Read the case study, Starbucks: A Case Study in Motivation.

Firstly identify, explainand discusscore concepts in the motivational theories developed by Maslow (hierarchy of needs), Herzberg (two- factory theory), and Adams (equity theory).

Secondly, in light of your discussion of the theories of, and research on motivation, evaluate the motivational strategies used by Starbucks to impact productivity, turnover, employee engagement, job satisfaction and organisational citizenship.

Please note, 1. Discuss means you must use journal articles as well as your textbook

(and other texts) to go beyond simplistic descriptions of theories. At a minimum, you should use 10 referred journal articles (ie from academic journals, not popular press articles).

2. Simply drawing a pyramid for Maslow and listing physiological needs as food, clothing shelter, etc, does not constitute an explanation or discussion of Maslow’s core concepts.

3. It is recommended, but not mandatory that you integrate the application into the theory section, eg after explaining and discussing Maslow’s theory, immediately discuss how Starbucks engages Maslow’s concepts (rather than having all the application at the end of the essay)Aim of the assignment: Students are to demonstrate a sound understanding of the above motivational theories. A sound understanding is demonstrated by: knowledge of the literature, a synthesis of the various ideas found in the literature, an evaluation of the theories and application of theoretical concepts to management practice (at Starbucks).

 

Please note, you are expected to conform to high standards of literacy and academic practice, including literature research and full documentation of sources. This means you must use references in your essay and you must cite those references both in the body of your essay and in an end reference list. Failure to do so is likely to result in a failed paper. Be sure to express the ideas you read about in your own words, but acknowledge their source by citing the reference. Avoid the use of direct quotes as they do not demonstrate to the marker your understanding of the concepts and reading material and consume many words without attracting any marks. You are required to reference using the author / date method. This method is explained in detail in this unit outline.

 

Plagiarised assignments will receive a mark of zero.

 

1.It is suggested that you start with your textbook and several other texts listed under recommended reading in this Companion to obtain a clear understanding of the core concepts of the various theories of motivation, their strengths and weaknesses, and the contribution they have made to the management of desired organisational outcomes. Be sure to cover the core concepts for each theory.

 

2.You should then search for relevant articles via the University’s Library electronic database, articles available on e-reserve for this unit, articles uploaded to Moodle, articles listed in this Companion under the topic of Motivation, and your preferred search engine. When sourcing material electronically or in hard copy, you must not cut and paste into your essay. This is plagiarism and will result in a failed paper (a mark of zero). See below for details of the required author / date method of referencing.

Your essay should be well structured, integrated and argued. 

 

3. A formal essay has a short introduction followed by the body of the essay and then a conclusion. Your paragraphs must be well formed with a solid topic sentence. Your writing style must be formal, not conversational and should not use abbreviations. See below for more details on a guide to essay writing and referencing. Your introduction should be more than a summary in the future tense and your conclusion must be more than a summary in the past tense (no marks for summaries or lists). 

 

4. Aim for strong synthesis and analysis, rather than simplistic definitions and restating material from your text. Your essay should be well integrated and holistic, not a series of short answer questions. You must not use dot points.

 

5. You are expected to conform to high standards of literacy and academic practice, including literature research and full documentation of sources. This means you must use references in your essay and you must cite those references both in the body of your essay and in an end reference list. Failure to reference (in-text and end reference list) is likely to result in a failed paper (zero marks). Be sure to express the ideas you read about in your own words, but acknowledge their source by citing the reference. Do not use direct quotes as they do not demonstrate to the marker your understanding of the concepts and reading material. You are required to reference using the author / date method. This method is explained in detail in this Companion to the Unit Outline.

 

Starbucks: A Case Study in Motivation 

 

Introduction

 

Rapid globalization over recent years has seen competition around the world become more intense, especially for the service industry with similar products. The most critical point for business to succeed is not only the quality of the products they supply, but the quality of the service with which the product is supplied to customers. Not surprisingly then, employers are looking for their people to not only master customer service transactions but to produce the complete “customer experience.” Moreover, they are asking their people to not only put their physical effort tirelessly into the work but to invest their ideas and creativity to make the business better. Business trend analysts have talked about these changes as a fundamental shift from the service economy to the innovative/experiential economy.

 

Starbucks: A brief History

 

Starbucks began in 1971 as Starbucks Coffee, Tea and Spice in Seattle, USA. In 1982 Howard Schultz joined the company as head of marketing and in 1987 acquired the company. He renamed the company Starbucks Corporation, developed a new business plan for it and became the Starbucks’ president and CEO. After a three year period with Jim Donald as CEO, Schultz returned to the CEO position in 2008 amid declining sales to engineer a U.S. turnaround after the company opened stores too quickly. As at 2012 Schultz is chairman, president and CEO of Starbucks.

Starbucks has enjoyed enormous success. By the start of 2006 there were approximately 10,000 Starbucks locations worldwide. In 2012 Starbucks has approximately 17,400 locations worldwide and plans to open about 1,000 net new stores during 2012, including their first store in Norway, Finland, Morocco and Disneyland and onboard Swiss trains. One reason for Starbucks’ success is that it has been able to find employees who are conscientious and intelligent, who seem motivated and satisfied with their jobs, who remain committed to their stores for a longer-than-normal period of time, and who perform their job duties reliably and enthusiastically. Put simply, Starbucks seems to be doing a good job of managing organisational behaviour.

 

Schultz’s Strategy to Make Starbucks a Great Place to Work

 

Howard Schultz strongly believed that Starbucks’ success was heavily dependent on customers having a very positive experience in its stores. This meant having store employees who were knowledgeable about the company’s products, who paid attention to detail, who eagerly communicated the company’s passion for coffee, and who had the skills and personality to deliver consistently pleasing customer service. Many of the baristas were in their 20s and worked part-time, going to university or pursuing other career activities on the side. The challenge to Starbucks, in Schultz’s view, was how to attract, motivate, and reward store employees in a manner that would make Starbucks a company that people would want to work for and that would result in higher levels of performance. Moreover, Schultz wanted to cement the trust that had been building between management and the company’s workforce.

 

Schultz recognizes competitors can replicate the products Starbucks serves, but competitors cannot replicate the Starbucks people serving their products to customers.Schultz seems to have developed his Employee First philosophy when he previously owned his Il Giornale coffee bar company. His memo dated May 19, 1986 while running Il Giornale states,

 

The attitudes of managers towards their people are of primary importance. Employees should be able to trust the motives and integrity of their supervisors. It is the responsibility of management to create a protective environment where Il Giornale values flourish. We believe our employees will develop a commitment to excellence when they are directly involved in the management of their areas of responsibility. The team effort maximizes results, minimizes costs and allows our employees to have authorship and integrity in their accomplishments as well as sharing in the financial rewards of their individual and team efforts.

 

We believe in hiring exceptional people who are willing to work for excellent results. In exchange, we are committed to the development of our good people by identifying, cultivating, training, rewarding and promoting those individuals who are committed to moving our company forward. Together, we can establish the [Il Giornale] difference.

 

Employee Benefits

 

One of the requests that employees, who are called partners, had made to the prior owners of Starbucks was to extend health care benefits to part-time workers. Their request had been turned down, but Schultz believed that expanding health care coverage to include part-timers was the right thing to do. His father had recently died of cancer, and he knew from having grown up in a family that struggled to make ends meet how difficult it was to cope with rising medical costs. In 1988 Schultz went to the board of directors with his plan to expand the company’s health care coverage to include part-timers who worked at least 20 hours per week. He saw the proposal not as a generous gesture but as a core strategy to win employee loyalty and commitment to the company’s mission. Board members resisted because the company was unprofitable and the added costs of the extended coverage would only worsen the company’s bottom line. But Schultz argued passionately, pointing out that if the new benefit reduced turnover, which he believed was likely, then it would reduce the costs of hiring and training—which equaled about $3,000 per new hire. He further pointed out that it cost $1,500 a year to provide an employee with full benefits. Part-timers, he argued, were vital to Starbucks, constituting two-thirds of the company’s workforce. Many were baristas who knew the favorite drinks of regular customers; if the barista left, that connection with the customer was broken. Moreover, many part-time employees were called upon to open the stores early, sometimes at 5:30 or 6:00 am; others had to work until closing—9:00 pm or later. Providing these employees with health care benefits, he argued, would signal that the company honored their value and contribution.

 

The board came round and approved Schultz’s plan. Starting in late 1988, part-timers working 20 or more hours were offered the same health coverage as full-time employees. Starbucks paid 75 percent of an employee’s health insurance premium and, over the years, extended its coverage to include preventive care, crisis counseling, dental care, eye care, mental health care, and treatment for chemical dependency. Coverage was also offered for unmarried partners in a committed relationship. Since most Starbucks employees are young and comparatively healthy, the company has been able to provide broader coverage while keeping monthly payments relatively low.

 

The value of Starbucks’ health care program struck home when one of the company’s store managers and a former barista walked into Schultz’s office and told him he had AIDS. Schultz said later:

I had known [Jim] was gay but had no idea he was sick. His disease had entered a new phase, he explained, and he wouldn’t be able to work any longer. We sat together and cried, for I could not find meaningful words to console him. I couldn’t compose myself. I hugged him.

 

At that point, Starbucks had no provision for employees with AIDS. We had a policy decision. Because of Jim, we decided to offer health-care coverage to all employees who have terminal illnesses, paying medical costs in full from the time they are not able to work until they are covered by government programs, usually twenty-nine months.

 

After his visit to me, I spoke with Jim often and visited him at the hospice. Within a year he was gone. I received a letter from his family afterward, telling me how much they appreciated our benefit plan.

 

By 1991 the company’s profitability had improved to the point where Schultz could pursue another employee program he believed would have a positive long-term effect on the success of Starbucks—a stock option plan for all employees. Schultz wanted to turn all Starbucks employees into partners, give them a chance to share in the success of the company, and make clear the connection between their contributions and the company’s market value. Even though Starbucks was still a private company, the plan that emerged called for granting every employee companywide stock options in proportion to base pay. In May 1991, the plan, dubbed Bean Stock, was presented to the board. Though board members were concerned that increasing the number of shares might unduly dilute the value of the shares of investors who had put up hard cash, the plan received unanimous approval. The first grant was made in October 1991, just after the end of the company’s fiscal year in September; each partner was granted stock options worth 12 percent of base pay; the value of these first shares was pegged at $6 per share. Each October since then, Starbucks has granted employees options equal to 14 percent of base pay, awarded at the stock price at the start of the fiscal year (October 1). Employees, if they wish, can cash in one-fifth of the shares granted each succeeding year, paying the initial year’s price and receiving the current year’s price. It took five years for the shares to fully vest. Each of the shares granted in 1991 was worth $132 in October 1996; thus, an employee making $20,000 in 1991 could have cashed in the options granted in 1991 for more than $50,000 in October 1996. In 1991 when the Bean Stock program was presented to employees, Starbucks dropped the term employee and began referring to all its people as partners because everyone, including part-timers working at least 20 hours per week, was eligible for stock options after six months. At the end of fiscal year 1997, there were 8.7 million shares in outstanding options at an average exercisable price of $19.72 (which compared very favorably to the current stock price of $43.50).

 

In 1995, Starbucks implemented an employee stock purchase plan. Eligible employees could contribute up to 10 percent of their base earnings to quarterly purchases of the company’s common stock at 85 percent of the going stock price. The total number of shares that could be issued under the plan was 4 million. After the plan’s creation, nearly 200,000 shares were issued; just over 2,500 of the 14,600 eligible employees participated. In 1996, the projected cost of benefits was $2,200 for each of the company’s 19,900 employees.

 

Starbucks was able to attract motivated people with above-average skills and good work habits not only because of its fringe benefit program but also because of its pay scale. Store employees were paid $6 to $8 per hour, well above the minimum wage.

 

Schultz’s approach to offering employees good compensation and a comprehensive benefits package was driven by his belief that sharing the company’s success with the people who made it happen helped everyone think and act like an owner, build positive long-term relationships with customers, and do things efficiently. He had a vivid recollection of his father’s employment experience—bouncing from one low-paying job to another, working for employers who offered few or no benefits and who conducted their business with no respect for the contributions of the workforce—and he vowed that he would never let Starbucks employees suffer a similar fate, saying:

 

My father worked hard all his life and he had little to show for it. He was a beaten man. This is not the American dream. The worker on our plant floor is contributing great value to the company; if he or she has low self-worth, that will have an effect on the company.

 

The company’s employee benefits program was predicated on the belief that better benefits attract good people and keep them longer. Schultz’s rationale was that if you treat your employees well, they will treat your customers well.

 

 

Commitment to Training

 

All Starbucks employees start their careers with 24 hours of classroom training at one of the company's regional training centers. Topics include retail skills, coffee brewing methods, customer service, taking personal responsibility for store cleanliness, and even a class on pouring the "perfect" shot of espresso. Courses are taught by district managers, specialists, and training managers who have been through the courses and who have worked in retail store for at least two months. Everyone is drilled in the Star Skills, three guidelines for on-the-job interpersonal relations: (1) maintain and enhance self-esteem, (2) listen and acknowledge, and (3) ask for help

 

Starbucks has found ways to encourage, not always require, people to learn. Rather than making advanced coffee education mandatory, Starbucks leadership offers partners the opportunity to become “coffee masters” and wear a black apron as opposed to the green apron that Starbucks’ baristas (coffee servers) typically wear. The status of coffee master is achieved through course training developed by Starbucks leadership, demonstrating proficiency on an objective knowledge test, and leading live coffee tasting programs within stores. The black apron of the coffee master is held in high regard in the culture from the top down. In fact, at the very top of the company, the business card of Jim Donald simply said “president, CEO, Coffee Master.”

 

Managers have an additional eight weeks of classes to choose from, including workshops on conducting performance appraisals, recruiting, and project management. The company also pays for worker attendance at outside professional seminars and workshops.

 

 

Communication 

 

In early 1990, the senior executive team at Starbucks went to an off-site retreat to debate the company’s values and beliefs and draft a mission statement. Schultz wanted the mission statement to convey a strong sense of organizational purpose and to articulate the company’s fundamental beliefs and guiding principles. The draft was submitted to all employees for review. Changes were made based on employees’ comments. The resulting mission statement appears in Exhibit 1.

 

To make sure the company lived up to the elements of the mission statement, a "Mission Review" system was formed. Employees were urged to report their concerns to the company’s Mission Review team if they thought particular management decisions were not supportive of the company’s mission statement. Comment cards were given to each newly hired employee and were kept available in common areas with other employee forms. Employees had the option of signing the comment cards or not. Hundreds of cards were submitted to the Mission Review team each year. The company promised that a relevant manager would respond to all signed cards within two weeks. Howard Schultz reviewed all the comments, signed and unsigned, every month.

 

As the company continued to grow, resulting in a large and geographically scattered workforce, Starbucks assembled a team of people from different regions to go over employee concerns, seek solutions, and provide a report at the company’s Open Forums. At these Open Forums, held quarterly in every geographic region where the company did business, senior managers met with all interested employees to present updates on Starbucks’ performance, answer questions, and give employees an opportunity to air grievances.

 

Since most partners (ie employees of Starbucks) are also owners, they are very interested in receiving company information. Consequently, senior management conducts quarterly open forums in the company's different sales regions. Typical topics include expansion plans, financials, and environmental issues. Partners are encouraged to share their ideas and suggestions openly at these forums. In addition to these quarterly meetings, Starbucks distributes annual Bean Stock reports to all partners, and the company publishes Pinnacle, a newsletter that spotlights company performance, as well as the activities of individual partners companywide. Starbucks also uses videos and

Teleconferencing to reach its partners.

 

Management by Teams

Starbucks recently instituted self-managed work teams at its coffee bean roasting plants. Plant managers and supervisors are responsible for the initial organization of the teams, but partners are encouraged to take over the day-to-day activities, such as decision-making. Cross-functional teams of partners and supervisors are also used to make hiring decisions. Partners are encouraged to offer their views on the candidates' potential compatibility with the company.

 

There is also a "Mission Review Team" which is made up of partners from throughout the company who visit Starbucks outlets to review the stores' operations. It is the partners who ensure that stores follow the company's guiding principles:

 

b) Treat all employees as partners--Every employee can contribute to the company. They will be more likely to want to do so if they are treated as equal and valued members of the organization.

 

c) Help employees learn--Be an advocate for helping employees learns and grow in their jobs, whether it's with on-the-job or formal training. The more employees see you have their best interests at heart, the more likely they will want to stay and grow with your organization.

 

d) Involve employees in decisions--As you involve employees in decision-making, you will build their commitment and make better decisions in the process.

 

 

 

Employee Empowerment and Social Purpose

 

Starbucks’ management is emphatic about the importance of pleasing customers. Employees are trained to go out of their way, taking heroic measures if necessary, to make sure customers are fully satisfied—the theme is "just say yes" to customer requests. Employees are also encouraged to speak their minds without fear of retribution from upper management—senior executives want employees to be vocal about what Starbucks is doing right, what it is doing wrong, and what changes are needed. Management wants employees to contribute to the process of making Starbucks a better company.

 

People want to do business with and work for companies that are socially conscientious. In addition to their corporate philanthropy and grant-giving, Starbucks encourages its employees to be involved in their communities; matching cash contributions in support of their partners’ efforts ($10 for each hour that an employee volunteers to a nonprofit or charitable organization). Profits from sales of the company’s logo-emblazoned “coffee gear” are channeled into clubs and services for employees, which include everything from running groups and bowling leagues to quilting and book clubs. Employees can donate an amount of their choice to a voluntary “CUP (Caring Unites Partners) fund”, which is used to provide grants to fellow employees who fall on hard times. Also, every year, as part of its Earthwatch program, the company selects a few employees to travel to coffee- producing parts of the world, where they learn firsthand about environmental and conservation issues from the growers. Furthermore, Starbucks leadership makes business decisions in accord with their social values.

 

Turnover, Employee Engagement, Job Satisfaction, Productivity and Organisational Citizensh

 

Starbucks believes that its efforts to make the company an attractive, caring place to work are responsible for its relatively low turnover rates. Whereas most national retailers and fast-food chains have turnover rates for store employees ranging from 150 to 400 percent a year, the turnover rates for Starbucks’ baristas run about 65 percent. Starbucks’ turnover for store managers is about 25 percent compared to about 50 percent for other chain retailers.

 

Studies on employee engagement show that 65% of workers lack consistent engagement or are actively disengaged. However, Starbucks’ guiding principles seem to have fostered a sense of satisfaction with the culture of the organization. A recent survey showed that 82% of employees were either “satisfied” or “very satisfied” with the company. One Starbucks store manager commented, "Morale is very high in my store among the staff. I’ve worked for a lot of companies, but I’ve never seen this level of respect. It’s a company that’s very true to its workers, and it shows. Our customers always comment that we’re happy and having fun. In fact, a lot of people ask if they can work here". Further, in 2007 Fortune magazine’s list of the “100 Best Companies to Work For” placed Starbucks at 16.

 

There is evidence that Schultz’s approaches, values, and principles are affecting company performance in the intended manner. In its second quarter financial report for April 2012, Starbucks reported record fiscal results with total net revenues increasing 15% to $3.2 billion and a seventh consecutive quarter of over 20% sales growth in China. For the same period, Starbucks had opened 176 net new stores globally, including its 3,000th store in the China/Asia Pacific segment, and the first Evolution FreshTM store in Bellevue, Washington (USA).

 

While reporting record revenues and its highest stock price in history (April 2012), Starbucks does not see that its only responsibility is to maximise profits for shareholders. During an interview Schultz stated that Starbucks does not have the singular goal of profit, that profitability must be balanced against a social conscience and that businesses must do more to serve the communities they live and work in, including creating jobs in communities with high levels of unemployment. For Schultz, “the values of Starbucks drive business though the lens of humanity” (http://www.youtube.com/watch?v=_ZiAsR6gXsw).

 

Exhibit 1: The Starbucks Mission Statement

 

Establish Starbucks as the premier purvey of the finest coffee in the world while maintaining our uncompromising principles a we grow. The following six guiding principles will help us measure the appropriateness of our decisions.

 

1.Provide a great work environment and treat each other with respect and dignity

 

2.Embrace diversity as an essential component in the way we do business. 

 

3.Apply the highest standards of excellence to the purchasing, roasting, and fresh delivery of our coffee. 

 

4.Develop enthusiastically satisfied customers all of the time. 

 

5.Contribute positively to our communities and our environment. 

 

6. Recognize that profitability is essential to our future success.