Leadership Approach Used By the Starbucks Company - Case Study Example

Master of Business Administration Managing the Human Resource Assignment Part 2 Teacher’s 6th July 2009 Table ofcontents Topics Page # 1. Leadership at Starbucks…………………………………………………………3 i) Theories of Leadership at Starbuck………………………………………………4 2. Strategies used by Starbucks to motivate its employees……………………….. 6 i) How to ensure the levels of motivation………………………………………….8 3. Conclusion..………………….………………………………………………. 10 References Answer # 1 Leadership at Starbucks Starbucks was initially created by three friends and grew at a slow pace under their tenure. But the company’s defining moment came under the leadership of Schultz in 1987. He expanded the company in other parts of the country and learnt new opportunities of business. Schultz demonstrated as a finest leader for the company and along with his team, worked really hard to take the company at a much mature level. From then till now, the strategy that is being followed by the company was based on team work and gave full importance to their employees to make them feel dependable and responsible. In 1999, Schultz stepped down as CEO in favor of Smith and had given him the authority. Gareth (1998, p. 38) states: Particular attention was focused on the idea of making employees feel more useful and important by giving them meaningful jobs and giving as much autonomy, responsibility and recognition as possible as a means of getting them involved in their work. The duty of any good and successful leader or manager is to create a work environment that is effective to growth. The leaders who are ready to work in teams with an appropriate level of command and authority of making decisions are considered to be successful in motivating and raising the need amongst the employees to achieve the goals. The statement that is being provided by the company’s CEO clearly showed that he has faith in himself and is confident that he would lead the company to a much higher level with a teamwork and authority because the managers or supervisors need to be authoritative in their decisions in order to lead a team. Kroom (1995, p. 355) suggests that, ‘authority can be considered the managers right to act.’ Theories of Leadership at Starbuck Leadership approach at Starbucks seemed to be of democratic style. The leaders or supervisors of the company provides their subordinates with the prospect to work under their leadership and make them make the most of their potential fully by letting them play a part in the decision making process and planning phase. They believe that the most successful innovation came out from their employees and by giving them the authority to bring about their job make the employees feel esteemed and honored. McGregor proposed a theory which became a base for leadership. According to him the manager or supervisor categorize their employees in two distinct groups of human behavior, namely Theory X and Theory Y. Kroom (1995, p. 357) write that, ‘the way in which manager or supervisor leads his subordinates is determined to a large degree, by his assumptions about human behavior.’ Theory X is considered to have those people who are not ready to do any work, very lethargic and lazy and are controlled by their supervisors. On the other hand, in Theory Y, the human behavior of the people is positive towards the work and is very keen and enthusiastic in fulfilling the job. ‘Theory Y which is a positive view, people are willing to work, will enforce self-control if they have committed themselves to objectives and will accept responsibilities.’ (Kroom 1995, p. 357). The leadership style that is being used at Starbucks by the manager or supervisor is democratic management style. They gave empowerment to their employees and encouraged innovativeness. The employees mostly lie under Theory Y and have positive attitude towards their objectives. It is to believe at Starbucks that by implementing ideas by the employees gave them a sense of contribution and was an important factor in motivation and commitment of the employees. Kurt Lewin and his colleagues identified the three different styles of leadership in decision-making which involves: 1. Autocratic 2. Democratic 3. Laissez-Faire In autocratic the decision is takes on the part of leaders or managers, and not a participative approach. In democratic approach, the employees are involved in the planning and decision making process. Whereas in Laissez-Faire the decisions are done mostly by the employees and minimum amount of contribution is involved on the behalf of leaders. But at Starbucks, democratic approach is applied, where both the parties communicate and stay in touch with each other to plan in an effective way. Rensis Likert presented another theory of leadership which has four distinct styles which involves: Exploitive authoritative, Benevolent authoritative, Consultative and Participative. The first three styles involve minimum amount of participation from one side either from employees or from leaders. But Starbucks used participative approach which involves both the leaders and the team. Starbucks is an employee friendly company and gives value to the ideas of their subordinates. Hence they approaches of leadership they are following engage their employees in decision making along with them. Answer # 2 Strategies used by Starbucks to motivate its employees In the current scenario, every company is striving to keep hold of their intellectual capital and also to hire the best from the market because after all, the entire key to success of any business is the human resource and no one wants to loose it. Starbucks is considered to be a leading company in the retail market and a company for which the people wants to work for and that is firstly because of the culture and the work environment and secondly due to their best human resource guidelines. Susan (2007, p.73) writes that, ‘You really have no chance of succeeding in your business without the right team. Your employees are your company and they can make or break your business over time.’ Starbucks treat their employees as a part of their family and strongly believed and realized that motivated and committed employees are the key to accomplish their business goals. The strategies used by them to stimulate and encourage the people to work with them include: 1. The training programs right after hiring, 2. The best compensation and benefit policies among the competitors, 3. Employee ownership program 4. The work culture. In order to enhance the skills of the workforce they have selected, they arranged for the training program. It provides the company with the competitive edge because very few retail companies invest considerably in their training program. To motivate the employees from the beginning of their career with Starbucks, they set a training program which involves team of experts and specialists in different fields which are particularly concerned in establishing the trainers’ interpersonal skills they would need to perform their job effectively, and to make them understand well the philosophy of the company. Raymond (1999, pp.3-4) writes that, ‘The goal of training is for employees to master the knowledge, skill and behaviors emphasized in training program and to apply them to their day-to-day activities.’ A different type of training is being provided to the managers and the employees other than frontline employees. The managers and other non-frontline employees are trained for a longer period because effective leadership is quite significant for building creative teams and stronger organization. Raymond (1999, p.10) also points out that, ‘Effective managers not only perform the basic management functions (planning, organizing, leading and controlling), but also good communicators help employees development and work collaboratively with employees.’ The most important human resource policy which is used to retain and attract the employees is the compensation and benefit programs the company is offering. Christopher G. Reddick and Jerrell D. Coggburn (2008, p. 16) writes that, ‘All human resource practices can be framed within a strategic focus. Strategic compensation links all pay and benefits to attracting, retaining and motivating employees.’ In the retail business Starbucks is best known for its benefit program. The company outstands in its benefit programs which are offered to both the full timers and the part time employees. The company strongly believed that if they treat their workforce well they are going to pay them back and help them achieve the organizational goals and success. They are following market lead policy in providing the wages to the employees, which means they are paying the highest in the retail market. The benefit programs they are offering to motivate and to make them committed to their work and organization are; the work/life balance, health insurance coverage, stock option, fitness program, child care and elder care assistance to the employees and partner connection. It is to believe that the employees feel important, more committed and associated to the company when they have a stake in its performance. Employee ownership program was introduced by the chairman in the company’s early years, to give the rights to the employees. Lynda (2005, pp. 39-41) states that, ‘employee have the desire to own their jobs- materials, ideals and the work they produce.’ The work culture of the organization plays a vital role in retaining the employees. The culture can be predicted by its mission statement and Starbucks’ mission is to provide a great job environment and treat each other with value and dignity, which clearly gives an idea that the company creates an environment that, is suitable for the employee to work. How to ensure the levels of motivation It is really essential for any organization to keep their employees motivated and committed towards their job and the company. ‘You may be the most knowledgeable, experienced, talented and capable manager in the world. But if your employees are lacking in motivation, mediocrity will creep into your organization.’ Insists Anne (2002, p. 50). In order to gain the employees’ enthusiasm towards work it is necessary that the company has a stable reward system. The employees working at Starbucks have an advantage that they are being provided with the best compensation and benefit system. Stewart (2007, p. 117) suggests that, ‘the more reliable the rewards and recognition system, the more it will drive the right behavior.’ It creates a sense of reliability for the company that whatever the efforts made by the employees they are being compensated and rewarded for that. As the company Starbucks planned to expand the business in the future, they would be needing a large number of workforce. The concept of job enlargement or enrichment could be very helpful for the attraction of the employees; the company needs to enlarge the duties and responsibilities of the employees that are hired. In today’s condition of financial turmoil, it is vital for the company to motivate the employees, who are currently functioning for them and also those whom they are planning to hire. They can not cut down their cost on the benefit programs because that would turn out to be a de-motivating factor. So, by increasing their job responsibilities, they would feel privileged and try to fulfill their duties with dedication and commitment. McGregor, Douglas (1960) suggests that, ‘Job enlargement – broadening the scope of an employee job adds variety and opportunities to satisfy ego needs.’ Although in the retail market Starbucks is leading in the human resource policies and are offering employee friendly programs but the analysts reported that the employees are not satisfied and complained that sometimes they were not paid the compensation for work-related injuries and they have to contribute for their own benefits. These views could be harmful for the company in the future, so it is the duty of the management to look after these matters and try to retain its people and to be committed towards its employees in the prevailing conditions of competition in the market and to be on the top with their employee welcoming policies. Conclusion On concluding the above discussion, with reference to the theories, it is to believe that the leadership approach used by the company Starbucks is of a democratic style. All the three theories of McGregor, Kurt Lewin and Rensis Likert are used to support the argument that the company involves its employees when it comes to decision making and planning to give them opportunity to fully utilize their potential. The policies they are using, in order to draw, retain and motivate through benefit programs, they are offering. The ownership program and the work environment they are providing is worth working with. References Bruce, A & Pepitone, JS, 1998, ‘Motivating employees’, pp. 144-145. [Online] Available at: http://books.google.com.pk/books?id=GuZzO2E7oTMC&pg=PA144&dq=how+to+motivate+employees. [Accessed 5 July 2009]. Bruce, A, 2002, ‘How to motivate every employee’, p. 50. [Online] Available at: http://books.google.com.pk/books?id=diMuuBFV6tUC&pg=PT1&dq=how+to+motivate+employees. [Accessed 3 July 2009]. Ford, L, 2005, ‘Transform your workplace’, pp. 39-41. [Online] Available at: http://books.google.com.pk/books?id=RvmfCOlEAmUC&pg=PA38&dq=how+to+motivate+employees+in+the+workplace. [Accessed 3 July 2009]. Kroom, J, 1995, ‘General Management’, pp. 355-357. [Online] Available at: http://books.google.com.pk/books?id=UGlqbHZDbU8C&pg=PA357&dq=theories+of+leadership. [Accessed 3 July 2009]. Lewin, K, LIippit, R & White, RK, 1939, ‘Patterns of aggressive behavior in experimentally created social climates’, Journal of Social Psychology, vol. 10, pp. 271-301. [Online] Available at: http://changingminds.org/disciplines/leadership/styles/lewin_style.html. [Accessed 5 July 2009]. Liff, S, 2007, ‘Managing government employees: how to motivate your people, deal with difficult issues, and achieve tangible results’, p. 117. [Online] Available at: http://books.google.com.pk/books?id=6lXBLFhRgDUC&pg=PA118&dq=how+to+motivate+employees. [Accessed 3 July 2009]. Likert, R, 1967, ‘The human organization: Its management and value.’ [Online] Available at: http://changingminds.org/disciplines/leadership/styles/likert_style.htm. [Accessed 5 July 2009]. Morgan, G, 1998, ‘Images of organization’, p. 38. [Online] Available at: http://books.google.com.pk/books?id=a_W8jXt4_eMC&pg=PA38&dq=how+to+motivate+employees+in+an+organization%3F. [Accessed 4 July 2009]. Raymond, A.Noe 1999, ‘Employee training and development’, pp.3-4. [Accessed 19 May 2009]. Reddick, CG & Coggburn, CG, 2008, ‘Handbook of Employee Benefits and Administration’. [Online] Available at: http://books.google.com.pk/books?id=F0kOEB6FnecC&pg=PA16&dq=how+is+compensation+and+benefit+used+to+motivate+employees. [Accessed 3 July 2009]. Worldatwork, 2007, ‘The WorldatWork handbook of compensation, benefits & total rewards: a comprehensive guide for HR professionals. [Online] Available at: http://books.google.com.pk/books?id=MiYSpBY7kq8C&dq=how+is+compensation+and+benefit+used+to+motivate+employees&source=gbs_navlinks_s. [Accessed 3 July 2009]. Read More