Where People Work and Play
A Management Profile:
Eric C. Lind
MG101
Starbucks is a Registered Trademark.
All images are courtesy of Starbucks Coffee.
Starbucks Coffeehouse
Where people work and play
The well known organization Starbucks, has become something of a
phenomenon in recent years. Concept: take a traditional Italian coffee house and
make a retail chain out of it. Along the way, this original vision transformed rather
dramatically. Starbucks is lauded for its’ coffee, yes, but its’ product line is far
from that singular. Starbucks mission statement follows:
Establish Starbucks as the premier purveyor of the finest coffee in the world while
maintaining our uncompromising principles while we grow.
The
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following six guiding principles will help us measure the appropriateness of our decisions:
Provide a great work environment and treat each other with respect and dignity.
Embrace diversity as an essential component in the way we do business.
Apply the highest standards of excellence to the purchasing, roasting and fresh delivery of
our coffee.
Develop enthusiastically satisfied customers all of the time.
Contribute positively to our communities and our environment.
Recognize that profitability is essential to our future success.
http://www.starbucks.com/aboutus/environment.asp
Interestingly, Starbucks also has an Environmental Mission statement as well:
Starbucks is committed to a role of environmental leadership in all facets of our
business.
We fulfill this mission by a commitment to:
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Understanding of environmental issues and sharing information with our partners.
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Developing innovative and flexible solutions to bring about change.
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Striving to buy, sell and use environmentally friendly products.
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Recognizing that fiscal responsibility is essential to our environmental future.
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Instilling environmental responsibility as a corporate value.
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Measuring and monitoring our progress for each project.
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Encouraging all partners to share in our mission.
http://www.starbucks.com/aboutus/environment.asp
Starbucks stock has been relatively stable throughout it’s growth cycle:
Starbucks Historic Closing Stock Prices
Starbucks Historic Closing Stock Prices
70
70
60
60
Price Per Share
Price Per Share
50
50
40
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30
30
20
20
06/26/92
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12/04/92
12/04/92
05/17/93
05/17/93
10/25/93
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04/05/94
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09/14/94
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02/23/95
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08/03/95
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01/12/96
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06/21/96
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11/29/96
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10/20/97
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02/22/99
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01/10/00
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11/28/00
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05/10/01
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10/24/01
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09/18/02
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02/28/03
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08/08/03
08/08/03
10
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0
0
Date
Date
Starbucks Closing Stock Prices
Starbucks Closing Stock Prices
(Provided by Yahoo! Finance: http://finance.yahoo.com) [Nasdaq:SBUX]
Introduction to Management
© Eric C. Lind 2003
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Starbucks Coffeehouse
Where people work and play
Often times we hear company executives talk about committing to the business.
Starbucks seems to have a habit of committing to people. The company
leadership pervades into the style of how this company does business, and in my
opinion does a very fine job of living up to the mission objectives. Three of the six
objectives in the mission statement have everything to do with how the company
chooses to deal with people, internally and externally: with dignity and respect
being the primary calling, and diversity being the second.
Over the last several weeks I have made visits to a number of the retail stores
and found things to demonstrate the effectiveness of the management team.
Additionally, I have been able to obtain some additional information from an
employee to support some of my thoughts.
Planning
Each of the stores I’ve been to are all laid out well. The stores are well organized
and clean. There are sitting areas with tables. All but one of the stores I visited
has internet capability available for customers. Products are clearly displayed
and available to customers as they wind their way to the sitting areas. The sitting
areas have small tables, big easy chairs, and quiet comfortable music to make
customers feel welcome and comfortable.
The staff is friendly and cooperative. It was impossible to discern at any of the
stores who the 1st line managers were, suggesting Theory Y policies and style.
As I sit here typing some of the employees are singing show tunes to entertain
each other as they work, and appear to be highly supportive of each other.
Interestingly, I discovered in talking with my employee friend that all employees
are required to do three very specific things to become a full employee:
1. Attend a two week training session to learn the “Starbucks” way.
a. This includes learning to make the broad variety of coffee products.
2. Read and a two inch thick book on company policy and procedure and
certify by signature that they have read, understood, and will abide by said
policies.
3. Sample every coffee the company sells
a. I should add that employees get a free pound of coffee every week,
and are expected to take advantage of it in order to try new flavors.
Organizing
Starbucks retail employees work in small organic groupings. Stores are located
throughout the country, and tend to be more highly concentrated in metropolitan
areas. I found in lower Manhattan that it was difficult to go more than five blocks
without seeing a Starbucks, and in many cases three blocks or less. I found the
same to be true in San Francisco when I was there earlier this year. Though I
can’t be sure, I suspect the only organized mechanistic structure exists in
Introduction to Management
© Eric C. Lind 2003
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Starbucks Coffeehouse
Where people work and play
coordinating stores in a regional way, and authority appears largely
decentralized.
Leading
As mentioned earlier, it was impossible for me to discern whom the manager in
charge was at any of the Starbucks I visited. There was no one giving orders or
asking for things to get done, rather it seemed that everyone was knowledgeable
and proactive in accomplishing daily tasks. I witnessed employees each
performing a variety of tasks: each would take turns making coffee or cleaning,
and I never once heard anything resembling a disparaging remark. It’s obvious
that the fun and inclusive vision of the leadership team is thoroughly channeled
down through the organization.
Controlling
Again, the structure of the retail organization lends itself to individual selfcontrolling and self-management. There’s a sort of “get it done” mentality among
employees that lends itself to excellence. In one instance a delivery of Christmas
goods was stuck in the corner of a smaller store, still on skids, but not waiting to
be put away, rather the goods were being put away by one of the employees and
the area was quickly cleared over the course of about two hours. Though I don’t
frequent Starbucks, I’ve never needed to wait for anyone to take care of my
order, rather the employees are normally waiting for me to make my choice.
General Management Skills in Practice
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Conceptual
In the retail environment at Starbucks, the need to understand a vast array of
food and beverage concepts is critical to the success of employees. Working at
Starbucks nearly requires learning another language. I myself have no idea what
the difference between a caramel marchiatto and a white chocolate mocha coffee
really are, nor would I know how to make it. Apparently some customers do, and
expect employees to have a firm understanding of their coffee needs. This
extends to Starbucks bagged coffee and even to their coffee makers.
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Interpersonal Skills
I can’t emphasize strongly enough the strength of employees interpersonal skills.
This strength has obviously been carried downward into the rank and file and is
regularly encouraged. I frequently hear hello, please, and thank you. More
importantly among staff, I frequently hear “can you help me?”
Introduction to Management
© Eric C. Lind 2003
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Starbucks Coffeehouse
Where people work and play
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Technical Skills
Returning to the menu for a moment, a significant amount of equipment requires
special skill to operate and understand. Many of the tools to make the array of
coffees available are downright dangerous to use without proper use and
training. The espresso and cappuccino machine comes with a severe risk of
scalding for instance.
Management Effectiveness
To be sure, Starbucks has proven profitable. The company has seen a dramatic
rise in gross profits over the last three years. It appears that the vision is catching
on with gross profit gains averaging roughly 25% annually over the last three
years.
PERIOD ENDING
29-Sep-02
30-Sep-01
1-Oct-00
Total Revenue
3,288,908
2,648,980
2,169,218
Cost of Revenue
1,350,011
1,112,785
953,560
Gross Profit
1,938,897
1,536,195
1,215,658
(Provided by Yahoo! Finance: http://finance.yahoo.com)
More locally, I see new retail stores being built to support Starbucks growing
business and customers are coming in droves to purchase their various coffee
fixes. It appears that Starbucks has been highly effective and is on track to
support their vision: “Establish Starbucks as the premier purveyor of the
finest coffee in the world while maintaining our uncompromising
principles while we grow.”
Management Efficiency
Several noticeable factors attribute management efficiency in any of the
Starbucks I’ve been to: cleanliness, store layout, and proactive employees. A
certain degree of pride accompanies each store. I understand that stock options
are a part of the pay plan and this likely contributes to the sense of ownership
employees put forth in their efforts.
Recommendations
Overall I’m very pleased with the management style presented at Starbucks.
Though I appreciate the benefits of the organic Theory Y presentation the
company puts forth, I would caution that as the company grows it would be
unfortunate if the policies became too lax, or as typically happens in corporate
culture, becomes more and more stringent. Starbucks should propagate its’
Introduction to Management
© Eric C. Lind 2003
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Starbucks Coffeehouse
Where people work and play
vision into future business plans and create long term plans and policies that
cause the company to always look for new ways to be innovative and proactive.
A good example of an aged company that did not abide this warning well is
McDonalds. McDonalds is no longer capable, in my opinion, of supporting a
growth company with its’ current product lines and presentation. Management
has become sterile and routine. At this rate, the Big Mac will always be the Big
Mac, and as consumer tastes change, so will the reduction in McDonald’s market
share.
Starbucks is relatively fresh and new and appears to be in their second stage of
long term growth. Continued differentiation in the market will foster long term
growth for Starbucks. Such long term goals require consistent dedication to
innovation along with visionary leaders who can move beyond the current
mission statement and into new territories when the time comes and the original
goals of becoming the premiere purveyor of coffee in the world have been
achieved.
Introduction to Management
© Eric C. Lind 2003
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