Question

Organizing

Organizing is an important task of managers. Once the organization’s goals and plans are in place, the organizing function sets in motion the process of seeing that those goals and plans are pursued. When managers organize, they’re defining what work needs to get done and creating a structure that enables work activities to be completed efficiently and effectively by organizational members hired to do that work. As Starbucks continues its global expansion and pursues innovative strategic initiatives, managers must deal with the realities of continually organizing and reorganizing its work efforts.

Structuring Starbucks

Like many start-up businesses, Starbucks’s original founders organized their company around a simple structure based on each person’s unique strengths: Zev Siegl became the retail expert; Jerry Baldwin took over the administrative functions; and Gordon Bowker was the dreamer who called himself “the magic, mystery, and romance man” who recognized from the start that a visit to Starbucks could “evoke a brief escape to a distant world.” As Starbucks grew, Jerry recognized that they needed to hire professional and experienced managers. That’s when Howard Schultz (Starbucks’s well-known former chairman, CEO, and president) joined the company, bringing his skills in sales, marketing, and merchandising into the mix. When the original owners eventually sold the company to Schultz, he was able to take the company on the path to becoming what it is today and what it hopes to be in the future.

As Starbucks has expanded, its organizational structure has changed to accommodate that growth while still retaining a “lean” corporate structure. Schultz focused on hiring a team of executives from companies like Nestlé, Procter & Gamble, Corbis, Microsoft, and PepsiCo, realizing how important it was to have an executive team with experience running divisions or functions of larger companies. Today the senior corporate team includes 13 “C” (chief) officers, 17 executive vice presidents, 2 group presidents, and 4 “partners.” Although the executive team provides the all-important strategic direction, the “real” work of Starbucks gets done at the company’s support centre, zone offices, retail stores, and roasting plants. The support centre provides support to and assists all other aspects of corporate operations in the areas of accounting, finance, information technology, and sales and supply chain management.

The zone offices oversee the regional operations of the retail stores and provide support in human resource management, facilities management, account management, financial management, and sales management. The essential link between the zone offices and each retail store is the district manager, each of whom oversees 8 to 10 stores, down from the dozen or so stores they used to oversee. District managers need to be out working with the stores and use mobile technology to allow them to remain connected to the district office. District managers have been called “the most important in the company” because it’s out in the stores that the Starbucks vision and goals are being carried out.

In the retail stores, hourly employees (baristas) service customers under the direction of shift supervisors, assistant store managers, and store managers. These managers are responsible for the day-to-day operations of each Starbucks location. One of the organizational challenges for many store managers has been the company’s decision to add more drive-through windows in its North American locations, which appears to be a smart, strategic move since the average annual volume at a store with a drive-through window is about 30 percent higher than a store without one. However, a drive-through window often takes up to four people to operate: one to take orders, one to operate the cash register, one to work the espresso machine, and a “floater” who can fill in where needed. Other organizing challenges arise any time the company introduces new products and new, more efficient work approaches.

Finally, without coffee and other beverages and products to sell, there would be no Starbucks. The coffee beans are processed at the company’s North American roasting plants in Washington, Pennsylvania, Nevada, South Carolina, and Georgia, and internationally in Amsterdam. There’s also a manufacturing plant for Tazo Tea in Oregon, and the company set up a coffee roasting facility with Tata Global Beverages in India. At each manufacturing facility, the production team produces the coffee and other products and the distribution team manages the inventory and distribution of products and equipment to company stores. Because product quality is so essential to Starbucks’s success, each person in the manufacturing facilities must be focused on maintaining quality control at every step in the process.

People management is a significant part of the jobs of Avani Davda, left, the former CEO of Starbucks Tata Limited—the joint-venture company that opened Starbucks stores in India—and Belinda Wong, right, current CEO of Starbucks China. The people in these positions are responsible for organizing Starbucks’s work force in the two most populous nations in the world with the fastest-growing economies and unique business cultures.

Ted S. Warren/AP Images

People Management at Starbucks

Starbucks recognizes that what it’s been able to accomplish is due to the people it hires. Since the beginning, Starbucks has strived to be an employer that nurtured employees and gave them opportunities to grow and be challenged. The company says it is “pro-partner” and has always been committed to providing a flexible and progressive work environment and treating one another with respect and dignity.

What kinds of people are “right” for Starbucks? They state they want “people who are adaptable, self-motivated, passionate, creative team players.” Starbucks uses a variety of methods to attract potential partners. The company has an interactive and easy-to-use online career centre. In Canada, job seekers—who must be at least 16—can search and apply online for jobs in stores or in corporate offices in one of 11 different categories. The American website allows job seekers to apply to the home office (Seattle) support centre and in the zone offices, roasting plants, store management, and store hourly (barista) positions in any geographic location. Starbucks also has recruiting events in various locations in Canada and the United States throughout the year, which allow job seekers to talk to recruiters and partners face to face about working at Starbucks. In addition, job seekers for part- and full-time hourly positions can also submit an application at any Starbucks store location. The company also has a limited number of internship opportunities for students during the summer.

Starbucks’s workplace policies provide for equal employment opportunities and strictly prohibit discrimination. Diversity and inclusion are very important to Starbucks. Although diversity training is important, it isn’t the only training provided. The company continually invests in training programs and career development initiatives: Baristas, who get a “green apron book” that exhorts them to be genuine and considerate, receive 23 hours of initial training; an additional 29 hours of training as shift supervisor; 112 hours as assistant store manager; and 320 hours as store manager. District manager trainees receive 200 hours of training. And every partner takes a class on coffee education, which focuses on Starbucks’s passion for coffee and understanding the core product. In addition, the Starbucks corporate support centre offers a variety of classes ranging from basic computer skills to conflict resolution to management training. Starbucks partners aren’t “stuck” in their jobs. The company’s rapid growth creates tremendous opportunities for promotion and advancement for all store partners. One day in February 2008, Starbucks did something quite unusual—it closed all its U.S. stores for three-and-a-half hours to train and retrain baristas on espresso. A company spokesperson said, “We felt this training was an investment in our baristas and in the Starbucks experience.” The company also embarked on a series of training for partners to find ways to do work more efficiently. A 10-person “lean team” went from region to region encouraging managers and partners to find ways to be more efficient.

One human resource issue that has haunted Starbucks is its position on labour unions. The company takes the position that the fair and respectful “direct employment relationship” it has with its partners—not a third party that acts on behalf of the partners—is the best way to help ensure a great work environment. Starbucks prides itself on how it treats its employees. As Starbucks continues to expand globally, it will face challenges in new markets where local labour groups and government requirements honour collective bargaining. Starbucks realizes it needs to be cautious so that its “we care” image isn’t diminished by labour woes.

Discussion Questions

1. Considering the expense associated with having more managers, what are some reasons why you think Starbucks decided to decrease the number of stores each district manager was responsible for, thus increasing the number of managers needed? Other than the expense, can you think of any disadvantages to this decision

Answer 1

Starbucks decided to decrease number of stores for operational optimisation, reducing fixed costs, achieving operating flexibility, capacity utilisation, better management and control, ease of payment structure and consolidation of stores to remove redundancy.

Disadvantage of such decisions would be higher employee turnover amd low employee retention rate as layoffs begin througj stores and team morale decreases.

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