Internal Environment of Starbucks Corporation - Case Study Example

Starbucks Corporation

Introduction

Starbucks is a US-based coffee retail chain that is specialised in coffee and coffee-related beverages. Starbucks was founded in the early 1970s in Seattle, US by Howard Schultz. Nowadays, the company operates more than 20,000 stores through a globally developed network of its own branded and licensed stores. Starbucks operates through five major segments including the Americas, EMES, channel development, and China/Asia Pacific (CAP) (MarketLine Advantage, 2015). Starbucks company related stores offer its visitors an extensive choice of premium coffee and tea beverages, roasted whole bean and grounded coffee, and a variety of snacks, pastries, desserts and other lunch items. In addition to these products, Starbucks offers its customers to buy branded accessories and beverage-making equipment (MarketLine Advantage, 2015). In addition to retail stores, Starbucks offers a variety of ready-to-drink beverages such as Starbucks Refreshers beverages, Frappuccino beverages, Starbucks Doubleshot espresso drinks. These products are sold through different distributors varying from warehouse clubs, grocery stores to convenience stores and specialty retailers (MarketLine Advantage, 2015).

This report aims to provide a more detailed analysis of internal environment of Starbucks Corporation, with a special focus made on corporate culture, personality traits, motivation strategy, and HR issues face by the company.

2. Culture analysis

The philosophy and culture of the company is based on the idea that Starbucks is a “third place” besides customers’ home and place of work. Starbucks is positioning its brand as a premium coffee retailer that provides exclusive premium experience to its customers. This approach to brand positioning is closely integrated into the corporate culture of Starbucks that is comprised of five main features: employees first, mutual respect and mutual trust, relationship-driven approach, collaboration and communication, openness, inclusion and diversity (Ferguson, 2015; Jianfei, 2014).

The founder and the ideologist of Starbucks, Howard Schultz, from the early beginning promoted a servant leadership approach, which characterizes Starbucks’ corporate culture until today. Managers, leaders, and supervisors provide substantial support for their subordinates and ensure that all employees have opportunities for career growth. This approach is an integral element of the company’s corporate culture, whereas employees comes first (Ferguson, 2015). In every possible way, the company reinforces the role of employees and the importance of caring for them as for company’s partners. By caring about the employees, Starbucks’ executives believe that employees will care about their customers.

In addition to strong focus on employees, Starbucks encourages and promotes warm and friendly relationships at all levels of the organization. Both employees and customers are treated with care and warmth. Collaboration and effective communication also are essential elements of Starbucks’ corporate culture. At the cafes, baristas and other employees closely cooperate and communicate with each other often in a highly intensive environment. Starbucks management strives to encourage, train and reward the cooperative behaviour as this behaviour is recognized to be a key to the company’s excellent customer service and profitability. Another critical element of Starbucks culture is communication. The management teams at Starbucks comprised of store manager, manager and assistant manager all have regular meetings twice a week in order to communicate and discuss the emerging and various operational issues and problems (Word Press, 2014). Managers are responsible to communicate with employees (partners) more that 80% of their working time as well as to improve communication skills of staff (Word Press, 2014). Effective communication and supportive working environment help Starbucks to maintain efficient business processes, to provide high quality service to customers, and to offer unique/exclusive coffee experience to customers.

Openness also is an important feature of corporate culture of Starbucks. The employees do not have fear to talk openly to their managers and supervisors. The company encourages open communication throughout all levels of the organization. Moreover, there were initiated open forums in order to encourage employees to communicate with their supervisors, to share their ideas and concerns, to ask questions, etc. (Ferguson, 2015). Thus, the management cultivates “partnership” culture and facilitates innovation and creativity within the company. Teamwork is very important element of Starbucks culture. Another important feature of Starbucks’ organizational culture is diversity inclusion. The company has introduced a policy prohibiting discrimination based on gender, age, sexual orientation, race, religion, ethnicity, culture, education, life experience, etc. Thus, the culture is inclusive and innovation-driven.

Q3.Personality traits

As it has been already discussed, Starbucks cultivates people-oriented culture, whereas employees and customers are key groups of firms’ stakeholders. As part of this culture, it is possible to identify some primary personality traits that are relevant to the organization. As the management of Starbucks promotes mutual trust and cooperation as two key factors of long-term success, such personality traits as openness, creativity, positive attitude and willingness to serve people are especially important (Jianfei, 2014).. Employees play an important role to the overall firms’ strategy and therefore, the company strives to employ “right people” with relevant attitudes, values, and personalities. In fact, the recruitment motto of Starbucks sounds as: “to have the right people hiring the right people” (cited in ICMR, 2005: n.p. ). The key personal qualities that were taken into consideration during the recruitment and selection process were: adaptability, the ability to work in a team, and dependability (ICMR, 2005).

In addition to everything said above, Starbucks seeks for such management competencies as entrepreneurship among its staff members. Entrepreneurship and leadership at managerial level are important personality traits that allow the company to create favourable working environment, pursue company’s strategy, and deliver expected level of service and innovation.

Howard Schultz created a business environment, where people are encouraged to reveal their best qualities and to maximize their efforts to better service the customers. Undoubtedly, in addition to hard-working employees, the company seeks for inspired people who like their job and respectfully treat the idea of offering high quality coffee experience to the customers. As Howard Schultz personally explained: “The key is heart. I pour my heart into every cup of coffee and so do my partners at Starbucks. When customers sense that, they respond in kind … If you pour your heart into your work, you can achieve dreams others may think impossible” (cited in Gallos, 2012: n.p.). Therefore, another critical personality trait for Starbucks’ culture is passion to coffee brewing and serving people.

4. Motivation strategy

Employee motivation is a crucial element of the firm’s success and profitability. Starbucks as many other organizations aims to develop effective motivation drivers that would stimulate employees to contribute to the organization’s performance. For this purpose, Starbucks’ management uses both financial and non-financial incentives. On the one hand, employees are motivated to outperform through receiving attractive financial compensation and opportunities for career growth development. On the other hand, employees are encouraged to work in a friendly, enthusiastic and lively environment, whereas all employees are treated as equal “partners”. Thus, based on the equity theory, the company motivate its employees by making them feel being fairly and equally treated (McWilliams, 2012). More specifically, Starbucks’ top management conducts various company-wide opinion polls, interviews, telephone surveys, comment cards, etc. in order to know the views and opinions of the employees and to allow them to speak (Jianfei, 2014). This perception of belonging to the organization allows the company to increase employee satisfaction and loyalty towards the company and thus, to increased efficiency and to reduce turnover rate (Word Press, 2014).

In addition to this basic pillar of motivation strategy, Starbucks employs many other different strategies and tactics to motivate and encourage its employees. The company offers medical care and some social benefits to its employees (Word Press, 2014). Starbucks company offers various empowerment programs, financial incentives such as bonus, flexible schedules and stock options for its employees as part of incentives’ strategy (Loyd, Jackson, & Gaulden, 2001). Employees who make positive contributions to the business and/or stay for a long period of time with the company benefit from increases in pay. Also, the company aims to provide trainings and to encourage continuous learning for its employees. Thus, Starbucks utilizes both intrinsic and extrinsic models of motivation that offer balanced approach between key aspects: financial reward and personal recognition/needs/ambitions.

Q5.HR challenges

While the company does not publicly report about any specific HR challenges, the primary research based on the Glassdoor.com reviews of Starbucks indicates that there are some problems with ‘people management’. One of the major challenges is associated with high employee turnover. According to the estimates, Starbucks “beats the average industry employee turnover rate by 140 percent” (Mooney, 2015: n.p.). Based on the evaluations of Starbucks’ employees, the company has been ranked of 3.8 out of 5 stars. This evaluation included such indicators as culture and values, senior management, work and life balance, remuneration, benefits, and career opportunities (Mooney, 2015: n.p.). While it is difficult to prioritise the specific issues that raise the main concerns and lead to employee dissatisfaction, it is possible to claim that the company has numerous gaps that need to be addressed. High employee turnover imposes significant reputation risks of a global coffee retailer as well as incurs high costs. The company invests heavily in training and development of employees, but this investment is less likely to generate efficient return if the turnover rate is so high. According Mooney (2015), the cost of replacing a barista in Starbucks costs the company $3,000. Therefore, Starbucks needs to identify the reasons of high employee turnover and based on these reviews to adjust its HR management strategy accordingly. The company might need to launch anonymous online surveys and encourage the employees to identify key factors of employees’ dissatisfaction and reasons for leaving the company.

Another HR issue identified in the case of Starbucks is poor communication between middle-level management and employees (Mooney, 2015). While effective communication and collaboration at all levels are defined to be the core values of Starbucks’ corporate culture, in real life the company faces with these problems. The company’s management needs to ensure that despite the aggressive business growth, employee receive relevant support and guidance on behalf of their supervisors. Overall, the company needs to address the problems of poor communication and high turnover by developing effective employee retention and engagement strategies. As CEO of Great Teams-Great results, Julie Alexander said, “Little benefits make a difference because they’re obvious and you see them every day” (cited in Mooney, 2015). Therefore, in case of Starbucks such small benefits as free coffee and free parking also might play a big difference (Mooney, 2015).

Conclusion and Comments

The company’s leaders have developed a strong corporate culture within an organization, which enabled a small Seattle-based coffee shop to grow to a successful global corporation and to develop a strong and powerful brand in the minds of consumers worldwide. The company claims to have a strong corporate culture, whereas employees are treated as Starbucks’ partners. This approach allows the management to engage with employees, make them feel part of the big family and develop careers within the company. Employees benefit from attractive remuneration package as well as favourable working environment. Due to effective recruitment and motivation strategies, the company is able to employ and to retain the best talents, people who share common values and personal traits that fit Starbuck’s corporate culture. The company is very successful in todays’ volatile and dynamic environment and is expected to outperform its competitors in the nearest future. However, the research indicates that despite all the benefits and strengths of Starbucks business and HR strategies, there are some critical issues that need to be addressed. High employee turnover in the company is one of the key problems that imposes significant reputation risks of a global coffee retailer as well as incurs high costs. Starbucks needs to identify the reasons of high employee turnover and based on these reviews to adjust its HR management strategy accordingly. Another problem identified was associated with lack of communication between the middle level management and employees. Starbucks’ management team needs to ensure that despite the aggressive business growth, employee receive relevant support and guidance on behalf of their supervisors.