Organizing is an important task of managers. Once the organizations 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’ 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” and recognized from the start that a visit to Starbucks could “evoke a brief escape to a distant world. As Starbucks grew to the point where Jerry recognized that he needed to hire professional and experienced managers, Howard Schultz (now Starbucks’ chairman) joined the company, bringing his skills in sales, marketing, and merchandising. 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.
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However, the company prides itself on its “lean” corporate structure. Howard Schultz is chairman and chief global strategist and Jim Donald is president and CEO. Schultz has focused on hiring a team of executives from companies like Wal-Mart, Dell, and PepsiCo. He says, “I wanted to bring in people who had experience working at $10 billion companies. ” These senior corporate officers include the following president of Starbucks Coffee U. S. and president of Starbucks Coffee International, 4 executive vice presidents, and 29 senior vice presidents.
These positions range from senior vice president of finance, to senior vice president of coffee and global procurement, to senior vice president of corporate social responsibility. (A complete list of upper level managers can be found in the company’s annual report on its Web site. ) Although the executive team provides the all—important strategic direction, the “real” work of Starbucks gets done at the company’s support center, zone offices, retail stores, and roasting plants.
The support center 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 over sees 8 to 10 stores apiece, which is down from the dozen or so stores they used to oversee.
Since district managers need to be out working with the stores, most use mobile technology that allows them to spend more time in the stores and still remain connected to their own office. A company executive says, “These are the most important people in the company. And while their primary job is outside the office and in those stores, they still need to be connected. ” In the retail stores, hourly employees (baristas) service customers under the direction of 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 to retail stores, 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 4 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.
And these people have to work rapidly and carefully to get the cars in and out in a timely manner, since the drive-through lane can get congested quickly. Finally, without coffee to sell, there would be no Starbucks. The coffee beans are processed at the company’s domestic roasting plants in Washington, Pennsylvania, Nevada, and internationally in Amsterdam. At each roasting plant, the production team produces the coffee and the distribution team manages the inventory and distribution of products and equipment to company stores.
Because product quality is so essential to Starbucks’ success, each person in the roasting plants must be focused on maintaining quality control at every step in the process. Communication at Starbucks Keeping organizational communication flowing in all directions is important to Starbucks. And that commitment starts at the top. Howard Schultz tries to visit at least 30 to 40 stores a week. Not only does this give him an upfront view of what’s happening out in the field, it gives partners a chance to talk with the top guy in the company.
The CEO also likes to “get out in the field” by visiting the stores and roasting facilities. Despite these efforts by the top executives, results from the most current employee survey indicated communication needed improvement. Managers listened and made some changes. An initial endeavor was the creation of Starbucks Broadcast News, an internal video newsletter that conveys information to partners about company news and announcements. Another change was the implementation of an internal communication audit that asks randomly selected partners for feedback on how to make company communication more effective.
In addition, partners can voice concerns about actions or decisions where they “believe the company is not operating in a manner consistent with Starbucks’ Guiding Principles” to the Mission Review team, a group formed in 1991 and consisting of company managers and partners. In 2005, more than 4,200 contacts were made with this team in North America. The concept has worked so well that many of Starbucks’ international units have provided similar communication forums to their partners. People Management at Starbucks “Our ability to accomplish what we set out to do is based primarily on the people we hire.
We recognize that the right people, offering their ideas and expertise, will enable us to continue our success” (www. starbucks. com). 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. As Starbucks continues its expansion both in the United States and internationally, it needs to make sure it has the right number of the right people in the right place at the right time.
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 center. Job seekers—who must be at least 16 years old—can search and apply online for jobs in the home office (Seattle) support center 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 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-time 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’ workplace policies provide for equal employment opportunities and strictly prohibit discrimination. Diversity and inclusion are very important to Starbucks as the following statistics from its U. S. orkforce illustrate: 65 percent of its total workforce and 34 percent of company executives are women; and 30 percent of its total workforce and 14 percent of company executives are people of color. That commitment to diversity starts at the top. During 2005, CEO Jim Donald and 12 senior executives participated in a 360-degree diversity assessment to identify their strengths and needed areas of improvement. Also during 2005, an executive diversity learning series was developed for individuals at the vice-president level and above to build their diversity competencies. In 2006, a full day diversity immersion exercise was launched.
Although diversity training is important to Starbucks, 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’ passion for coffee and understanding the core product.
In addition, the Starbucks corporate support center 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. If they desire, they can utilize career counseling executive coaching, job rotation, mentoring, and leader ship development to help them create a career path that meets their needs. In 2006, Starbucks was named one of Training magazine’s Top 100.
One example of the company’s training efforts: When oxygen levels in coffee bags were too high in one of the company’s roasting plants (which affected product freshness), partners were retrained on procedures and given additional coaching. After the training, the number of bags of coffee placed on “quality hold” declined by 99 percent. One human resource issue that has haunted Starbucks is its position on labor unions. The company states on its Web site, “We firmly believe that the direct employment relationship which we currently have with our partners is the best way to help ensure a great work environment.
We believe we do not need a third party to act on behalf of our partners. We prefer to deal directly with them in a fair and respectful manner, just as we have throughout our history. ” Starbucks prides itself on how it treats its employees. However, the company “settled a complaint issued by the National Labor Relations Board that contained more than two dozen unfair labor practice allegations brought against the company by the union, Industrial Workers of the World. The settlement stemmed from disputes at three stores in New York City and will likely have little impact on the vast majority of Starbucks workers. Change and Innovation at Starbucks Starbucks has always thought “outside the box. ” It took the concept of the corner coffee shop and totally revamped the coffee experience. The company has always had the ability to roll out new products relatively quickly. If a new product seems like it would appeal to customers-the popular pumpkin spice latte is one example-they often skip product testing and don’t use focus groups to assess the product. Innovation is so important, in fact, that the category management group is responsible for changing the items on the shelves every six weeks.
And Starbucks relies heavily on its partners to be the driving force behind innovations. As we said earlier, Starbucks is firmly committed to its belief that “We recognize that the right people, offering their ideas and expertise, will enable us to continue our success” Discussion Questions 1. What types of departmentalization are being used? Explain your choices. (Hint: In addition to information in the case, you might want to look at the list of corporate executives on the company’s Web site. ) 2. Do you think it’s a good idea to have a president for the U. S. division and for the international division? What are the advantages of such an arrangement? Disadvantages? 3. What examples of the six organizational structural elements do you see discussed in the case?
Describe. 4. 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? 5. Give some examples of the types of communication taking place at Starbucks. 6. Suppose that you’re a Starbucks store manager in Birmingham, Alabama. How do you find out what’s going on in the company? How might you communicate concerns or issues that you have? 7. Starbucks has said its long-term goal is to have 15,000 U. S. stores and 30,000 stores globally. In addition, the company has set a financial goal of attaining total net revenue growth of 20 percent and earnings per share growth between 20 to 25 percent. How will the organizing function contribute to the accomplishment of these goals? 8.
Starbucks has said that it wants people who are “adaptable, self-motivated, passionate, and creative team players. ” How does the company ensure that its hiring and selection process identifies those kinds of people? 9. Select one of the job openings posted on the company’s Web site. Do you think the job description and job specification for this job are adequate? Why or why not? What changes might you suggest? 10. Evaluate Starbucks’ training efforts. What types of training are available? 11. Pretend that you’re a local Starbucks’ store manager. You have three new hourly partners (baristas) joining your team.
Describe the orientation you would provide these new hires. 12. Would you classify Starbucks’ environment as more calm waters or white-water rapids? Explain. How does the company manage change in this type of environment? _ 13. Describe Starbucks’ innovation environment. 14. Which of the company’s Guiding Principles affect the organizing function of management? Explain how the one(s) you chose would affect how Starbucks’ managers deal with (a) structural issues; (b) communication issues; (c) HRM issues; and (d) change and innovation issues. (Hint: The Guiding Principles can be found on the company’s Web site)