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Q3.In publish 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 statement tell you about the CEOs view of leadership? Making reference to appropriate models and theories of leadership, provide a critical evaluation of the leadership approach and style in Starbucks.
Starbucks was started in early 70's by three friends and they introduced the beans coffee and its equipment to the market. Howard Schultz was a visionary person and he joined the company as a manger in Starbucks. Howard Schultz had the vision for the company and getting an idea of ready-to-drink coffee in a mug from Italy and introduced it in the Starbucks. He left the company in 1985 and started his own coffee shop with the name of Gironale. He always interested in Starbuck due to its inner capabilities. He bought the company in 1987 when previous owners decided to sell the company. Under Howard's supervision and leadership, Starbucks grew rapidly. Schultz received an International Humanitarian Award in 1996.
CEO's view of leadership:
Many Scholars define leadership differently "Leaders are individuals who establish direction for a working group of individuals who gain commitment form this group of members to this direction and who then motivate these members to achieve the direction's outcomes" (Conger, 1992).
Chemers, M. M. (2002) "Leadership is a process of social influence in which one person can enlist the aid and support of others in the accomplishment of a common task".
CEO of Starbucks always admire people with talent and new ideas, he hired Howard Behar and Orin smith as financial and operational Managers. Starbucks achieved number of milestones under Schultz leadership and became the first private company in North America which provide benefits to part-timers and full-timers.
According to the Starbucks CEO's statement "If they had faith in me and my motives they wouldn't need a union" reflects his powerful communication & democratic skills as a leader. 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).
Howard believes in treating people with respect and dignity. He always cared about his employees and gave them the opportunities to come forward and show their abilities for the company. In 1999, Schultz stepped down from the post of CEO for Smith and continued as chairman and chief global strategist of company. According to Howard's, "treat people like family and they will be loyal and give their all" and on his philosophy Starbucks created different benefit programs for employees including part timers. It consist of stock share plan, work life balance etc. Schultz played a major role in developing an employee ownership program at Starbucks shortly after he bought the company. He introduced 'Bean Stock' plan in which all employees were eligible to get the shares of the company. Make them feel like an owner improved employee's performance and to retain them. It boosted employee commitment and maintained low employee turnover (Long, 2002).
Leadership Approach and style in Starbucks:
For evaluating the approach and style in Starbucks I would like to take the help of some theories based on leadership approach and the style of leadership.
According to Vechhio (2000) that Leadership might be based on function of personality or it can be seen as a behavioural category. Leadership is the act of influencing the performance of a prearranged set in its efforts toward goal scenery and goal attainment (Stogdill, 1950).
Theories of Leadership Style and Approach:
According to the researchers Charismatic leaders are those who persuade their followers because they have Unspoken capabilities in their communication or personality etc. researchers says that leaders communicate their ideas in such a way that they encourage their followers to achieve his vision (Jacobsen and House, 1999).
According to Conger (1989) charismatic leadership approach is process of creating idea and persistent evaluation of the environment, corresponding vision by motivating and convincing arguments, structuring faith and commitment, attaining the vision by giving employees empowerment, using simple stories etc. Howard Schultz using this approaches provided them better work environment, involved them in decision making and also having a vision for rapid expansion which he communicated to his employees.
Transformational leaders form "a relationship of mutual stimulation and elevation that converts followers into leaders and may convert leaders into moral agents" (Burn's, 1978). The facts mentioned in case study about Howard Schultz shows that with different qualities of his leadership he was also a transformational leader. Schultz in early expansion of his business he transform a new strategy for the business and keep on introducing new things for the benefit of the company and for its employees.
The transformational leaders motivate followers to do more than originally expected. Transformational leadership is consists of four basic components, Idealized influence, inspirational motivation, Intellectual stimulation and Individualized consideration (Bass, 1985). Howard Schultz being a tycoon for the employees, it is likely to attract and motivate workers. In a company people look for its leader's Vision, passion, Decision-making and team building qualities (Vogan, 2007).
Understanding the way of leadership we can refer to these approaches:
Traits approach: Leaders are born and consists of certain inherited characteristics or personalities traits.
The functional approach: Leadership skills can be learned and developed.
Leadership as behavioural category: the kind of behaviour of people in leadership and influence on group performance.
Style approach: concerned with effects of leadership on those being led.
Contingency models: deals with importance of situations. Interactions between the variables involved in leadership situation and behaviour.
If we look at the case study we can determine that in Starbucks Howard Schultz approach is more towards functional and style approach as he offered his employees opportunities to become leader and give them learning and development environment to polish their skills to fulfil the goals for the company.
Need of a Union:
Trade unions are group of people agreed together to achieve shared interests. Union is a blend of the group of employee and the organization. Unions' works for their members to defend them from exploitation, collective bargain for wages and work condition, and career development. There is always a need of a union in any trade to preserve the benefits for both company and the employees (Flanders, 1970).
According to the case study, Schultz being a leader treats his partners well and provided them with bundles of benefits and helped them in all kinds of problems but on the other hand Schultz did not realise the need of a trade union in the company which can also be beneficial for the company. He sacked every one who tries to join a union it shows that he is also a democratic leader.
Bass, B. M. (1985). Leadership and Performance Beyond Expectation. New York: Free Press.
Bass, B.M. (1990). Bass and Stogdill's handbook of leadership. New York: Free Press.
Burns, J.M. (1978). Leadership. New York: Harper & Row.
Chemers, M. M. (2002). Cognitive, social, and emotional intelligence of transformational leadership: Efficacy and Effectiveness. In R. E. Riggio, S. E. Murphy, F. J. Pirozzolo (Eds.), Multiple Intelligences and Leadership.
Conger, J. (1992). 'Learning to Lead'. San Francisco: Jossey-Bass.
Conger, J. (1989). The Charismatic Leader. San Francisco: Jossey-Bass.
Long, R. J. (2002). Strategic Compensation in Canada. 2nd ed. Scarborough, Ontario: Thomson Learning.
Flanders, A. (1970). Management and Unions, Faber & Faber.
Jacobsen, C. and House, R. J. (1999). "The rise and decline of charismatic leadership" http://leadership.wharton.upenn.edu/1_change/publications/House/Rise%20and20%Decline%20of%20Charismatic%20Leadership%20-%20House.doc. Last accessed 12th July 2009.
Patty Vogan, (2007). Five Key Traits of Great Leadership.
Stogdill, R. M. (The Ohio State University Columbus, 1950). Leadership, membership and organization. Psychological Bulletin 47, p3.
Vecchio, R. P. Organizational Behavior: Core Concepts, Fourth edition, Dryden Press.
Question 4: '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?
Committed & Motivated employee:
A lot of present-day authors have defined the concept of motivation. They defined motivation as it is a mental process that gives behaviour purpose and direction (Kreitner, 1995), a propensity to act in a purposive way to attain specific, unmet desires (Buford et al, 1995), an internal drive to satisfy an unsatisfied need (Higgins, 1994) and the will to attain (Bedeian, 1993). Motivation is also stated as the inner strength that makes individuals to attain individual and organizational goals.
Earlier employees were used as an extra input into the manufacture of commodities and facilities. However Hawthorne Studies may have changed the way of thinking about employees which was carried out by Elton Mayo from 1924 to 1932. This study shows that employees are not motivated by money only but also their behaviour is linked to their attitudes (Dickson, 1973). In this current age every company need motivated and committed employees to achieve there strategic goals so as the Starbucks.
Motivation program in Starbucks:
Case study shows that in Starbuck motivated and committed employee have a great importance. Therefore Starbucks always put an extra input to assure recruiting motivated employees and after attaining them. Starbucks offers an interactive structure that encourages employees to commit themselves into their job and achieve a new level of performance. Howard Schultz knew the importance of the benefits to retain the employee that is why he introduced such benefits perks which was highly beneficial of the staff. He gave those benefits for both part and full time employees. According to Pinder (1998), "Work motivation is a set of energetic forces that originates both within as well as beyond an individual's being, to initiate work-related behaviour, and to determine its form, direction, intensity, and duration".
Starbucks included paid vacation, sick leave, health benefits and stock options. It also offered flexibility in working hours for the workers and 'one-size fits all' benefit for the employees, this benefit was also adopted by different service provider companies. Company also introduced 'Bean stock' program for the employees. Starbucks applies different strategies to hire and attain their employees.
Starbucks strategies to gain motivation & commitment from its employees:
After reviewing the case study, I identified some elements by using Starbucks achieve motivation and commitment from the employee.
Selecting the right candidate for the job according to the criteria they have set.
Investing on employee training and development and teaching them three main star skills enhance self esteem, listen and knowledge and ask for help.
Empowering the employees by involving them in decision making.
Giving employees flexible work hours to achieve work-life balance.
Feed back system for the employees
Equality in the status caption to show every one is equal.
Giving them Owner ship by selling company shares to employee and labelling them as partners.
As a result Starbucks kept growing in the market and expanded worldwide. Starbucks has low turnover, increase in sale and new openings of stores and good customer care.
To understand what motivated employees and how can they motivated was the centre of various researchers. There are five major theories which can make us understand about motivation which are Maslow's hierarchy of need theory, Herzberg's two-factor theory, Vroom's expectancy theory, Adams' equity theory, and Skinner's reinforcement theory. I will discuss Maslow's and Hezberg's Theory in context with Starbucks to understand the level of motivation of employees in Starbucks.
Maslow's Hierarchy of Need Theory
If we understand Maslow's theory then we come to know that he has discussed five levels of needs of an employee, physiological need, safety, social, ego and self actualisation (Maslow, 1943). According to the Maslow to motivate the employee, fulfil the lower need first and then proceed for the upper need in the hierarchy. Maslow also explained that "man is a wanting animal, only an unsatisfied need can motivate its behaviour and the dominant need is the prime motivator of behaviour" (Maslow, 1954).
Hezberg's two factor theory
According to the herzberg's there are two major factors in motivation of the employee: motivators and hygiene. They can also be known as intrinsic factor and extrinsic factor. In intrinsic such as independence, achievement in job and recognition of the work create motivation in employee, in extrinsic or hygiene factor consist on higher pay rate, promotion and penalties like disciplinary action or criticism that can create job dissatisfaction (Hezberg, 1957).
In the light of these theories we can determine that Starbucks motivated its employees by empowerment, keeping their social need intact, equality in the company, investing heavily on training and development, rewarding highest pay in industry, giving them number of benefits which motivated employees intrinsically as well as extrinsically. On the other side researcher criticized that employees were not paid for work related injuries, increment was very little. Thus these kinds of factors may decrease the motivation of employees and their performance may reduce which may affect organisation negatively.
According to the case study Hr policies are the best in the market and if we look at the employee turnover in Starbucks is far less than the other market turnover. In a survey Employee working in Starbucks more than 70% of the employees was satisfied by the policies in Starbucks. Howard Schultz says that "You can't expect your employees to exceed the expectations of your customers if you don't exceed the employees' expectations of management" (www.starbucks.com)
Fact mentioned in the case study shows that the policy of the Starbucks is well formed and beneficial for the company as well as for the employees even in the long run. Assuring the motivated employee is also well organised by the HR department in the company.