Introduction
Leadership is the ability to direct and persuade people towards achieving a shared aim or dream. To ensure an organization prospers, it is paramount that those at the top understand how important effective leadership is to motivate staff members, cultivate a favourable work atmosphere and stimulate success. By considering pertinent scholastic theories paired with Starbucks’ experiences, this study aims to highlight Schultz’s competency when managing diverging aspects such as cultural diversity, social responsibility (CSR), endurance, and gender pay disparity. This paper examines the vital impact of good leadership demonstrated by Schultz in overcoming the matters above, further solidifying its significance for progress. Through evaluating realistic realizations augmented alongside applicable theoretical foundations belonging to Starbucks, one seeks exposure to leaders’ outstanding roles in victory attainment within corporations.
Background
2.1 Overview of Starbucks and Howard Schultz
Starbucks, a prominent global coffeehouse chain, has achieved widespread success and established a significant market presence across six continents, including Asia, Europe, and North America (Aminuddin et al., 2021).In July 2023, the market capitalization or ‘market cap’, i.e. stock price per share, totalled $117.98 billion, thus positioning it 113th in Fortune 500 most valuable companies index. According to surveys done last year, Starbucks still boasted maximum US locations, although some 600 stores had closed their operations (Starbucks, 2020), demonstrating it hadn’t relinquished much grasp over American commercial establishments -40%. To foster a safe and peaceful atmosphere amongst consumers, former CEO Howard Schultz integrated these shops as Third places where people come together for social meetings, hangouts etc….. This new premise empowered customers with the right not just to enjoy free space at cafes without paying any fees(Starbucks 2022). It is important that premises are made appealing, which stirs a sense of homely pleasure, so shoppers can relish quality speciality coffees.. indulgent meals/ pastries etc., while simply taking comfort contentedly–divested from everyday stressors.
In 1981, when he ventured into Pike Place Starbucks in Seattle for the first time, Howard was enchanted by the taste of Sumatra coffee. There he met seasoned coffee masters who had expertise and passion like none other- so dedicated that they gave out their best beans and espoused them. His sheer determination earned him a permanent place in Starbucks which only progressed through thick and thin- sometimes heading the company’s charge as its CEO; many times pacing it up to open 3000 outlets worldwide across continents from Japan, China to Europe; restoring coffee brewing traditions with better customer service all along;lastly implementing unique plans such as The Starbucks College Achievement Plan benefitting partners’ academics too (George, 2015)
2.2 Challenges Faced by Starbucks
Starbucks encounters significant challenges in its global operations that impact the company’s performance and reputation. One of these challenges is cross-cultural conflict. Starbucks needs to adapt its business model in order to operate effectively within the French market. In this instance, the contention was that the corporation engaged in the sale of inferior products at excessively high costs. The entrance of Viennese Coffee sparked the attention of the local population. Starbucks faced a novel challenge within the context of its operations in Saudi Arabia. The logo of the corporation was considered to be obscene, leading to customer complaints. In order to garner the affection and backing of the community, it was necessary for them to acclimate themselves to the prevailing local customs. The previous iteration of the logo prominently displayed a mermaid without upper body coverage. However, the most recent revision included a crown design that resembles ocean waves. Moreover, there exists a social convention wherein individuals of different genders are typically expected to occupy separate seating arrangements in public settings. As a result, the firm established distinct waiting and working areas for individuals of different genders.
One of the complications encountered by Starbucks is related to its sustainability agenda caused by its expansive international expansion. Environmental ramifications such as energy utilization, garbage handling and ensuring ethical sources all have a considerable impact on the brand’s reputation and status in society. Recently, Starbucks issued an announcement regarding its vision for long-term objectives; amongst those declared were targets to halve carbon discharges, water intake and amount of litter produced during 2030. The corporation seeks to actively benefit our planet by building out resource-affirmative operational plans moving forward.
Another significant challenge Starbucks faces is the increasing competition in the coffee industry. With the rise of speciality coffee shops and fast-food chains offering coffee, Starbucks faces intense competition for market share. This competition is further intensified by the increasing popularity of online ordering and delivery services, making it easier for consumers to access coffee from various sources. Despite cut-throat competition from various international rivals such as McDonald’s, Tim Hortons and Dunkin’ Donuts, Starbucks is determined to broaden its expanse by surpassing the milestone of 55K stores all around the world before 2030. Their speculated sales are likely to reach $32.914 billion in 2022 only! Unlike them, their major adversary Dunkin opened merely 9000 retail outlets in 2020 within the US alone; however, their growth estimates indicate a CAGR (Compound Annual Growth Rate) of 3.9%, forecasted over five years span based on Strategic Analysis Of Starbucks Corporation report by Nithin Geereddy, Both giants enjoy immense customer loyalty within US market respectively yielding approximately 60% pie share each on a combined basis amidst global coffee & doughnut markets (Geereddy, 2014).
Theoretical Underpin and Leadership Style(s) of the CEO
3.1 Skills approach
Schultz’s leadership style aligns with the Skills Approach, which emphasizes the importance of specific skills for effective leadership. Confidence, determination, and integrity are essential for successful leaders. Schultz exemplifies these traits in his strategic decision-making, displaying a strong sense of purpose and conviction in guiding Starbucks through challenges and driving its growth. Howard Schultz’s determination can be seen in his priority to the well-being and development of his staff through employing his formidable drive and persuasive abilities to realize his overarching goals. Schultz has moreover exhibited the capacity to inspire and drive his personnel, encompassing both guidance and emotional acumen. For example, on the inaugural day of Starbucks’ establishment, Schultz proceeded to convene with the remaining partners of the company. The individual possessed a set of three key points inscribed on a note card measuring five by 7 inches that read as follows: “1. Speak from my heart. 2. Put myself in their shoes and 3. Share the Big Dream with them” (Sachs, 2020). Schultz placed significant emphasis on cultivating a corporate culture that prioritizes the well-being and development of individuals within the organization. This portrays his integrity and determination. According to him, the labour force generates economic value by producing goods and services, thereby delivering value to consumers. In a previous statement, he expressed that the company fundamentally embodies human-centric values. It would be unlikely to encounter another consumer brand that is as heavily dependent on human behaviour (Ignatius, 2010).
Moreover, Schultz demonstrates exceptional social and emotional intelligence, a crucial aspect of the Skills Approach. He connects with employees, stakeholders, and customers, fostering trust and camaraderie within the organization. For example, he offers a wide range of benefits, from health coverage to stock options and educational assistance. Workers at Starbucks who put in at least 20 hours per week are eligible for the company’s health insurance program (Geekmaster, 2021).
Drawing from the Three Skills Approach, Schultz exhibits various critical problem-solving skills during his leadership. As a leader, he possesses technical skills, evident from his in-depth knowledge and focus on studying coffee beans, contributing to the company’s quality and reputation. Moreover, Schultz demonstrates strong human skills, effectively communicating with employees and stakeholders to build relationships and motivate the workforce. For example, with regards to addressing the concerns raised by his constituents, he ensures that proper measures are implemented, as demonstrated by a particular event involving an employee who filed a complaint over their work schedule and afterwards discussed it during an interview. Upon acquiring knowledge of this data, he expeditiously initiated a dialogue with the shop manager with the aim of establishing a more uniform and reliable framework for the scheduling of employee shifts (Geekmaster, 2021). Additionally, Schultz displays conceptual skills, enabling him to envision the company’s future and formulate strategic plans. Recognizing that Schultz used the term “partners” when referring to employees and that he placed a premium on vision is crucial. In addition, he instituted a policy of rewarding staff members with “Bean Stock” (Tan & Ko, n.d.).
For instance, by applying the Nine Key Problem Solving Skills, Schultz effectively addresses specific challenges faced by Starbucks. For instance, when confronting environmental impact concerns, Schultz employs constraint analysis to develop sustainable sourcing practices, demonstrating wisdom in balancing business goals with social and environmental responsibility. Furthermore, his sense-making and visioning skills drive Starbucks’ commitment to corporate social responsibility (CSR) and community engagement, aligning the company’s objectives with broader societal benefits.
3.2 Leadership Style
A transformational approach characterizes Schultz’s leadership style at Starbucks, as he surpasses conventional management practices to inspire and motivate employees. Transformational leadership focuses on cultivating a collective sense of purpose and passion within the workforce, encouraging employees to excel and contribute significantly to the company’s success. Schultz creates an atmosphere that promotes innovation, continuous improvement, and adaptability, allowing the company to thrive in a dynamic market (Saulina & Syah, 2018). In his participative leadership style, Schultz values the input of employees at all levels, empowering them to actively contribute their ideas and perspectives to decision-making processes. This participatory approach fosters a sense of ownership and commitment among employees, cultivating loyalty and dedication to Starbucks’ goals.
Moreover, Schultz’s ethical leadership principles guide the organization in operating with integrity, ensuring responsible business practices and accountability for its social and environmental impact (Tien et al., 2020). By prioritizing corporate social responsibility (CSR) initiatives, Starbucks has implemented various sustainability practices, responsible sourcing efforts, and community engagement endeavours, aligning the company’s objectives with broader social and environmental benefits. To demonstrate ethical leadership, Schultz exemplifies transparency, honesty, and a commitment to corporate social responsibility.+. Thus, Schultz’s leadership style, characterized by transformational and participative approaches, fosters a positive and inclusive work culture that empowers employees and positions Starbucks as a socially responsible global leader.
Application
4.1 Role of Howard Schultz at Starbucks
As the CEO of Starbucks, Howard Schultz played a crucial role in addressing various challenges faced by the company and setting realistic goals to ensure its success. One of the significant challenges was cross-cultural understanding, given Starbucks’ global staff and customer base. Schultz recognized the importance of cultural sensitivity and inclusivity in fostering a harmonious work environment and seamless customer interactions. To tackle this issue, he implemented comprehensive diversity training programs that educated employees about different cultural norms, values, and communication styles, fostering mutual respect and belonging among diverse employees (Valerevna, 2022). Schultz also demonstrated strong leadership in corporate social responsibility (CSR). Recognizing Starbucks’ responsibility as a globally influential brand, he championed various sustainability initiatives to reduce the company’s environmental impact. Responsible sourcing of coffee beans, eco-friendly packaging, and energy-efficient practices was prioritized, aligning Starbucks’ business objectives with social and environmental benefits. The emphasis on CSR initiatives resonated positively with socially conscious consumers, further strengthening the brand’s reputation.
Another challenge Schultz addressed effectively was the gender pay gap and promoting diversity and inclusivity within Starbucks. He advocated for pay fairness and equal opportunities for employees, irrespective of gender, fostering an inclusive work environment that boosted employee morale, job satisfaction, and productivity. Schultz pursued a proactive strategy to combat the gender wage disparity and encourage variety among Starbucks. As part of this plan, compensation was made equivalent regardless of sex, inquiries on former salaries were eliminated from interviews, and recruiting postings were accessible publicly with straightforward details. This policy’s aims included allowing all employees unbiased opportunities at remuneration, creating a congenial milieu that embraced differences between genders and sustaining an elevated talent pool coupled with morale-bolstering results for the business overall. Schultz’s commitment to diversity and equality also made Starbucks an attractive employer with a diverse talent pool. Drawing from transformational and participative leadership styles, Schultz prioritized open communication and encouraged employees’ active participation in decision-making processes, fostering a culture of collaboration and engagement (Wang et al., 2022). The generous benefits program at Starbucks showed the company’s dedication to diversity and equality, with features including paid family, medical, and sick leave. Employees with caregiving duties were also provided with access to Care.com for ten days of kid or elder care. To further promote justice and equity, Starbucks instituted consistent and clear protocols for annual wage hikes and incentives. His visionary mindset and dedication to responsible leadership played a pivotal role in transforming Starbucks into a socially responsible organization.
4.2 Impact of Schultz’s Leadership
Howard Schultz’s leadership style and approach have profoundly impacted Starbucks, driving its growth, fostering a positive work environment, and reinforcing its reputation as a socially responsible brand. One of the critical theories that align with Schultz’s leadership style is the situational leadership theory, which emphasizes the importance of adapting leadership behaviour to suit the readiness and competence of employees (Kim & Park, 2021). By tailoring his leadership style based on employees’ varying needs and capabilities in different regions, Schultz ensures that his guidance is relevant and practical, increasing trust, motivation, job satisfaction, and productivity among the workforce. However, the situational leadership approach also presents some challenges. Different cultural settings may require nuanced leadership approaches, and understanding cultural norms and values becomes crucial for effective leadership. If managed carefully, situational leadership can lead to consistent leadership behaviour and decision-making, potentially causing employee confusion and uncertainty. Schultz faces the challenge of balancing consistency in leadership with adapting to local cultural preferences, requiring ongoing effort, sensitivity, and cultural intelligence from him and the leadership team. Schultz’s challenge lies in striking the right balance between maintaining Starbucks’ brand identity while respecting and adapting to local cultural preferences. Navigating these complexities demands ongoing effort, sensitivity, and cultural intelligence from Schultz and the leadership team.
Additionally, Schultz’s leadership can be understood through the path-goal theory, which focuses on the leader’s role in clarifying goals, providing guidance, and removing obstacles for employees to succeed (Bussing, 2021). By emphasizing the importance of setting clear goals and supporting employees, Schultz fosters a positive work environment that encourages innovation and collaboration. Both the path-goal theory and situational theory are leadership models that emphasize the importance of adapting leadership style to the needs of employees and the situation. However, while situational theory focuses on matching leadership style to the employee’s level of readiness, the path-goal theory emphasizes the leader’s role in clarifying goals, providing guidance, and removing obstacles for employees to succeed. Schultz’s leadership style aligns more closely with the path-goal theory, emphasizing setting clear goals and supporting employees to foster a positive work environment. By prioritizing a learning-oriented environment and encouraging employees to embrace challenges and reach their potential, Schultz creates a corporate culture that values ongoing improvement and adaptability.
4.3 Recommendations for the CEO
Based on the analysis of Howard Schultz’s leadership at Starbucks, several recommendations can be made to further enhance the company’s success and address challenges more effectively. First and foremost, the CEO should focus on developing cultural intelligence among leaders and employees to address the challenges related to cross-cultural understanding. This can be achieved through targeted training programs and workshops that increase awareness of cultural differences and promote inclusive leadership behaviours. Starbucks can improve customer relations and workplace harmony by cultivating cultural intelligence. Second, the CEO should prioritize sustainability and find new ways to lessen the company’s environmental effects. This could involve growing renewable energy, circular economy ideas, and trash reduction and recycling efforts.
Additionally, as Starbucks grows, the CEO should emphasize the importance of ethical leadership practices throughout the organization. This involves leading by example, promoting transparency, and ensuring that ethical considerations are integrated into decision-making processes. Upholding ethical standards will strengthen the company’s reputation and foster trust among employees and stakeholders. To sustain Starbucks’ growth and adaptability, the CEO should foster a culture of innovation and continuous learning. Encouraging employees to embrace challenges and providing opportunities for skill development will keep the workforce engaged and prepared to navigate changing market dynamics.
Conclusion and Recommendations
In conclusion, Starbucks’ success and reputation as a socially responsible worldwide brand are due to Howard Schultz’s leadership. His transformational and participative leadership styles have created a positive, inclusive work environment fostering innovation and employee engagement. Schultz’s visionary approach and commitment to sustainability have contributed to Starbucks’ market leadership and reputation as a responsible corporate citizen. However, cross-cultural understanding, sustainability, diversity, and inclusivity challenges persist and require ongoing company leadership attention.
For leaders in the service industry, possessing a combination of crucial leadership styles and skills is essential for success. First and foremost, transformational leadership is crucial, as it enables leaders to inspire and motivate their teams to achieve outstanding performance and embrace innovation. Leaders should also adopt a participative leadership approach, valuing employee input and fostering a collaborative work culture that empowers the workforce. In terms of skills, leaders in the service industry should exhibit solid cultural intelligence to navigate diverse cultural contexts effectively.
Additionally, leaders should prioritize sustainability and corporate social responsibility, integrating ethical considerations into business practices and engaging in meaningful community initiatives. The leader should advocate for female pay equity and workplace diversity. Regular pay audits, equal career growth, and leadership opportunities for women and other underrepresented groups are essential. Encouraging open dialogue on diversity and fostering an inclusive culture will also help create a more empowered and engaged workforce. While the situational leadership approach offers flexibility, the CEO should ensure that it does not lead to inconsistency or lack of direction within the organization.
Moreover, excellent communication and social skills are vital for building relationships with employees, customers, and stakeholders, fostering trust and loyalty. It is essential to strike the right balance between adapting leadership styles based on employee readiness and maintaining a clear and consistent vision for the company. Strategic thinking and problem-solving skills enable leaders to navigate complex challenges and make informed decisions to drive organizational growth.
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