Case Study:
Challenge to Change at Starbucks
From 2008 to 2010, Starbucks was faced with a challenge: Reduce spending by 500 million. This
required closing 600 stores and canceling the planned opening of 348 others. Those stores represented
8 percent of U.S. company-owned operations and 12,000 partners (employee) positions. It was a bitter
medicine traced to company misreads and missteps. CEO Howard Schultz told Starbucks employees,
“I am sorry, and I apologize if anyone feels that we have fractured the culture and values of the
company.“
A challenge to change faced Starbucks. Operationally, changes to jobs and roles shifted
rapidly. On one afternoon in 2008, Starbucks closed the doors to every store in the company to
retrain 135,000 baristas on how to correctly pour a shot of espresso. These closures cost an
estimated $6 million.
Other changes followed, including a standard six-step process to brew coffee, setting up a
pastry case in 25 minutes rather than 45 (saving $60 million in less than three months), and having
employees slow down to focus on quality-making no more than two drinks at the same time and
ending the practice of reheating milk.
For Starbucks, the challenge of change continues, especially in a global economy.
Coffee drinking tends to reflect economic growth, so as the middle class of other countries such as
China grows, so will coffee consumption-something Starbucks is betting on.
Objective:
The analysis of company success metrics can cause an organization to undergo dramatic changes in their
vision and place the leader in a role to initiate the needed changes in order to survive and succeed against
the competition.
Summary:
Starbucks CEO, Howard Schultz accepted the mantle of change leadership in order to stem the loss of
profits. He practiced effective leadership as he apologized to the employees that his leadership affected
the culture and vision of the organization. Fortunately, he became an excellent “change” leader by
focusing on Starbucks 1) structure, 2) tasks, 3) technology, and 4) the people – employees and customers.
In practicing effective “change” procedures, Starbucks rebounded, but they must continue to foresee
necessary changes to continue as a global force in the coffee consumption market.
Challenge to Change at Starbucks
Questions:
1.
What would you do if you were leading Starbucks today?
2.
What policies and practices would you change?
3.
What policies and practices would you keep?
Teaching Points:
✓ Discuss the need for store leaders and baristas ask for customer feedback on what products they
would like Starbucks to offer.
✓ Since employees are generally resistant to change, leaders must make sure the employees; 1) see
the need for the change by having it fully explained and understood, 2) realize the value in the
change and convince the employees affected to commit to the change, 3) involve those affected
by the change as early as feasible in the change discussions, 4) let the people know when the
change will take place, and 5) identify what assessment tools you will use to evaluate the change.
✓ Employee “attitudes” are an integral part of the change process. Therefore, discuss the possible
negative attitudes found in the “attitude trough” that need to be overcome if the changes are to be
successfully implemented, Figure 17-9, p. 407.
✓ Review the seven Leader Guidelines for making effective changes, pp. 395 – 396.
✓ The leader is the initiator of an effective change process. This process must be facilitated by the
leader (e.g., Howard Schultz at Starbucks), and not delegated to a subordinate.
✓ Leaders must be willing to apologize to the employees when things go wrong.
✓ Leaders must constantly review and revise (when necessary) the company’s vision statement.
✓ Introduce the students to the concept of a “Hardy Personality,” pp. 426-429.
✓ Remind the students of their role as leaders when dealing with employee Job Stress (prevention
and management), pp. 414–416.
✓ Effective leaders are not “stress carriers.” Share a personal story of a stress carrier in your career
“gave stress to others” rather that assisting employees and themselves in managing the evitable
stress that comes within each of our workplaces.
Challenge to Change at Starbucks
Related AOL 6 Text Information to Support Your Class Discussion:
o You can make minor changes in processes for quality product or service delivery daily.
However, you might consider exploring with your students the process for understanding
Complex Organizational Change. Please see Figure 17 – 2 on p. 397, “The Eight–Stage Process
of Creating Major Change.”
o You will want to caution your students concerning “common errors” that can occur during the
change process. p. 398.
o The word “change” often creates fear among employees even if it is a minor one since it can
affect their sense of job stability. You will want to address how to handle the change “fear”
factor with your class. p. 404.
o Your students will need to exhibit strong leadership with their employees, so we discuss how to
lead people through the change process. pp. 394 – 396.
NOTE: We routinely research the subject of our specific case assignment to determine changes in
vision, mission, leadership team, new product development, financials, current national/global news
events, etc., prior to the class discussion. An example of this is found in the Introduction section
preceding our suggestions for using Case Analyses in your class. We have used Hewlett-Packard as a
sample for all the cases since this form of organizational information is fluid and possibly time
sensitive.