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Change Management at Starbucks
William O'Donnell
HRM/531
June 14, 2017
Mary Ann Wangemann
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Change Management at Starbucks
Change is unavoidable for any organization operating in a dynamic environment. The
competitive pressures require firms to be flexible rather than rigid if they are to remain relevant
and survive in their industries. Organization change is the adoption of new behaviors and way of
doing things by an entity (Blanca & Ramona, 2016). As companies seek to adjust to their
changing environment both within and outside, they may have to change its technologies,
strategies, culture, business process, structure and much more.
Starbucks Coffee had been a leading and recognized brand before the departure of
Howard Schultz in 2000, who was running the organization as a CEO. The company was set on
a trajectory growth that was intended to expand the market presence of the brand. The revenue
streams were increasing, and the company's growth was inevitable. The subsequent eight years
since the departure of Howard as the CEO became detrimental for the business. The company
failed in many ways. Everything changed, right from the leadership and the organization's
culture. The customer traffic had fallen in most of the coffee outlets, and the stock prices had
equally gone steeply. The 2006 stock price for Starbucks was as high as $46 but was hammered
down to $14 (Adi, 2010). The fall scared away investors from the company. Due to the reduced
number of clients, visiting the Starbucks the revenues were significantly affected leading to
reduced profit. Starbucks coffee faced intense competition from McDonald's and Dunkin' Donuts
who introduced coffee to their product lines at lower prices (Adi, 2010). The price competition
led to many customers opting for the competitor’s coffee especially during the economic crisis.
One of the major things that contributed to the fallen performance of Starbucks was the
aggressive opening of stores. For instance, in Manhattan, there were 185 coffee outlets, eight per
square mile. The stores focused on the grab-and-go customers and valued speed in service
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delivery rather than having a client relation that enhanced interaction. During the days of
Howard, baristas would have a chat with their customers to get to know if they were satisfied
with the quality of the drink (Adi, 2010). The coffee house had moved from its service culture.
Starbucks vision from the onset was to remain small, local and maintain customer intimacy.
People Involved in the Change Process
The change management process needed the presence of a visionary to restore back
Starbucks back to its feet. There was no better person than Howard Schultz, the former CEO who
had initially started the outlets and led the enterprise on a trajectory success path. Howard was
re-appointed as the company's CEO eight years since his departure. He would now be involved
in the day-to-day operations of the enterprise. He was to be the overall team leader for the
change management process that was to take effect at Starbucks. The change process at
Starbucks was not a one-person business but involved every individual in the organization.
Howard Schultz stated that the leadership had failed including himself who had stepped down
from the day-to-day operations as the CEO to become the Chairman of the Board of Directors.
The Change Implementation Methods
Change of Culture
The success of an organization lies within its culture. Culture determines employee
behavior (Piderit, 2012). Howard Schultz believes that the success of Starbucks does not result
from the coffee it offers its customers but from the employees in the organization. The CEO's
first approach to implementing the change management process at Starbucks was closing stores
for three and a half hours during normal day operations to re-train employees. The exercise was
imperative because the company had long lost its direction and an understanding of what the
company stands for in its endeavors. As much as the shareholders found this to be an insane
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move, the CEO found this quite relevant in taking back the organization into developing a clear
sense of commitment to the quality of their services (Adi, 2010).
The culture in the organization also had to change to make the workplace a much
friendly and interactive environment through changing how employees viewed each other by
titles to view each other as partners. Employees at Starbucks now refer each other as partners and
see each other as equals in the organization. The effort was to make every employee understand
that they play a significant role in shaping the organization's success and their efforts combined
is the only way to achieve outstanding performance. Additionally, Starbucks had to adopt" a
participative decision-making process that ensured zero confinement to employee's opinion. A
participative decision-making process ensures that the employees feel valued within the
organization and become free to share ideas that can contribute to business growth" (Sofat, Kiran
& Kaushik, 2015). Starbucks also opted to avoid debt financing and allocate dividends to its
employees with a free script issue. The move is aimed at motivating employees when they have a
sense of stake in the organization.
Communication and Employee Engagement
Starbucks has developed a well-developed system to eliminate bureaucracy where
employees regardless of their work positions consider each other as partners. Reducing
bureaucracy needed the company to have first line collaboration to avoid distances that are
caused by the diversity of status. To further enhance employee closeness and connection the
coffee outlets hire not more than six employees in one store. The supervisors and directors give
equal priority to suggestions and complaints raised by their staff.
Budget, Timelines, and Measures of Success
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Starbucks set up funds for expansion to increase the number of outlets. In the 2010 fiscal
year, Starbucks estimated to increase its coffee stores to 300. The development strategy targets to
increase the revenue growth in the fiscal year and raise competition. The timelines for the
opening of the 300 stores were set to take place in the year of 2010. Performance measurement is
essential to track the progress of implementing the change management process (Piderit, 2012).
Key performance indicators and standards of performance are set before the implementation
phase to form the basis of measuring progress. Starbucks success measurement was reviewed by
analyzing the both results and process metrics. The company success is evaluated on four key
performance indicators, which include economic, environmental, labor practices and workplace
safety, human rights and society, and lastly product responsibility indicators (Starbucks Global
Responsibility Report, 2012). The company conducts quarterly reviews for the goals set to
establish any deviations and take corrective actions.
Recommended Follow-up Plan
The recommendation is that Starbucks makes follow-up using customer satisfaction
surveys to obtain feedback on the quality of their service and what needs improvements.
Additionally, the company needs to conduct employee satisfaction surveys, which are essential
to understanding the employee's needs. Lastly, Starbucks should also evaluate their expansion
strategies based on the projected profits to see the viability of the plans.
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Starbucks Change Management Plan
Establish need
for change
Poor change
Performance
Excellent change
Performance
Reward successful
change process
Develop a
change
program
Develop
long and
Short-term
goals
Communicate
the vision
Evaluate
Empower
Performance
employees
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References
Adi, I. (2010). The HBR interview: “We had to own the mistakes.” Retrieved from
https://hbr.org/2010/07/the-hbr-interview-we-had-to-own-the-mistakes
Blanca, G. & Ramona, T. (2016). Change, resistance to change and organizational cynicism.
Studies in Business and Economics, 11(3), 47-54.
Piderit, S. K. (2012). Rethinking resistance and recognizing ambivalence: A
multidimensional view of attitudes toward an organizational change. Academy of
Management Review, 25(4), 783–794.
Sofat, K., Kiran, R. & Kaushik, S. (2015). Management of Organizational Change and its
Impact on Commitment: A Study of Select Indian IT Companies. Global Business and
Management Research: An International Journal, 7 (3), 69-86.
Starbucks Global Responsibility Report. (2012). “Global reporting initiative performance
indicators.” Retrieved from
https://www.starbucks.com/assets/79decb3b5f814b8086ebfc6f137aadd1.pdf
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