Howard Schultz or CEO and President Starbucks - Case Study Example

Leader: Howard Schultz- CEO and President Starbucks. Student’s Name: Student number: Name of the unit: Unit Code: Unit coordinator: Introduction Leadership is a very important integral part as far as getting better productivity and performance is concerned. It has come as a late realization to managers and leaders of organisations that in order to get the best out of the workforce, they need to be led, inspired, motivated and committed, not just managed (Kippenberger, 2002). And all these are functions of leadership. Leadership is the ability to persuade people to do what you want them to do but in the process invoking in them the thought that, that is what they themselves wanted to do (Parker and Begnaud, 2004). From the words of the leadership genius himself, leadership is the dedicated process of making other people to fully and willingly subscribe to a course of action in order to realise agreed ends. It is all about getting to know the people, connecting with the people who in this case are called followers and forging for them a unique vision and strategy that will go a long way in ensuring that the agreed objectives are met (Gallos, 2008). For any leader to be effective in his or her endeavours to lead, one must also possess good communication skills so that whenever there is a vision that need to be communicated to the followers, it is done that is convincing and mind changing (MTD, 2010). Communication in this case is the ability to pass ideas to the followers and for those ideas to adhered to by the followers and implemented without question. This essay will look at Howard Schultz, the CEO and president of Starbucks. The essay will explore his leadership and communication styles that have made him a renowned world leader in business. The essay will go further to judge whether Howard Schultz’s leadership and communication styles are relevant and well suited in a global arena. Leader: Howard Schultz- CEO and President Starbucks Howard Schultz was offered an opportunity to work as a marketing director at Starbucks in 1982. His salary was to be less than half what he was earning at his sales job at Hamamaplast. But because of the passion that Howard had developed for Starbucks and the vision he had in place as far as Starbucks was concerned made him abandon his sales job at Hamamaplast which was paying more relative to what he was now earning at Starbucks (Starbucks, 2015). Howard made known to the current CEO, Jerry Baldwin, of his intentions and vision for Starbucks. This is depicted when he proposed to Baldwin in 1985 that it was time for Starbucks to open a network of coffee houses. Baldwin being sceptical turned this down. But because of his passion in coffee being served differently, Howard borrowed money from Starbucks and opened his own coffee store giving it the name Il Giornale. He opened this in April 1986. In 1987 Howard learned that the Starbucks owners were selling the company at the price of $4million. Howard in consultation with his creditors was able to raise the money and bought Starbucks (Astrum People, 2015). Howard at the helm of Starbucks was able to turn the company around gaining international reputation opening stores as far as Japan, Singapore, Netherlands, and many more countries. Actually, in 1992, Howard decided to make Starbucks a public company putting its shares on the New York Stock Exchange (Astrum People, 2015). The success that Starbucks has experienced and continues to experience can be largely attributed to the leadership and communication styles that Howard Schultz has employed in the management of the company. When Howard Schultz stepped down as the CEO of Starbucks in 2000, the company started experiencing declines in sales and profit. This prompted the return of Howard Schultz in 2008 as the president and CEO of Starbucks with the responsibility of helping the company find its innovative edge. After his return the company started making progress and after a year of his return shareholders were paid dividends. Howard himself attributes the progress of Starbucks especially this turnaround after his return to his effective communication skills, networking skills and his ability to accommodate advice (Schultz & Gordon, 2011). Howard Schultz’s transformational leadership style has in a long way helped create the globally recognised coffee store. After purchasing the company in 1987, Howard was able to build it into a global company opening branches all over the USA and outside the USA. His transformation leadership style was exhibited when he took over Starbucks. His vision of making Starbucks an international was seen when under his leadership, Starbucks opened many stores across the USA and overseas. His initial intention of expanding Starbucks when he was the sales director was realized when he took over the management at Starbucks (Starbucks, 2015). As a transformational leader, Howard was able to identify the change that was required at Starbucks and had the ability to communicate this needed change to the people he was managing in a way that made them heed the directives without questioning. He was able to convince his followers to share in his transformational ideas. His transformational leadership and skills also become evident on his return to the company as the president and CEO in the year 2008 for the second time. On stepping down as the CEO of Starbucks in the year 2000, Howard left the company an international recognised brand in terms of coffee experiencing high returns. But eight years after his departure the company that he had built was experiencing the worst of the financial crisis (HBR, 2015). Howard was compelled to come back and take charge for the second time. The responsibility this time round was different from the first one. This time round he was charged with the responsibility of making Starbucks regain its lost glory. Amidst all these, as a transformational leader Howard took bold steps which almost everybody was against. He decided to close the Starbucks stores for three and half hours every day and this is to enable the employees to be re-trained. He also took 10,000 store managers to New Orleans for a conferencing anchored on training for transforming the company (HBR, 2015). This is an indication that Howard had a vision for the company and passion for coffee production and nobody would stand in his way of revamping a company that he had passion and love for. He was not only devoted to transforming the organization, but also transforming the workforce as well. He wanted to change the way employees conducted business, hence the urgent need for retraining the employees. As a leader, he had it in himself that for the organization to transform it has to start with the transformation of the workforce. Howard had the understanding that the environment in which business is carried out changes from time to time, and in order to cope up with these changes, the way business is approached and done has to change as well. Thus, it is pertinent for employees to attend retraining programs from time to time. In his transformation of the company in regaining its lost glory, as a leader the first step was to own to the mistakes that had been done resulting in the company’s financial crisis. In his interview with the Harvard Business Review, this is what Schultz had to say “Even though I wasn’t the CEO of the company when it was experiencing financial woes, I was around as the chairman and I should have known more. I am responsible” (HBR, 2015). Schultz said that admitting and owning up mistakes and taking responsibility for them is one of the ingredients of a successful leader and for that matter a transformational one. Instead of blaming the CEO who was at the helm of Starbucks when it experienced a decrease in sales and profit, he instead owned up to the mistakes. This gave confidence to the management at Starbucks at that time creating trust and confidence with their CEO. There was no element of fear that they could be reprimanded for their failures instead the CEO encouraged teamwork to find out where their house was leaking and together seal the loopholes. Howard Schultz’s leadership style was also charismatic in nature since employees liked and followed him. Charisma is a modern form of influence in which the leader has exceptional qualities as perceived by his or her followers. The leader is perceived by his or her followers to be possessing exceptional behaviours and expertise as well as acting in a way that appeal to his followers in different situations (Yukl, 2010). Howard is a charismatic leader because he possesses extraordinary expertise in management. Crises provide an excellent opportunity for charismatic leaders to emerge (Bell, 2013). The way Howard behaves and acts when in a crisis situation depicts that he is a charismatic leader. For instance, when he was recalled back to Starbucks in the year 2008 to help the sinking corporation, we expected and even those bringing him back expected him to start by restructuring the workforce. This is by sacking those in top management, but that was not the case, he instead took them to a training conference at the cost of the company (Astrum People, 2015). In the year 1997, Howard Schultz received a call that 3 Starbucks employees at the Georgetown store had been shot dead. His charismatic leadership qualities were depicted on how he responded to this crisis. Instead of seeking advice from his lawyers and letting public relations officers at Starbucks to handle that situation, he took it upon himself cutting his vacation short and immediately travelling to Washington, D.C. Howard visited the families of the murdered employees and grieved with them. Doing this made his employees identify with him as an emphatic and compassionate leader possessing qualities that employees taught were unique for a person in his position (Stallard, 2015). Howard’s charismatic traits were also exposed when he took the helm at Starbucks in 2008 as the CEO for the second time. Charismatic leaders have the ability to help sinking organisations gain their competitive edge and emerge again as relevant within the market. The selection of Howard as the leader to help Starbucks reclaim its innovate edge in business is a clear indication that the board believed that Howard had in him those unique qualities to help Starbucks navigate the tides of the moment. It is even made clear after a year at the helm the company starts making profits and increases in sales were also experienced. Bussing-Burks (2009) describe Howard’s leadership style as one that penetrates and spreads within the Starbucks culture. She describes Howard as being a visionary and a charismatic leader who has motivated those under him to do great work. Howard believes in treating the workforce right in order to get the best out of them. Whatever the rank you hold at Starbucks, the health scheme is uniform. This makes employees feel that they are not being discriminated against. On top of that employees get to share in the profit of the company. Those who were suffering from AIDS, Starbucks paid for their care for 29 months before the government comes in to offer care (Astrum People, 2015). Employees are involved in decision making in the organisation and points to the fact that, to certain extent, Howard is a democratic leader. His leadership style makes employees to see themselves as partners and not workers (Plunkett, Allen & Attner, 2013) Howard Schultz is also a good communicator. He has good communication skills. This is depicted in the way he communicated his vision for expansion to the then CEO, Jerry Baldwin. At this time, he was also three years old in the company but this did not scare him off in expressing his expansion vision to the top management (Astrum People, 2015). His communication style is not only depicted in what he says, but more in what he does. For instance, when he received the news of the death of Starbucks employees in Georgetown, he did not call a press conference so as to grief with the affected families through the press but he instead visited the families and grieved with them. This act communicates volumes in regard to his leadership skills as well as his character. Whenever he came out to talk about Starbucks, Howard always talked about his employees and customers as well as the stakeholders. He emphasised more on customer satisfaction in what they were offering. Howard also had a different view of the business that Starbucks was in. He always pointed out to his employees that Starbucks was in a people business and not in the coffee business (Gallo, 2011). In essence, Howard through this way of communication encouraged his employees to forge a connection with the customers. Employees were not selling coffee to customers instead they were selling an experience. The way Howard communicated and still communicates his vision about the Starbucks brand makes the difference as far as the coffee business is concerned. Howard does not communicate about coffee as a brand. He instead communicates what Starbucks as a brand stands for (Gallo, 2013). Starbucks’s mission also communicates a lot on how Starbucks management takes corporate social responsibility. “To inspire and nurture the human spirit- one person, one cup and one neighbourhood at a time” reads the mission statement (Starbucks Coffee Company, 2015). This mission communicates more than just selling coffee. It is communicating a human connection. Howard Schultz’s effectiveness in communication is depicted when he accepts that when the company was experiencing financial difficulties, under his leadership, they as the management had to state in front of the company that they had failed the company. He goes further to say that having made such a confession removes the burden of holding the truth (HBR, 2015). Even when the company was experiencing difficulties, he always had a way of breaking this bad news to employees in a way that didn’t demoralise the employees. He always found a way of breaking bad news to his employees without causing detrimental effects to the company. Another incident pointing to Howard Schultz’s effective communication skills is when his opinion about gay marriage was sought. In March 2013, he made a statement supporting same sex marriages. A shareholder also lamented at that declaration saying that because the CEO had such an opinion and the fact that he has made his opinion known to the public, Starbucks had lost revenue in terms of sales due to its support for gay marriages. Howard responded by saying that the decision was made through the lens of his people, the employees as well as the customers. He was quick to remind the public that Starbucks employs over 200,000 employees and it is for that reason that the company must embrace diversity (Bio, 2015). Making this bold move to make public the company’s view on gay marriages makes Howard an effective communicator and brings out his character of diversity having in mind that Starbucks is an international coffee store serving people of differing views as far as sexuality is concerned. In fact, Howard was very straight forward on this topic in that he told the shareholder who was making claims that Starbucks had lost revenue because of its support on gay marriages to sell his shares at Starbucks and buy shares in another company. He went ahead and explained that not every decision he makes as the chief executive is an economic decision (Bio, 2015). Starbucks also communicates class in their dealings by offering after sales services like entertainment in form of music, wireless internet, and mobile application among others. This is in their attempt to make the customer experience at Starbucks stores attractive and romantic (Schultz & Yang, 1997). Howard’s effective communication skills enable him to set an emotional connection with whoever he is talking to. In his communication, he brings out what he stands for and the values of the company (Gallo, 2011). He talks about his passion for coffee and creating a place in his coffee stores where people are treated with respect and dignity. Because of the efficient communication, Howard has made people like him and eventually do business with him simply because he passionately and enthusiastically communicates his brand to the people (Gallo, 2011). Howard Schultz’s approach to leadership and communication is very effective in a globalised environment. His transformational leadership style is best suited to the globe environment. This is especially so because companies need to change and transform in order to fit into the requirements of the host people. It is also a relevant way to lead because the global arena is dynamic more so when it comes to business. Customers’ tastes and preferences are bound to change, changes in technology are also bound to have its effect on the way business is carried out. In general, globalisation changes the way business is carried out. Leaders of multinational corporations with transformational leadership skills will have an edge since they will be able to take their companies across the tidal waters of change. In order for a leader to be effective in the global arena, he or she must be in touch with the reality that the business context is bound to change due to technological, political, legal, economical, sociocultural and ecological changes (Gupta & Wart, 2015). Howard Schultz’s transformational leadership skills make him suitable to lead in a global environment. In a global environment, there are people with different beliefs, customs, norms and values. In the leadership of Howard Schultz, he is depicted as a man who embraces diversity and has an understanding that people are different and in leading them, it is wise to take into account their needs. This is shown when Howard Schultz agrees to same sex marriages citing the fact that Starbucks is all inclusive and does not discriminate. This makes him suited to the global leadership. He has the understanding that there is no universal approach to leadership instead leadership should be approached in a way depending on the context and who are your followers. A global leader must have at his or her fingertips the knowledge about the local context (Gupta &Wart, 2015). Because of uncertainties in the global environment, crises are bound to pop up in the organisation and sometimes these difficulties aren’t anticipated at all. In order to navigate through such difficulties a charismatic leader has to emerge to lead the organisation through this. Because of his charismatic leadership style, Howard Schultz is suited for leadership in a global environment (Gupta &Wart, 2015). Because in his leadership at Starbucks we see him returning to the company for a second time as the CEO and helping the company reclaim its lost glory in terms of sales and revenue. This makes his approach to leadership more applicable to global environment since this environment is full of uncertainties and difficulties may sprout any time. His communication skills are overboard as far as leading in a global arena is concerned. He had a vision and was able to communicate this vision to his followers that is the employees who helped him implement the vision without questioning because the way the vision was put to the employees, it was vividly understood. He explained to his employees that they won’t just be selling coffee, but what they will be doing is establishing a connection with the customer so as to for the customer to keep coming back. He was able to lead his followers through his effective and assertive way of communicating. In the global arena, most organisations have found themselves on their knees because of failing to effectively communicate their strategy to its employees. Thus, because of the extra ordinary qualities that Howard Schultz possess he is most suited to lead an organisation within the global environment. He can be able to come up with a strategy which he can effectively communicate to the employees of the company. His compassion and courage are best suited for a global environment. When his employees were murdered in a shooting, he showed compassion by going to be with families of the murdered employees. Identifying with your employees can make you relevant as a global leader. Without fear he also assertively communicates the stand of Starbucks Corporation on gay marriages. It takes courage to come out and publicly declare that your organisation supports same sex marriages. This courage is what is required of a leader who is leading in the global arena. What has made most corporations lose out on revenue is the second guessing their stand on certain social issues. Leaders fail to clarify their stand on specific social issues. But as far as Howard Schultz is concerned, making known to the public of your stand on certain social issues puts your organisation in a pole position when competing in a global business context. Many a times when Howard Schultz encounters questions regarding the success of Starbucks, one word stands out in most of his responses; passion. In order to build a successful company you have to put your heart into what you are doing. You have to love it. It is this passion that Howard had for the coffee business that made him leave his high paying job at Hamamaplast to settle for a low paying job at Starbucks. Many at that time would have concluded that, that was a stupid economic decision on the part of Howard Schultz. But because of the passion and the vision he had for coffee business, he sacrificed his high paying job. He decided to settle for a low paying job but in an environment where his vision and passion can have a chance. For one to be an effective leader in the global arena in business, one needs to make sacrifices. Sacrifices, as depicted by Howard’s success story can pay off in the long run. So Howard Schultz’s ability to sacrifice for the common good of the company makes his approach suitable in the global arena of business. One as a global leader is bound to succeed if he is willing and ready to make sacrifices for the corporation. Putting your heart into what you are doing in the global environment as a global leader will go a long way in ensuring that you succeed in the global environment of business. Being passionate about the organisation and what the organisation stands for saw Howard Schultz build an empire in Starbucks. And he is not afraid to admit that Starbucks has had such tremendous growth simply because of love. In his book, Howard says “….the story of Starbucks is not just a record of growth and success…It’s living proof that a company can lead with its heart and nurture its soul and still make money” (Schultz & Yang, 1997, p. 5). Love is an ingredient in the global environment of business. Howard Schultz’s approach in leadership of upholding the values the organisation stands for is a better approach and is well suited for a global environment of doing business. Howard allows for the input of stakeholders through a web based interactive forum, where they post suggestions, discuss and eventually select the best (Daft, 2010). In making the final decision, that decision is begged on the values that the organisation stands for. Staying firm as far as the values of an organisations are concerned leaves one in a pole position to succeed in global leadership. Also allowing the input of all the stakeholders will go a long way in ensuring success in the global arena in terms of leadership and communication. This approach of Howard in empowering others to weigh in matters to do with decision making is well suited for a leader in a globalised environment. Conclusion In conclusion, Howard Schultz’s leadership and communication styles has seen Starbucks grow from a single coffee store in Seattle to thousands of coffee stores around the world. His expertise in leadership has seen him create something out of the coffee business. His visionary skills first saw the expansion of Starbucks within the United States of America and even outside of the country. His transformational leadership skills saw the company regain its innovative touch starting the year 2008 when he returned to the company for the second time as the CEO to help the company to revert back to a profit making company again. This saw the company regain its competitive edge in the coffee business. His charismatic leadership skills saw employees follow him every step of the way in building the Starbucks Empire (Daft, 2010). Through his effective communication skills he was able to communicate this vision to stakeholders and employees and eventually actualise the vision. References Astrum People. (2015). Howard Schultz Biography: Success story of Starbucks CEO. Retrieved from Astrum people website: http://astrumpeople.com/howard-schultz-biography- success-story-of-starbucks-ceo/ Bell, R. M. (2013). Charismatic leadership case study with Ronald Reagan as exemplar. Emerging Leadership Journeys, 6(1), 66-74. Bio. (2015). Howard Schultz. Retrieved from the Biography website: http://www.biography.com/people/howard-schultz-21166227. Bussing-Burks, M. (2009). Starbucks. California: Greenwood Publishing Group. Daft, R. (2010). Organization theory and design. (10th ed.). Mason, OH: South Western Cengage Learning. 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