Starbucks Culture Analysis

MGT 303 Dr. Marcie LePine

Chloe Bosmeny Alexandria Gil Chris Stuller

Colton Sanchez Colin Johnson Johnny Takada

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Introduction/ Executive Summary

Starbucks currently has about 155,000 full­time employees (Starbucks Statistics). Any company

this large has a heavy burden of creating a culture which can be instituted at every level, from the

corporate executives to retail store workers. The mindset of putting people first, both with

customers and employees has led to creating one of the most value brands, according to Forbes,

and has been named one of Fortune’s top companies to work for (100 Best) (Reuter 1). Being

such a large company, Starbucks has still managed to maintain free flowing feedback among

employees at all levels, which positively contributes to their company mission, “to inspire and

nurture the human spirit.” (Mission Statement)

Overtime, Starbucks has grown to a vertically integrated organization, controlling much of

their supply chain. This is a major financial undertaking and supports the thousands of stores

which operate in over 50 countries (Starbucks Statistics). Success has continued at the individual

retail store level through strict managerial setups which dictate a single manager in every store

and require the district manager to spend time in each store on a regular basis. There is

transparency and accountability at all levels with the continuous oversight and by training

executives in retail stores, so they gain a thorough understanding of daily operations. The

carefully calculated bonus seek to reward top employees, without sacrificing any of the

Starbucks principles, and not making financial measures the sole focus. This company’s focus on

leaders places more importance on the leadership skills of a manager, rather than their ability to

generate revenue.

The major issues identified by our team revolve around the enormity of the company and the

personnel management. The inability for managers to be coarse and confrontational with their

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employees when necessary, can be seen as a flaw of the Starbucks ideal of competent leaders.

Although a strong focus is placed on developing leadership, for their store managers, this is still

a shortcoming on the retail level. The ability to hire and develop the talent is limited by the

minimal growth potential within each individual store. With the diversity of locations and

clientele served, often corporate goals and “universal” solutions for retail stores are difficult to

translate to many of the locations which face unique challenges and markets.

To better accommodate employee retention and allow members to meet their full potential,

our team recommends an option for managers to grown beyond their individual store and have

the possibility of reaching the corporate world. Although there is great compensation for the

large part­time force, which include full health insurance benefits, stock awards and free coffee

(Best 100), there should also be a serious focus on the leaders at the retail level. Executives are

able to spend time in the retail level and if the inverse was true, the corporate vision could

translate more fluidly to the employees directly interacting with the customers.

The other beneficial practice which should be instilled would be the creation of a employee

retail network. Many companies have very inexpensive and effective mediums which allow for

communication between employees in different stores and sometimes even different countries.

The creation of an environment which encourages sharing of best practices, would ultimately

foster innovation and could positively contribute to employee morale and ultimately retention.

Increasing the visibility and impact of lower level employees could go a long way in continuing

to grow this customer focused coffee company.

Corporate Culture

Starbucks was founded on the principle of people first. This a is quote from one of

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Starbuck's founding executives, “We’re not in the coffee business serving people, we’re in the

people business serving coffee.” The company strives to shift the mindset on whom you’re

accountable to and how do you serve those people most effectively. This principle changes the

way you build strategy. Howard Behar and Gregg Johnson left Starbucks around the same time

because the CEO Howard Shultz had thrown the company culture out to get better short­term

financial results. Many executives saw this as a major betrayal of the way the company should be

run. After all, Mr. Johnson says, “Starbucks is not about selling coffee, it’s about creating a

unique experience.”

Another aspect of Starbuck’s corporate culture that transcends from the executive offices

to the storefronts is the free­flowing feedback. When interviewing Mr. Johnson, he informed that

at anytime anyone in the company is able to and willing to provide constructive feedback,

regardless of their position in the company. Mr. Johnson gave us an interesting anecdote where

he remembered hiring an ex­military officer into an executive position and the manager

approached Gregg after a few weeks saying he’s never worked anywhere where people are so

willing to provide feedback. This quote illustrates the need for self­awareness in employees at

Starbucks at all levels.

Org Structure

Starbucks is a vertically integrated company with hundreds of companies embedded in

the corporation. It has a huge manufacturing arm, supply chain arm, non­retail arm, and retail

side. For our project we are focusing on Starbuck’s retail sector. Each Starbucks store has a store

manager, one or more assistant managers, and a supervisor for every shift. The number of

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assistant managers at every store depends on the store’s volume and size. The reason a higher

volume store will have more salaried managers is because these stores are more complex to

operate thus more managers are required. Each district manager is responsible for 8­10 stores

and every 2­3 weeks they spend an entire day in each store in their jurisdiction. Individual stores

are monitored by external customer service snapshots and mission reviews from individual

partners. Partners are a critical part of monitoring store success. If at anytime a partner feels

something is not consistent with Starbucks mission they can submit an anonymous review to HR

and the company can investigate immediately to find out what the problem is. District managers

also conduct store visits where they essentially audit the store to measure standards and develop

action plans to deal with issues outside of the norm. When the manager returns he goes over the

previous action plan with the store managers and then develops a new plan if needed. Mr.

Johnson goes on to explain that any retail operation is all about having a consistent repeatable

process. If there is not a system in place for exactly what to do things will not get done at the

store level, then things on a greater scale will not get done. It’s a combination of systems and

processes with good leadership that will replicate execution.

A key element of Starbucks’ retail management structure is the concept of having only

one manager per store. A lot of companies try to increase efficiency and decrease cost by having

managers in charge of more than one store. About 10 years ago, Taco Bell attempted this

strategy and gave excelling managers more stores to oversee, the results were disastrous.

Starbucks also tried this and it backfired. This strategy did not work because managers did not

have enough time to make a significant impact at multiple stores. Mr. Johnson and other

executives looked at the data and realized that supposed mediocre managers who were left at one

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store, rather than excelling ones that were moved around, were producing much higher financial

results and lower turnover rates. Thus, Starbucks now places managers at stores for an extended

period of time to achieve far better results.

Translating corporate ideals to retail stores takes place on several dimensions. Starbucks

trains managers to ensure they can “walk the talk” when it comes to core values. The measure

their performance to create consistency among stores. This is done by using employee pulse

surveys and employee engagement surveys on a regular basis. Then execs can distill these results

on a store level to the manager on how well they’re “living the culture.” Stores that have high

engagement levels, high snapshot scores, and managers who have been in place for an extended

period of time have a very high correlation to achieving greater financial results.

The challenging part for Starbucks, in translating ideals to stores, is the fact that with so

many stores, managers are very unlikely to actually meet executives like the CEO Howard

Schultz. The question then remains, how can you ensure that whoever the managers report to

reflect the Starbucks culture, known as the “1000 points of Howard.” This is where the training

and placement of executives in stores comes into play. Starbucks provides extensive training to

managers to make sure they can “walk the talk.” Additionally it practices a unique strategy in

that it places new executives in stores for 1­6 months. During this time, the executives learn the

day­to­day operations by actually doing the work themselves. They wipe down tables, serve

coffee, and supervise shifts. Starbucks will spend more than an average four year college tuition

placing and maintaining these executives in stores for training, for a variety of reasons. The

connections and experiences these people make are invaluable. It also provides them credibility

in making future decisions because they have lived the life and actually worked in the stores

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knowing what changes need to be made.

What Starbucks strives for in managerial teams at stores is fairly simple. Upper

management figures out what it takes to supervise one person then divides by the number of

hours in a day or month and assigns that many direct reports. Most store managers are promoted

from within. Starbucks looks for supervisors that love to identify future leaders and managers,

and know everything about their employees. Mr. Johnson informed us that if someone is the type

of person that wants to be a merchandiser and develop new drinks and set prices, they will hate it

there.

With these managerial standards and teams set, next comes measuring success at each

store. According to Mr. Johnson, success at Starbucks is reflected in how managers are bonused.

However, it entails much more than a simple bonus. These bonuses attempt to reward what is

important to Starbucks. Financial factors obviously play a role, that is growth in sales and

performance against financial objectives at top and bottom lines. Yet, Starbucks looks beyond

these financial benchmarks and tries to reward carefully without exploiting people. To explain

this Mr. Johnson gave us an example, “If someone can get a bonus by hitting labor target of 19%

but they get a bigger bonus by hitting 17% you’re hurting employees and customers. So, bonus

targets are set up by variance of the target, thus missing the target either up or down is bad for

the manager.”

In terms of true success: people are promoted by positive employee pulse surveys, hitting

proper numbers, financial performance, and snapshots from customer service. To give some

perspective, Mr. Johnson said he could count on two hands how many people were fired for poor

financial results at the store level, but could count hundreds who were fired for poor leadership

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of employees.

Managerial Flaw at Starbucks

Respect and dignity are highly valued in the Starbucks corporate culture; while these

traits are great on paper, according to Mr. Johnson, they are often misconstrued. Executives and

managers will often hold back from having constructive conversations with people who aren’t

performing because they think it’s disrespectful. However, by not having these difficult

conversations, executives are short­changing their employees. Leadership is lacking in this area

at Starbucks because, as Mr. Johnson puts it, “Great leaders are separated from average ones

because the exceptional leader can have this difficult conversation and leave the person feeling

valued and determined, even though they were underperforming and screwing up” Nurturing and

caring leadership needs to happen because when people feel like you believe in them, they will

exceed expectations. Another major challenge at Starbucks will always be hiring, retaining, and

cultivating talent. As Mr. Johnson stated, “The availability of real estate and coffee will never be

an issue.” The only challenge is personnel management. Basically, putting the right people in

right places for continued growth.

Local Store Culture

The working environment at Starbucks is generally friendly and family­oriented. Most

workers enjoy each others’ time outside of work hours. There is a strong sense of friendship and

teamwork in the workplace. Managers care about employee feedback and try to accommodate

employee schedules as much as possible. Managers are very understanding and the workplace

relies heavily on constant communication. There are complaints from time to time, but overall,

employees are treated very well and issues are usually immediately addressed. The baristas love

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their management team because they are always open to feedback and their is not a power

distance.

At high and low traffic locations, the goal is to deliver optimum, high­quality customer

service to everyone who walks through the door. At high traffic locations, such as the Memorial

Union location or the Mill location, the constant flow of customers can be hectic and

overwhelming, but ultimately customer service is the priority and the workplace is still a fun

environment. Success of all stores are measured by the quality of service provided to customers

and efficiency coffee delivery. The success is based on smooth operations and steady sales.

Clear, constant communication is key to their success.

Starbucks intended corporate culture is almost completely aligned with actual local store

culture. The local stores stress customer service and the employees are treated very well.

Managers accommodate school and other work schedules and will accommodate spontaneous

events like funerals. They are socially responsible in each store, recycling all recyclable waste.

They also donate all espresso grains and donate all remaining pastries to homeless shelters.

The only problem employees have with Starbucks is a typical problem that many

corporate chains have to face: not all solutions work for every individual store. One solution

implemented at all stores, may work for one store but may not work for another. Because stores

are located in high traffic areas and low traffic areas, solutions need to be based on each store.

One solution or alteration may work positively for one store, but may affect another store

negatively.

Recommendations:

Internal growth for managers beyond retail:

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Starbucks executives indicated that one of their greatest managerial flaws and challenges

remains hiring, keeping, and cultivating talent in the retail setting. This is understandable with

most retail jobs because, company loyalty, length of employment and opportunity for individual

growth are limited. The highest growth opportunity within the retail setting is the position of

store manager. But the question remains, how can store managers turn Starbucks into a

managerial or corporate career path? While, executives are required to undergo training

programs in the retail setting to further learn of the company’s processes and systems, why does

the reverse not hold true for store managers?

It must be noted that store managers and executives do in fact work together in manager

training programs in transferring core values from the corporate to retail levels. Starbucks’

service chain is successful but lacks in their employee relations (“Putting the service chain to

work”). Currently, opportunities for highly­performing store managers to transition from the

retail to corporate setting seems to be non­existent within Starbucks. “Only if individual

measures are tied together into a comprehensive picture will the service­profit chain provide a

foundation for unprecedented profit and growth” (Putting the service chain to work”). By

creating further growth opportunities for employees in the retail setting to transition to corporate

positions, an incentive of company loyalty and longevity is created. In creating long­term

incentives for retail employees, Starbucks would improve its retention rate, while also continuing

to foster its ideals and culture simultaneously between the varying levels of the organization.

Opportunities for advancement within a corporation is a key motivating factor that drives an

employee’s work ethic. (“How do you Motivate Employees?”)

Creating retail employee networks:

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A strong and identifiable company culture present within organizations inevitably creates

a sense of community among employees. This is of Starbucks in the retail setting, as local

baristas noted that the Starbucks working environment is friendly, family oriented and overall

enjoyable and healthy. Local­level employees also noted the teamwork and family feeling

established internally at their respective stores, creating meaningful friendships with peers

translating beyond that of the retail setting. In a larger sense, the Starbucks culture has been

identified as “We’re not in the coffee business serving people, we’re in the people business

serving coffee, ” and is applied through customer service at the retail level. However, this motto

can also be applied to its employees as “how can the company best serve its employees”.

In order to further develop meaningful working relations between employees of differing

retail locations, Starbucks should establish a network or networking platform for it’s retail level

employees. According to Kaplan, a network for employees and managers could benefit the

Communications and Feedback & Learning processes within the balanced scorecard. Time and

time again in business, networks are said to be the one of the most vital assets, and such

opportunities should be afforded to lower­level employees. This network could help employees

further their education to gain a better understanding of the Starbucks corporate vision (Kaplan).

In terms of store growth and increased productivity, managers would be able to connect and

share information and insight they’ve gained. This information could also act as feedback for

managers to review and improve their own managerial style (Kaplan). Additionally, employees

would be allotted the opportunity to share experiences, ask questions, and even potentially find

new opportunities within the company elsewhere. As a whole, by establishing a networking

medium for Starbucks retail employees, company culture will be further enriched through the

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establishment of larger retail communities all working towards one common goal.

Conclusion:

Starbucks culture and business model have made them one of the most successful

companies in the world today. Through coordinated efforts Starbucks has been able to improve

their market share, brand recognition, and revenues on a national and international level.

Although Starbucks has enjoyed great success over the past decade no company can remain

stagnant in today’s ever­changing marketplace. To ensure continued success in the future we

suggested changes to Starbucks promotion and training practices in the retail setting and the

implementation of an employee retail network. These changes are remedies to weaknesses that

we found throughout our research as well as those that were told to us by our interviewees. Our

suggested changes would allow Starbucks to train more effective employees, to retain those

employees, and to share the knowledge that these employees learn on the job between people

around the corner or around the world. This free flow of knowledge would allow the company to

thrive from the retail side of the organization through the top management. For these changes to

be truly effective however they must be implemented across the entirety of Starbucks and its

subsidiaries. This has been a weakness of Starbucks’ in the past however we believe that through

a coordinated company wide effort we can implement these changes and in turn reap the rewards

across the entire organization.

For Starbucks to continue to enjoy success as they have in previous years they always

must be searching to improve their business. Changes in the company and its culture, such as

those that we suggested, need to be commonplace to ensure they can meet the demands of a

changing marketplace and a changing consumer. No one really knows what the future for big

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business has in store, but companies can make sure that they survive the extreme highs and lows

by diagnosing problems and implementing solutions on a continual basis. To stay ahead of

competitors and at the top of the marketplace companies such as Starbucks must always be ready

and open for change.

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Works Cited

Kaplan, Robert S., and David P. Norton. "Using the Balanced Scorecard as a Strategic

Management System”. Web. 2 Dec. 2013.

<http://hbr.org/2007/07/using­the­balanced­scorecard­as­a­strategic­management­system/ar/1>.

"Starbucks Company Statistics." Statistic Brain 8.12.2013. n.pag. StatisticBrain.com.

Web. 2 Dec 2013. <http://www.statisticbrain.com/starbucks­company­statistics/>.

Retuer, Thomas. "World's Most Valuable Brand." Forbes. n.d. n. page. Web. 2 Dec.

2013. <http://www.forbes.com/companies/starbucks/>.

Mission Statment, Starbucks Corporation Incorporated,

http://www.starbucks.com/about­us/company­information/mission­statement

"100 Best Companies to Work For." CNNMoney. 2012: 73. Web. 2 Dec. 2013.

<http://money.cnn.com/magazines/fortune/best­companies/2012/snapshots/73.html>.

Heskett, James L.; Jones, Thomas O.; Loveman, Gary; Sasser, W. Earl, Jr.; Schlesinger,

Leonard A. “Putting the Service Profit Chain to Work.” Web. 2 Dec. 2013.

Johnson, Gregg. Interviewed by Colin Johnson. 18 Nov. 2013.

Tran, Kevin. Interviewed by Jonathon Takada. 20 Nov. 2013

Lobario, Alexis. Interviewed by Jonathon Takada. 20 Nov. 2013

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