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Starbucks Corporation: Case Study in Motivation

HRM (case solution)

HUMAN RESOURSE MANAGEMENT

A CASE STUDY ON STARBUCKS

Prepared By

Rossi Norman Dias.

MBA

BRAC University.

Date: 19 November 2013

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Starbucks Corporation: Case Study in Motivation

HRM (case solution)

Starbucks Corporation: Case Study in Motivation

Because of rapid globalization over recent years, competition around the world becomes more
intense, especially for the service industry with similar products. The most critical point for business
to achieve success is not only the quality of products they supply, but the atmosphere of cooperating
and the amount yielded from teamwork in retail sales. Therefore, it turns out 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 and selling special coffee beans, and other various kinds of coffee or tea drinks. It
owns about 4000 branches in the whole world. Moreover, it has been one of the most rapid growing
corporations in America as well. The reasons why Starbucks is popular worldwide are not only the
quality of coffee, but also its customer service and cosy environment. Starbucks establishes
comfortable surroundings for people to socialize with a fair price, which attracts all ages of
consumers to come into the stores. Besides, it is also noted for its employee satisfaction. 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 average. As a result,
Starbucks is one of the optimal business models for strategies of employee motivation, customer
satisfaction and cooperation of teamwork.

The history of Starbucks:

Starbucks began by three friends, Jerry Baldwin, Zev Siegl, and Gordon Bowker, who knew each
other at the University of Seattle, in 1971. A sales representative, Howard Schultz, decided to be a
part of Starbucks, as director of marketing and retail sales, after he realized the atmosphere and
environment of the company. In 1985 Howard Schultz 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 changed 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 was to set up new stores in other places. In I987,
Starbucks had the first overseas store in Japan. Until the end of 2002, Starbucks has developed from
17 stores to 5,688 spreading over 30; it has grown over 300 times in these ten years! In Fortune
magazine, Starbucks was ranked the 11th best company to work for in 2005 in the USA and then rose
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Starbucks Corporation: Case Study in Motivation

HRM (case solution)

up in 2006 to 29th. In 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.

Motivation:

Motivation is a vital factor for business in the production process. Labourers are not machines, and
can not always do the same task with equal passion. The chief executive officer of Starbucks
corporation, Howard Schultz, considers that the reason for success in Starbucks is not coffee but
employees. He firmly believes that the spirit of Starbucks is employees and feels honoured about the
value of Starbucks employees. Starbucks offers an interactive structure that makes personnel throw
themselves into their job.

1) Equal treatment: The managers in Starbucks treat each employee equally and all of the staff are
called ‘partners’, even the supervisors of each branch. In order to narrow the gap between managers
and employees, they also cowork with the basic level staff in the front line. Due to this, they can
maintain a good management system and create a much closer and more familiar atmosphere than
other places. Not only do employees enjoy their job but customers are also affected by their
enthusiasm.
2) Listen to employees: Starbucks has a wellorganized communication channel for employees. It
places great importance on labour. For example, managers plan the working hours per workers and
arrange the schedule of time off, according to the workers’ wants in order to meet their requirements.
There are interviews weekly to see what employees’ needs are. 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 work together in achieving
their goals. As a result, the policies and principles are communicated between all staff, and there is
no limitation in employees’ personal opinions.
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 dental) and vacations. Moreover, the partners who work over 20 hours a week are
entitled to benefits.

Starbucks also thinks that debt financing is not the best choice, thus it chooses to allocate stock
dividends to all employees with a free script issue. By this policy, the employees can get benefits
from the dividends of the company. Because of this, they have the same goal; in other words, they
are motivated to increase the sales to earn more profits. To Starbucks, the employees are the most
important asset.

Teamwork:

1) The strategies to keep good relationships: Starbucks establishes a well developed system to
keep good relationships between managers and employees. As mentioned, they use the title “partner”
regardless of the level of the worker, which narrows the gap of bureaucracy. Furthermore, they
cowork in the first line to eliminate the distance between different statuses. Thirdly, the numbers of
employees are usually from three to six. Such a small size helps staff get to know each other easily
and deeply. Suggestions and complaints made by employees are treated of equal importance. In the
same way, they have a right to participate in the process of revising company policies. In that case,
each staff member thinks that they also play an important role in company operating, and they jointly
work out the direction of Starbucks. All this gives employees respect and a sense of participation.
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Starbucks Corporation: Case Study in Motivation

HRM (case solution)

2) A goal of public welfare: Starbucks contributes part of its profits to public service. As a
consequence staff has an idea that what they do for Starbucks is for society as well. With regard to
goals, Starbucks set a challenging and specific goal, and it allows all partners to decide the direction.

Questions:
1) Starbucks’ employees can be seen as a formal team as opposed to an informal team.
Differentiate between ‘formal’ and ‘informal’ teams.

2) The employees of Starbucks retail shops clearly work together well as a team.
List four characteristics of teams that have ‘gelled’ together.

3) “… the numbers of employees are usually from three to six.”

a. Why is the size of team an important factor?
b. What are the benefits to Starbucks of having small teams of staff in each branch?

4) Starbucks achieve success and adhere to the criteria of planning, execution and review.
a. Explain three issues that need to be addressed in the planning process.
b. Reviewing is an ongoing process. Explain three things Starbucks can do continually to ensure
goals are being accomplished. (HINT: apply your facts on the review process to the Starbucks
situation).

5) How does Starbucks manage to keep good relationships between their managers and employees?

6) Name the five issues that teams should take note of and address if necessary, before these issues
become a crisis.

7) The staff at Starbucks are empowered and motivated employees. Briefly explain, in your own
words, the three principles that Starbucks implement in motivating their employees.

8) Management needs to commit to certain aspects in order to empower employees.

List four of these aspects.