Innovation and Change - Case Study Example

Innovation and Change Introduction Any organized human activity, which is done in-group, will be most times constituted into an organization. So, Organization is a structure with a ‘collage’ of workers doing their allocated work under the supervision of a leader, for the benefit of the organization as well as them. The workers will be initially recruited for different roles or jobs according to their educational qualifications, experience, skill, knowledge etc. After the recruitment and apportionment is over, it is the duty of the organization importantly its leader to provide the employees an optimal working environment. In that environment only, employees will show optimum productivity, with the leader optimizing the employees’ productivity. But, sometimes organizations will not be able to provide a best working environment due to various factors, with leader’s performance failing in those factors. This will surely bring down the motivation level of the employees to bare minimum. With less motivation, the employees will be hard-pressed to use his/hers physical and mental part, to work effectively for the organization. This will lead to a situation when the organizations like Starbucks might commit certain mistakes, affecting its name and productivity. To stop mistakes from happening, improve productivity and importantly change that negative image, the same organizations will come up with certain strategies to correct its name as well as to improve profits. Executive Summary Starbucks, US based chain of Coffeehouse shops, is one of the well known brands, having a worldwide presence. But, as discussed above, Starbucks fell short in certain ethical related aspects affecting its brand image in the early stages of 2000’, thereby necessitating a strategic change. So, this paper will firstly analyze the factors that necessitated changes in Starbucks’ functioning, as those factors formed a kind of cultural web around Starbucks’ organizational culture, giving it a negative image. Then the paper will discuss the strategies or steps, Starbucks took under the leadership of its Chairman and CEO, Howard Schultz, to actualize those changes, even while pointing out the negative factors or resistance that happened while implementing or actualizing the changes. Finally, the paper will also discuss how the outcome of the change management, particularly how Starbucks was able to replace the bad image through a series of steps under the concept of CSR (Corporate Social Responsibility). Background and the factors that necessitated or caused the changes Starbucks Coffee or Corporation, US based coffee chain was founded by three persons Jerry Baldwin, Zev Siegel and Gordon Bowker in 1971. They started of by selling high-quality coffee beans and other coffee related equipments. Then in 1982, Howard Schultz joined the Starbucks shop at Seattle. In 1985, he made a trip to Milan, Italy to study the coffee market there, and coming back to Seattle, he advised the Starbucks management of that time to sell coffee and espresso drinks along with the beans, seeing the potential to develop a similar coffeehouse culture in Seattle (starbucks.com). But, the management team rejected Schultz’s idea under the pretext that entering the beverage business would sidestep the company and divert from its main focus of coffee beans. On the other hand, Schultz was very sure that there is a market for coffee-based beverages, and so he left the Starbucks and started the Il Giornale coffee bar chain in 1985. II Giornale was able to create a good impression in the market and was able to attract the customers. This strategic leadership shown by Schultz was rewarded with the ultimate reward in 1987, when the original Starbucks management team sold its entire Starbucks unit to Schultz and his company. With the acceptance coming from the same persons who rejected his idea and the Starbucks’ unit in his hand, Schultz renamed Il Giornale with the Starbucks name and aggressively marketed the coffee-based beverages also as Starbucks, thereby expanding its market all over U.S. From that beginning, Starbucks has elevated his status to become the world’s largest Coffee shop chain because of its presence in more than 40 countries. But, like any other high performing organizations, Starbucks also wants to grow, profit wise, by increasing the number of shops. Apart from this aspiration, Starbucks also wants to establish it as the most recognized and respected brand in the world. To achieve that brand image, Starbucks apart from putting its marketing department to fullest work, wanted to relieve itself from the cultural web or shed its negative image in relation to ethics. That is, Starbucks’ management in the 2000’s indulged in certain non-ethical activities, which become a part of the organizational culture with employees also playing their part. As the management themselves, initiated those non-ethical processes the Starbucks’ culture was riddled and stuck with those aspects, creating a kind of cultural web. So, Starbucks initiated steps to escape or relieve from this cultural web by changing certain ethical related aspects affecting its brand image. The background or factors for this change or initiative is that, in the early part of 2000, Starbucks came under attack from different types of people for its involvement in controversial and unethical issues like Fair Trade coffee and bovine growth hormone milk. Fair Trade Coffee is the term given to the coffee beans that are purchased through ethical means, and importantly by providing fair price to the coffee growers in the home country and in Third World countries. That is, there have been instances, when many small coffee farmers receive prices for their coffee that are less than the costs of production, forcing them into a cycle of poverty and debt. Starbucks was also accused of this practice, as evidence suggested that they have been buying coffee beans from the African coffee growers for a very low price. Also, Fair Trade coffee means providing the coffee growers or the country or society of the coffee growers with community development, health, education, and environmental stewardship (globalexchange.org). But, Starbucks fell short in taking care of these aspects as well. So, this need to practice or vend Fair Trade coffee by taking care of the coffee growers and their community is the one of the important factors that necessitated change in Starbucks’ functioning. Then, the Starbucks’ practice of using recombinant bovine growth hormone (rBGH) treated milk also necessitated change of its danger to the human health. That is, if the cow is injected with BGH or rBGH, it will produce higher quantity of milk. But, coffees prepared with rBGH treated milk contains substantially higher amounts of a potent cancer tumour promoter called IGF-1, and also contains higher levels of pus, bacteria, and antibiotic, leading to health problems (shirleys-wellness-cafe.com). As Starbucks used this BGH treated milk, it gave raise a lot of criticism, again necessitating change in this aspect as well. This recognition of problems inside Starbucks forms the first part of Lewin’s 3 Step processes, which is unfreezing. According to Lewin, unfreezing the existing situation or problems only forms the first step, and as the Starbucks and its management have recognized the problems and have unfreezed it, they have fulfilled the first step of the Lewin’s process. So, the above discussed factors, which incorporated into Starbucks’ culture and formed a cultural web, only ‘pushed’ Starbucks and Howard Schultz to bring about major changes, leading to the formulation of strategies, which improved the company’s fortunes, take care of ethics and also created a respectable image for it. Evolution of Starbucks into Ethical Company The main strategy which was successfully implemented by Starbucks as part of change management is to build long term productive relationships with farmers who supply the coffee beans for its coffee products. That is, Schultz mandated that coffee farmers especially from its major sources in the African countries of Ethiopia, Rwanda, etc, should be paid premium prices, so that it constitutes the concept of Fair Trade and also they have enough money to look after the family, and avoid planting illegal crops. Because of this strategy or evolution, Starbucks was able to build a strong and positive ethical image. That is, when Starbucks took care of the farmers’ needs according to the rules of the Fair Trade, the coffee that was vended in Starbucks’ shop evolved into a Fair Trade Coffee. So, Starbucks ‘evolved’ into an ethically sound organization with the introduction of Fair Trade or ethical coffee in 2002. Among the socially conscious actions, this idea of concentrating on Fair Trade coffee is working for Starbucks even now, with the ethics issues being taken care. Starbuck have embraced Free Trade coffees in a big way creating number of records. “Starbucks is North America’s largest purchaser of Fair Trade CertifiedTM coffee. Starbucks is the only company licensed to sell Fair Trade Certified™ coffee in 23 countries.” (starbucks.com). Adaptation of new practices as part of the change process One of the important decisions, Starbucks took as part of its change process is banning the use of rBGH in its coffees. That is, when the dangerous nature of rBGH was revealed, there was opposition from various quarters against the Starbucks’ continuous use of rBGH. And when the opposition from the customers strengthened, Starbucks went with the change and adapted to the changing environment. So, the Starbucks decided to stop using the rBGH treated milk, and then fully switched over to the suppliers of organic milk, adapting to the new regime. “Our entire core dairy supply – fluid milk, half and half and whipping cream –is sourced from suppliers that do not use rBGH, a synthetic growth hormone. We take our customers’ requests seriously. After over a year of work with our suppliers, every espresso drink that’s ordered in our company-operated stores now comes with dairy sourced without the use of rBGH” (starbucks.com). Thus, stopping the use of rBGH in its coffees is a major change initiated by the Starbucks, which optimized its brand image and respectability. Revolution which improved its functioning as well as its brand image As part of the strategic initiative by Howard Schultz, the performance of Starbucks’ employees was optimized or accentuated by the adoption of a revolutionary mission statement. The principles that are put forward in that mission statement helped its employees (or ‘partners’ as they were known by the Howard Schultz and his management team) to determine their roles in correlation to the company’s goals. Then, importantly, it also gave them the opportunity to provide their feedbacks about the various principles of the mission statement. That is, the Starbucks management led by Schultz introduced the mission statement among the employees, particularly the new employees, and formed the final mission statement after the analysis of the feedback from the employees. “New employees discuss the Starbucks mission statement and do customer-service role-playing.” (Schultz qtd. inc.com). So, the revolutionary idea that was implemented by Schultz was the actualization of the ‘customer feedback incorporated company’s mission statement’. As rise and fall of any organization will depend on the role of the employees, they have to be provided the best working environment by the management. So, the plan or idea of Starbucks to provide a favourable working environment was implemented through the adoption of a mission statement, incorporated with employees’ feedback. And the things Schultz did, to integrate the employees’ feedback into the mission statement can be divided into three stages. In the first stage, the Schultz and the management of the Starbucks distributed a copy of the mission statement and gave comment cards for feedback during the initial orientation of the new employees or “partners”. Then in the second stage, Starbucks related all the decisions that were made inside the organization to the guiding principles. And finally in the third stage, the company formed a “Mission Review” system so that any employee could comment on a decision which was undertaken in relation with the consistency of the six guiding principles. Then based on the comments or feedback given by the employees, Starbuck released a final statement, “people first and profits last”. This emphasis on the human employees and the customers by Schultz showed Starbucks’ ethical values. This revolutionary change as part of the change management process, gave Starbucks a favourable image. Starbucks role in the reconstruction of communities The other main strategy of Starbucks which formed part of Starbucks change management process and importantly fulfilled its CSR (Corporate Social Responsibility) is the implementation of various social development programs, thereby reconstructing many communities. The program which involves construction or reconstruction of infrastructure to the needy, fulfils the ethics issues because the rich and self-sufficient organizations are expected to do something to the ‘insufficient’ sections. It aided CARE by providing more than $100,000 a year. Its decision to co-operate with CARE has resulted in many beneficial activities to many communities, like construction of many welfare infrastructures including clean-water systems, health and sanitation training and literacy. So, the contribution made by Starbucks helped CARE to implement many society elevating projects, which is still elevating the living condition of the people in many countries especially Third World countries. Apart from elevating the peoples’ or farmers’ lives, these changes are also elevating the company’s image. So, by concentrating on their important partners and aiding them, Starbucks are keeping themselves ethically correct, thereby changing or nullifying the negative image it gained. The other ethics based strategy which was formulated and implemented by Schultz is providing aid to environmental initiatives. That is, the company’s environmental affairs team under the guidance of Schultz took many steps to minimize the company’s “footprint” in environmental problems inside its coffee shop and in other premises. For that, they suggested and implemented recycling and energy conservation by reducing wastes and by educating the ‘partners’ through the company’s “Green Team”. Johnson and Scholes (2002, p. 107) state, that an organization might develop in the future, based on groupings of key environmental influences. All these initiatives helped Starbucks to actualize the changes it wanted to implement, fulfilling the second step in Lewin’s 3 step process. Lewin’s second step in the process of changing behaviour is movement. In this step, it is necessary to move the target system to a new level of equilibrium into a favourable end state. This is what Starbucks did, when it evolved into a ethical company by providing ethical or Free Trade coffees, then it adapted to the changing environment and started using non-rBGH treated coffee, it also created a kind of revolution by incorporating employees’ feedback into its important mission statement and finally by reconstructing communities, it showed its ethical side and fulfilled its CSR. Outcomes After Starbucks initiated these above mentioned processes or initiatives, as part of the change management, to change its brand image into a favourable one, it got the desired outcomes. Firstly, its strategy to liaise with CARE resulted in Starbucks getting the prestigious International Humanitarian Award from CARE. “Schultz was the recipient of the International Humanitarian Award from CARE for his vision and leadership in developing an innovative partnership between Starbucks and CARE to support people in coffee origin countries.” (wpcarey.asu.edu). Then, even many surveys conducted by prestigious groups and agencies among the companies, showed that Starbucks had indeed become a top organization in terms of ethics and CSR. For example, in 2006, Starbucks ranked seventeenth on the Business Ethics “100 Best Corporate Citizens”. Also, it remained for eight years in the list of Fortune “100 Best companies to work for”, staying at the 26th position in 2006. These awards and recognitions formed the best outcomes of the changes initiated within and outside the Starbucks. Conclusion Finally, the organization and its leader should not stagnate and saturate. They should learn new levels of perception and acquire lot of insights for running an organization, and through that option only an organization can change the negative things and actualize positive changes. "But unless it is seen as the task of the organization to lead change, the organization - whether business, university, hospital and so on - will not survive” (Drucker, 1999, 73). This is what Starbucks and its CEO and Chairman, Howard Schultz did, when Starbucks’ image particularly its ethical image was bordering on the negative side. Through series of steps, Starbucks was able to achieve the intended outcomes and importantly reach the third stage of Lewin’s 3 step change model as well. The third step of Lewin’s model is refreezing. That is, when the organization initiates the changes and achieves the desired end state or outcome, its main duty is to sustain or ‘stick’ to the changes. Starbucks was able to do it, as it is continuing the introduced practices even now, giving it a favourable brand and ethical image . Bibliography Drucker, P.F. 1999, Management Challenges for the 21st Century, Oxford: Butterworth-Heinemann. globalexchange.org, Fair Trade Coffee, viewed on March 21, 2008 http://www.globalexchange.org/campaigns/fairtrade/coffee/ inc.com, Lasting Impressions, viewed on March 20, 2008 http://www.inc.com/magazine/19980701/968.html John G. and Scholes K. 2002, Exploring Corporate Strategy: Text and Cases, 6th ed. England: Financial Times/Prentice Hall. Starbucks.com, Fair Trade and coffee social responsibility, viewed on March 8, 2008 http://www.starbucks.com/aboutus/StarbucksAndFairTrade.pdf starbucks.com, Statement and Q&A-Starbucks Completes its Conversion – All U.S. Company-Operated Stores Use Dairy Sourced Without the Use of rBGH, viewed on March 20, 2008 http://www.starbucks.com/aboutus/pressdesc.asp?id=819 starbucks.com, 2008, Company Timeline, viewed on March 20, 2008 http://www.starbucks.com/aboutus/Company_Timeline.pdf shirleys-wellness-cafe.com. Genetically engineered Recombinant Bovine Growth Hormone (rBGH/BST) in your milk, viewed on March 12, 2008. http://www.shirleys-wellness-cafe.com/bgh.htm wpcarey.asu.edu, Deans Council of 100, viewed on March 20, 2008 http://wpcarey.asu.edu/community/dc100/exe_year_starbucks.cfmwpcarey.asu.e du, Read More