. Starbucks establishes a comfortable surroundings for people to socialize with a fair price, which attracts all range of ages’ consumers to get into the stores. Besides, it is also noted for its satisfaction of employees. The turnover rate of employees at Starbucks was 65% and the rate of managers was 25% a year However, the rates of other national chain retailers are 150% to 400% and 50% respectively. Compared with them, the turnover rate of Starbucks is much lower than other industries on averagely. (Michelli, 2006) As a result, Starbucks would be one of the optimal business models for the strategies of employee motivation, customer satisfaction and cooperation of teamwork.
In the first stage, the historical background of Starbucks will be introduced. Secondly, an issue about the methods of motivating employees are going to discuss. Next, the strategies, which are used by Starbucks to make their teamwork performance well, will be pointer out. In the end, there is a conclusion about the effect of policies in motivation and teamwork.
2. The history of Starbucks
Starbucks began by three friends, Jerry Baldwin, Zev Siegl, and Gordon Bowker, who knew each other in the University of Seattle. In 1971, the first name of their store is “Starbucks Coffee, Tea, and Spice” in Seattle, Washington’s Pike Place Market. They engaged in making profit from selling coffee beans roasted to individual customers and restaurants. Until 1982, they had increased the number of stores to four. During the same period, a sales representative of the house ware business in New York, Hammerplast, visited them. Howard Schultz wanted to know why a small company needs a large number of percolators from Hammerplast. Because of the trade relationship between these two companies, he was acquainted with the three inventors. After he realized the atmosphere and environment of the company, he decided to be a part of Starbucks, then as a director of marketing and retail sales.
In the following year, he had a vocation to Milan, Italy. Though the time, he experienced an entirely different coffee culture from the United States. The culture of Italian café had been one part of people’s daliy life. There were numerous coffee bars around the area and the public usually liked to socialize in a coffee bar. Under those circumstances, Schultz had an idea of a new flavor of café and a stylish environment to communicating with friends.
After the trip, he prepared the business plan for his vision. However, the three initiators did not want to transfer their business into restaurant industry. Consequently, in 1985 he chose to establish a new coffee shop, named II Giornale, in Seattle. After the next two years, due to the successful strategy of Schultz, the original three owners of Starbucks decided to sell their corporation to Schultz. Then Schultz gathered other investors and took over the name of II Giornale to Starbucks. He sought to pursue his dream to make everyone taste his coffee, so he focused on the rate of expanding. At that time, he though that the most efficient way to grow the amount of branches is to set up new stores in other places. In I987, Starbucks had the first overseas store in Japan.
In the subsequent years, owing to the rising expenses with the worldwide broadening, there was a deficit in Starbucks for the next three years. In contrast, he firmly believed that not to “sacrifice long-term integrity and values for short-term profit” (Michelli, 2006). In 1991, it turned loss into gain and its sales grew up sharply to 84 percent. Until the end of 2002, Starbucks has developed from 17 stores to 5,688 spreading over 30 countries in by this strategy, it is an over 300 times growing in these ten years! (shown as Exhibit 1) From Fortune magazine, Starbucks was ranked the 11th best company to work for in 2005 in the USA and then risen up in 2006 to 29th. As to 2007, it was ranked as the 16th best. In the same year, Starbucks was also voted as one of the top ten UK workplaces by the Financial Times. (Resource: wikipedia)
Exhibit 1: STARBUCKS STORE LOCATIONS
Source : Starbucks Corporation
Motivation is a vital factor for business in the process of making their production. Labours are not working machine, so that they can not always do the same affairs with equal passion. Accordingly, the efficient method to make staffs keen on their jobs should be to motivate them. It might even gain a better yield than purchasing plenty of equipments and facilities.
However, to be contrary to the classical management approaches, some reports had proposed that the ways to motivate employees are not only money. Kohn (1993) showed a survey that if a reward frame only offers physical rewards, the produce from workers might decline, especially in the creativity industries. What is more, other factors are essential as well, such as working environment or relationship between employees and managers. Nicholson (1998) reported that “workers had strong social needs which they tried to satisfy through membership of informal social groups at work place”. Besides, “the importance of informal social factors in the work place such as co-worker relationships and group norms that influence employee motivation and performance is highlighted” (Macky & Johnson, 2003)
A pervious researcher, Pugh & Hickson (1989) cited Elton Mayo (1933) made an investigation called ‘Hawthorne Experiment’. According to the results, if managers provided a suitable working environment considering each personal requirement and their sense of satisfaction rather than a higher salary or bonus, workers were encouraged to be more hard-working and efficient. He also verified that if managers of an organisation do not consider about individual works’ needs and wants, then treat them as equal units would “maximise payment and minimise effort”. As a result, how to use non-financial incentives would be an important issue for nowadays business.
The chief executive officer of Starbucks corporation, Howard Schultz, considers that the tip of success in Starbucks is not coffee but employees. Constantly accumulating the working experience of employees and providing chances of promotion in a company for working partners is the way to operate sustainability. He firmly believes that the spirit of Starbucks is employees and feels honored about the value of Starbucks employees. For this reason, it is necessary to have a perfect education and training policy for better performance in a company (Michelli, 2006). Starbucks offers an interactive structure that makes personnel instill themselves into their job; hence they can motivate partners to satisfy themselves then achieving a new level of performance.
3.1 Equal treatment
The managers in Starbucks treat each workpeople equally and all of the staffs are called ‘partners’, even the supervisors of each branch are called it as well. In order to narrow the gap between managers and employees, they also co-work with the basic level staffs in the front line. Due to this, they can maintain a well management system and create a much closer and more familiar atmosphere than other place, which makes not only employees can enjoy their job but also customers are affected by their enthusiasm.
3.2 Listen to employees
Starbucks has a well-organized communication channel for employees. It places a great importance on labours. For example, managers plan the working hours per workers and arrange the schedule of time off, according to their wants to meet their requirements. There are interviews weekly to see what employees’ need is. A special survey called ‘Partner View Survey’ is taken off approximate every two years. The managers can receive feedbacks through the event to which part should be improved or what issue should be paid more attention to.
The partners have the right to figure out what is the best policy for them, and the directors show a respect for each suggestion. Starbucks even wants every employee to join in making and developing plans, then achieving their goals all together. As a result, the policies and principles are communicated between all staffs, and there is no limitation in employees’ personal opinions. For this reason, business could improve their strategies even innovate by different ideas.
3.3 Good welfare measures
All employees, including informal personnel, are offered a great deal of welfare policies, for instance, commodities discounts for employees, medical insurance (including health, vision and dentil) and vacations. Moreover, the partners who work over 20 hours a week are entitled for benefits. Starbucks also thinks that debt financing is not the best choice, thus it chose allocate stock dividend to all employees with a free scrip issue. By this policy, the employees can get benefits from the dividends of company. Because of this, they have the same goal; in other words, they are motivated to increase the sales to earn more profits.
Starbucks just handles personnel with its core value, which is the employees are the most important asset of Starbucks. Showing a respect to employees and well-developed environment have lead Starbucks to produce the best working quality for customers and an increase in profits.
Teamwork can not only construct a small social structure in organization for employees to socialize, but also composite of various kind of members who equip with different background of skill and knowledge on account of the mission. Each member plays an important role in the teamwork; therefore everyone in that team can meet their need for getting acquainted with different colleagues and learn new skill from each other. Hoegl & Gemuenden (2001) observed that the definition of teamwork is a social system including more than three people in an organization or context. These members identity others as one member of the team and they have the same goal. Robbins (2001) stated that the factors influencing teamwork are relation of leadership, roles, principles, status, size, composition and the power of agglomerate.
4.1 The strategies to keep well relationship
Starbucks establishes a well-developed system to keep good relationship between mangers and employees. At first, the leaders of a retail shops use the same title “partner” as a basic level worker to narrow the gap of bureaucracy. Furthermore, they co-work in the first line to eliminate the distance between different statuses. Secondly, the numbers of employees are usually from three to six. Such a small size of a retail shop makes staffs acquaint with each other easily and deeply. In the co-working period, this helps a team to match different personalities and majors quickly to achieve well performance. Next, the suggestions and complaints provided by employees are treated of equal importance. In the same way, they have a right to participate in the process of revising company policies as well as a manager. In that case, each staff thinks that they also play an important role in company operating, and they can join to work out a direction of Starbucks. These give employees not only a respect, but a sense of participation.
4.2 A goal of public welfare
Starbucks has endeavored to create “third place” (outside from home or office) for people to take a rest (resource: wikipedia). They want to provide such a comfortable environment to increase the harmoniousness of the society. Apart from this, Starbucks contributes part of its profits to public service; on the other hand, it also set a goal to improve and donate to the society. As a consequence, the aim makes all staffs have an idea that what they do for Starbucks is for the society as well. As the goal theory, Starbucks set a challenging and specific goal, and it permits all partners to decide the direction. Afterward, employees embrace to do what they chose and they get some feedbacks form the goal. The concept causes an increase of the power of agglomerate and enthusiasm in relation with a positive effect to the profit of Starbucks.
Starbucks changes the behaviours and view points of global consumers to coffee, and this successful example has caught global attention. Nevertheless, it was also a small retail coffee shop in North American initially. Nowadays, it is not only one of the fastest growing corporation, but also an outstanding business model with lower employee turnover rate and higher profit performance. According to the case of Starbucks, it shows that motivation is the key factor of a company policy; in other words, opposite to the principles of classical management which only concerns about produce but ignore workers’ ideas. In recent successful businesses, the appropriate management for labours should include financial and emotional rewards. Besides, motivation and personal satisfaction should be put into first rank. A good relationship between managers and employees could maintain a high quality of performance. Just like Starbucks, to use the correct strategy would lead to a successful path.
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Starbucks, http://www.starbucks.com/, date accessed 20/11/07
Wikipedia, http://en.wikipedia.org/wiki/Starbucks, date accessed 20/11/07