2013

Starbucks Corporation: Case Study in Motivation

HRM (Human Recourse Management)

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. This case is about Motivation and team work. A question and answer
session has done at the end to solve out the Starbucks case.

Article adapted from

http://www.freeonlineresearchpapers.com/starbuckscasestudy
11/19/2013
 Starbucks Corporation: Case Study in
Motivation
HRM (case solution)

HUMAN RESOURSE MANAGEMENT

A CASE STUDY ON STARBUCKS

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Prepared By

Rossi Norman Dias.

MBA

BRAC University.

Date: 19 November 2013

 Starbucks Corporation: Case Study in
Motivation
HRM (case solution)

Starbucks Corporation: Case Study in Motivation

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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
 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 Page | 4
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.
 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 have 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.

Article adapted from

http://www.freeonlineresearchpapers.com/starbuckscasestudy Page | 5

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.

SOLUTION OF THE CASE

 Starbucks Corporation: Case Study in
Motivation
HRM (case solution)

1) Starbucks’ employees can be seen as a formal team as opposed to an informal team.

Differentiate between ‘formal’ and ‘informal’ teams.

Answer: F
ormal team is those groups which are given legitimacy by the organization. For example, at
the Starbucks Company, the formal group is the formal organizational structure of the company which Page | 6
involves the flat structure involving the board of directors, managers, and the staff. This group consists of
a manager and his subordinates, and both of them share a common specialty.
I
On the other hand, nformal teams have no structure whatsoever and they do not focus on specialty. There
is no manager/leader; team members are completely equal in informal teams. It is said that when people
come together and start interacting with each other for a long time, they form informal team. Informal
groups are said to affect the organizational structure. The informal team is established in this company
(Starbucks) to ensure that communication has been effective. Instead of using the various stages in order to
reach those above, then these groups can be used to help solve those problems. For example, Starbucks uses
the informal groups to address the matters which arise in this company. It is through this group that the
information is communicated to the rest of the workers.

Thus formal and informal teams differ from each other in the following respects:

1. Origin: The reasons and circumstances of origin of both formal and informal teams are quite different.
The formal teams are created deliberately and consciously by the framers of the company. On the other
hand, informal teams arc created because of the operation of socio-psychological forces at the workplace,
that is, people while working together develops certain liking and disliking for others for the type of
interactions not provided officially.

2. Purpose: Since formal teams are deliberate creation, they are created for achieving the legitimate
objectives of the company. The informal teams are created by company members for their social and
psychological satisfaction.

3. Size: Formal teams may be quite large in size. Sometimes formal teams are constituted to give
representation to various interest groups in the company, and their size has to be kept large. However, the
informal teams tend to be small in size so as to maintain the group cohesiveness which is essential for the
informal teams to be attractive for the members concerned.

4. Authority: The members of formal team derive authority through the formal source that is through the
process of delegation and reallocation. Thus authority flows from the higher lo lower levels. In the informal
team, all members are equal; however, some may command more authority by virtue of their personal
qualities. Thus, authority is commanded. People give authority to those persons who are likely to meet
members' needs maximum. This is the way of emergence of informal leaders in the informal groups. Such
people have maximum positive interactions in the groups.

5. Behavior of Members: The behavior of members in the formal team is governed by formal rules and
regulations. The rules are normally directed towards rationality and efficiency. In the informal team, the
behavior of the members is governed by norms, belief, and values of the groups. The kind of behavior that
is expected of a member is specified by these factors.
 Starbucks Corporation: Case Study in
Motivation
HRM (case solution)

6. Communication: Communication is prescribed in the formal team. It is normally through chain of

command to which people refer as formal channel of communication. All communications in the formal
groups are expected to pass through that channel. In these informal groups, the communications pass
through informal channels.

2) The employees of Starbucks retail shops clearly work together well as a team. List four characteristics Page | 7
of teams that have ‘gelled’ together.

Answer: The employees of Starbucks retail shops clearly work together well as a team; according to this
the four characteristics of teams that have ‘gelled’ together could be the following respects:

 The Managers and supervisors of Starbucks company co-work with the basic level staff in front
line which creates the management system a much closer and more familiar atmosphere than other
bureaucrat places.
 The numbers of employees in Starbucks are usually from three to six, that helps staffs get to know
each other well and deeply. Any ideas and objections made by employees are treated of equal
significance.
 The chief executive officer of Starbucks Corporation confidently feels and believes that the spirit
of Starbucks is its employees and offers an interactive structure that makes personnel throw
themselves into their job.
 The Managers of Starbucks Corporation treat each employee equally and all of the stuff called
partners to narrow the gap between managers and employees.
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?

Answer:

a. Team size is determined by company/organizational task types, goals, and processes. So, the size of a
team is clearly an important factor, because a large team is hard to manage and sometimes it could be
biased to some individuals than others. Also it is difficult to know well and deeply every members of a
large team. Whereas, smaller teams experience better work-life quality and work outcomes. Smaller
team also may experience less conflict, stronger communication, and more cohesion.
b. The benefits to Starbucks enjoying of having small teams of staff in each branch are:
 It narrows the gap of bureaucracy.
 Stronger communication among the staffs.
 Experience better and quality work.
 It creates bridge between organization-level strategy and staffing decisions.
 It eliminates the distance between different statuses.
 It helps to treat employee’s equal importance.

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.
 Starbucks Corporation: Case Study in
Motivation
HRM (case solution)
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).

Answer: a. As reading the case of Starbucks Corporation it is clear that the three issues which need to be
addressed in the planning process are: Equal Treatment, Listen to the employees, Good welfare measures.
Page | 8

 Equal treatment: It is one of the important issues which need to be addressed in the planning
process. Equal treatment at the work place means that the employer may not treat anyone
differently to other employees. In the case we see that, the managers in Starbucks treat each
employee equally and all of the staffs are called ‘partners’. It helps to narrow the gaps between
managers and employees. Every employee deserves fair and equal treatment and respect in the
work place, it helps to create friendly working environment. So, if equal treatment addressed in the
planning process it will help a company to maintain a good management system and create a much
closer and more familiar atmosphere than other places.

 Listen to the employees: Listening to the employees can be another important issue which needs to
address in the planning process. Sometimes business faces ricks when they fail to address this
concern. In the case we see that, Starbucks wants it’s every employee to join in making and
developing plans, then work together in achieving their goals. As a result, their policies and
principles are communicated between all staff, and there occurs no limitation in employees’
personal opinions. Listening to the employees’ means giving them great importance which can
motivate and encourage them to concentrate on their work effectively.

 Good welfare measures: Good welfare measures is an issue where employees are offered welfare
policies like medical insurance(including health, vision and dental), commodities discounts, house
rent etc. In the case we observe, all employees of the Starbucks, including informal personnel, are
offered a great deal of welfare policies. Moreover, the partners who work over 20hours a week are
entitled to benefits. So, this issue needs to be addressed in the planning process to motivate the
employees.

b. The three things that Starbucks can do continually to ensure goals accomplishment are:

i. Motivate employees

ii. Continue team work and communicate properly

iii. Maintain excellent relationship (with the employees and customer).

i. Motivate employees: Starbucks is already a famous coffee shop in the world and it has been one of the
most rapid growing corporations. If Starbucks wants to keep this accomplishment than it has to motivate
its employees properly on a continue basis. Starbucks believes that if the employees are motivated, they
work properly for the accomplishment of the organizational goal. As Employees are the heart of any
 Starbucks Corporation: Case Study in
Motivation
HRM (case solution)
business so by motivating its employees will help Starbucks not only to achieve its goal but also to expand
its business.
ii. Continue team work and communicate properly: Without an effective communication between Managers
& employees an organization can’t go for a long way. It means it can’t sustain in the business world. So if
Starbucks wants to ensure continually goal accomplishment, it must have to communicate in a proper
channel.
iii. Maintain excellent relationship: To ensure the goal accomplishment Starbucks should maintain a good Page | 9
relationship with both customers and its employees. It provides great support to its employees as well as
customers, so by continuing this relationship Starbucks can ensure its objective.

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

Answer: The managers of Starbucks treat each employee equally and all of the staffs are called partners.
g
Moreover to narrow the ap, they also co-work with basic level staff in the front line so that they can
maintain a good management system and create a much closer and familiar environment. Managers also
pay attention to employees through a communication channel. Starbucks manage to keep good relationship
between their managers and employees are:
 Promote Understanding of Shared Goals: For employees to work together effectively, they must
understand group and individual goals. Lack of goal clarity often is misidentified as an individual
performance issue. This leads to blame, conflict and increased turnover by frustrated employees
who are working hard but not getting the results the organization expects. Starbucks promote a
clear understanding by sharing goals to its employees and managers.
 Promote Understanding of Task Relevance: When employees understand shared goals, talent
managers can cultivate an atmosphere focused on problem solving, removing performance barriers
and delivering outcomes. This eliminates finger-pointing because when everyone understands the
relevance of everyone else’s contributions, employees have increased awareness of their
interdependencies and thus have more respect for one another. Starbucks manages to promote a
clear understanding about its every task relevance among the managers and employees.
 Managers and employees both has access in giving opinion: Starbucks manages to keep good
relationship between their managers and employees by permitting them both in presenting their
views and opinion.
 Equal Treatment: Starbucks treats all it’s employees equally, which help to manage good relation
between managers and employees.
 Flexible working Hours: Starbucks: Starbucks have flexible working hours, where 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.
 Good welfare measures: Starbucks offer a great deal of welfare policies, for instance, commodities
discounts for employees.
 Treat as important Asset: Starbuck treats it’s employees as the most important asset in the
corporation, which also help to manage good relation between managers and employees.

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

Answer: The five issues that teams should take note of and address if necessary are:

 Strong values to the customer: Team should give strong note to it’s customers. A strong value to
the customers comes from the culture of company which develops customer’s values and society’s
values including the value of organization to drive the direction of business improvement.
 Starbucks Corporation: Case Study in
Motivation
HRM (case solution)
Starbucks mission is that of providing a good environmental workplace and treating partners with
respect, various elements of business, highest standard of delivery coffee, engaging communities
and environment, active to make customer satisfaction and having profitable business. The
company has made a long run relationship with suppliers and sellers more than need low prices
because it wants to high quality products and service. Strong values drive customer value come
from the culture of company which develops customers values and society’s values including the
value of organization to drive the direction of business improvement. Page | 10

 Values-based service brand and communication for values resonance: Brands are very
important because it can communicate with customers. So a team’s responsibility is to value it’s
brand and if the products or services of an organization are good they are appreciated by the
consumers. But if they are not there will be damage of company’s image. Starbucks has succeeded
in marketing and has good resonance because it has strong relationships with its customers, the
local communities that create trust to each other. Starbucks has collaborated with social
responsibilities and also communicate company activities with its stakeholders to promote an
accountable environment. Brand of Starbucks has succeeded by improving the environment of the
stores through attractive furnishing, fixtures, artwork and music. Starbucks has designed the stores
as the bridge between the workplace and home for the customers. Starbucks has given to create a
warm and comfortable environment for the customers who would always feel different when they
would come to a Starbucks store to consume coffee.

l
 Values-based service leadership for living the values: For any team the place of a eader is very
important and vital. A team should take notes to value its leadership service. Starbucks has
supported employees with touchable incentives like working conditions. Furthermore engages in
empowerment, corporation and communication of culture and value. All staff is called partners
without any regards to positions. The company empowers by decentralizing, where partners
corporate with the teams in each area.

 Values-based service experience for co-creating: The main concept of services is that customers
should have real experience before buying and consuming services or commodities which they
need. The team responsibility is to priorities this issue. In-case of Starbucks we see that the
company has offered a good music and great environment in the Starbucks houses. No doubt, why
customers come to visit Starbucks to meet their friends, relaxing ever working because Starbucks
it offers customers more than beverages.

 CSR as a strategy to sustain in the business: A team should take note to it’s CSR activities. CSR
c s r
or orporate ocial esponsibilities can improve corporate production or services to build the
values. Starbucks has the long term relationships with suppliers to control the qualities and prices,
which they work together with suppliers and discuss strategic business to improve and develop
products. Starbucks focuses on social and environmental points. Starbucks company engages the
business ethics, which it can see Starbucks mission or Starbucks code of conduct (from the part of
Strong values drive customer value) including company’s policy both social and environmental.

f
These are the ive 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.
 Starbucks Corporation: Case Study in
Motivation
HRM (case solution)

Answer: The three principles that Starbucks implement in motivating their employees are given below:

Equal treatments: Starbucks treat each employee equally and called partners, even the team leaders. They
also work with sales team members in front line to narrow the gap between them. They have small teams
which contains 3 to 6 workers, so that they can maintain good management system. Equal treatment at the
Page | 11
work place means that the employer may not treat anyone differently to other employees. Every employee
t
deserves fair and equal reatment and respect in the work place, it helps to create friendly working
environment.

Listen to employees: Listening to the employees’ means giving them great importance which can motivate
and encourage them to concentrate on their work effectively. Through a well-organized communication
channel, Starbucks listen to their employees. Managers plan according to employee’s requirements which
motivate them a lot. In the case we see that, Starbucks wants it’s every employee to join in making and
developing plans, then work together in achieving their goals. As a result, their policies and principles are
communicated between all staff, and there occurs no limitation in employees’ personal opinions.

Good welfare measures: It is an issue where employees are offered welfare policies like medical insurance
(including health, vision and dental), commodities discounts, and house rent etc. Starbucks offer a great
deal of welfare policies: for example, a commodity discounts medical insurance and vacations. Also the
partners who work more than 20 hours entitled to benefits. Starbucks not only offers a great deal of benefits,
they also allocate stock dividends to all employees with a free script issue. Because of this they have the
same goal, which motives then to increase sales to earn more profits.

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

List four of these aspects.

Answer: E
mpowerment is one of the philosophies discussed most often, especially as it relates to the
corporate team environment. The idea is simple enough: by implementing practices that help employees
feel confident, capable, and in control of the outcome of their work, they feel empowered to do that work
effectively and without excessive oversight. Ideally, this ensures commitment to the company's core
mission and vision, which results in greater productivity over the long term. Management needs to commit
certain aspects in order to empower employees. These aspects are:

1. Giving Reward: To empower employee’s manager needs to commit aspects of giving reward which
can help employees to continue to feel empowered, by rewarding them for their productivity will encourage
them to their job. A nice bonus or a gift card is always appreciated as a reward.
2. Developing Competency: In order to implement employee empowerment the employees must be
competent. Competency goes beyond developing job-task specific knowledge. Employees must
be properly trained. It does not make sense to empower employees to do things such as make
decisions or approve or initiate action if they are not properly trained
3. Delegating tasks: Once an employee has enough training that their ability to do the job is
unquestioned, manager will have to remind them that they are, in fact, empowered to do that job.
In other words, start delegating tasks to them, and make them aware that it's up to them to get the
job done.
 Starbucks Corporation: Case Study in
Motivation
HRM (case solution)
4. Sharing Information: Information is what the organizational culture is made of initially. Information
is the gatekeeper to power. Sharing information about goals and, "Effective communication about
the organization's plans, successes, and failures may seem commonplace, however its importance
cannot be undervalued. So, management needs to share the information about the organization’s
plan with the employees to empower them.
Page | 12
These are the four aspects that management needs to commit to empower employees.

Conclusion

Starbucks changes the behaviours and view points of global consumers of coffee, and this successful
example has caught global attention. Nowadays, it is not only one of the fastest growing corporation,
but also an outstanding business model with low employee turnover rate and high profit performance
shows that motivation is the key factor of a company policy, opposite to the principles of classical
management which is only concerned about production and ignores workers’ ideas. A good
relationship between managers and employees could maintain a high quality of performance. We can
learn from Starbucks: using the correct strategy leads to success.