Running head: THE MANAGEMENT STRUCTURE OF STARBUCKS COFFEE 1

The Management Structure of Starbucks Coffee

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The Management Structure of Starbucks Coffee

Executive Summary

Starbucks Coffee is a company that capitalizes on its corporate structure to enhance its

business agenda in the global arena. Being the largest chain of coffeehouses in the world,

Starbucks enjoys a competitive advantage in the industry partially through the aptness of its

management structure. The company has thousands of cafes across the globe and primarily

profits from the sale of coffee and tea beverages. It boasts of a heavy workforce that runs into

hundreds of thousands and relatively low employee turnover. Starbucks has a matrix

organizational structure, which is the least bureaucratic and the most excellent human resource

policy. The McKinsey 7-S model can assist in describing the company’s change and innovation

strategy. In addition, Starbucks’ communication channel, which flows in all organizational

directions, is effective for its employees. The company’s management controls different

processes to guarantee the realization of desired goals at all corporate levels. On the other hand,

the CEO exhibits several servant and transformational leadership styles to run the company and

address various management issues.

Introduction

Every business entity employs various strategies to gain a competitive advantage over

others and enjoy a larger market share eventually. The management or corporate structure is one

crucial strategy that influences many areas of a firm’s operations including leadership style,

change in management strategies, communication, and other factors essential for business

growth (Geereddy, n.d.). Starbucks is a good example of a company whose management

structure has evolved to match its present business needs (Geereddy, n.d.). For instance, the firm

altered its organizational structure after its business expansion, which came after it acquired
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Seattle’s Best Coffee and Ethos Water (Geereddy, n.d.). Founded in Seattle in 1971, Starbucks

rose to become the world’s most renowned and fastest-growing businesses. Initially

characterized by a gradual but sure growth, the firm expanded rapidly towards the close of the

1980s and into the 1990s. At the start of the 21st Century, Starbucks had approximately 9,000 s

outlets worldwide (see app. 1).

Company Products/Services, Number of Employees and Turnover

Among the most renowned cafes worldwide, Starbucks primarily benefits from the sale

of assorted coffee and tea beverages alongside selling roasted exotic coffee beans (“Starbucks

Company Profile”, n.d.). The company’s main product, however, is fresh-brewed coffee, which

is, however, supplemented by other products such as hot and iced espresso drinks, non-coffee

beverage blends, Tazo teas, and smoothies among others. The company also sells various types

of merchandise such as coffee brewers and grinders, coffee mugs and coffee accessories, home

espresso machines, premium chocolate, and compact discs. Fresh food is also available at

Starbucks with sandwiches, baked pastries, salads, and yogurt parfaits as part of the menu.

Finally, there are other available global consumer products, such as Starbucks liqueurs and an

assortment of super-premium ice creams.

The number of employees at Starbucks has been rising steadily through the years, which

corresponds to the firm’s growth in global presence. The present total number of employees is

estimated at 346, 000, which is up from the 2015 figure of 238, 000 (“Starbucks Company

Profile”, n.d.). Appendix 2 illustrates the steady rise in staff at Starbucks from 2015 to date.

Among the core reasons for Starbucks sustained popularity over the years is the quality of

its coffee and an incredible customer service. Starbucks is widely acclaimed for its employee

satisfaction. The firm’s staff turnover rate is approximately 65% as that of managers is about
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25% per annum (“Starbucks Company Profile”, n.d.). Unlike other similar corporations,

Starbucks’ turnover rate is significantly low, thus making Starbucks be among the best

businesses with a high consumer satisfaction and employee motivation.

Organizational Structure and Design

Starbucks Coffee’s organizational structure is a matrix type. It is a hybrid one that

comprises diverse aspects of the cardinal types of management structure (Meyer, 2019).

Particularly, the company’s structure is characterized by interchanges among its varied units. For

instance, Starbucks' product division intersects with both its geographic and functional divisions,

which also cooperate with other sections of the company. The main elements of this firm’s

management structure are a functional hierarchy, geographical units, product-oriented units, and

dedicated teams. Appendix 3 provides an overview of the company’s matrix type of management

structure.

HR Structure and Management (Staffing, Benefits and Compensation, and Motivation)

The early 2000s were a challenging period for Starbucks as the company struggled to

attain and retain its staff to safeguard its projected growth. The HR team discovered that success

in the retail chain required a team of motivated and devoted employees (Tikson & Hamid, 2018).

As a result, the company started to select the right staff and retain them. People have their

personal expectations on where they feel their goals can be realized. Therefore, any organization

with well-designed human resource policies would identify competent workers and match them

accurately to their areas of expertise (Tikson & Hamid, 2018). The HR management in

Starbucks, therefore, ensures that the candidates selected can identify the job’s rapport with their

goals and personality.

After hiring the right people, Starbucks invests in their training to ensure that they would
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perform their duties efficiently. The company’s management acknowledges that critical

decisions such as whom to hire, the kind of training to offer, what to pay, and the evaluation of

employee performance have a significant impact on staff motivation and their ability to provide

quality service to the customer (Tikson & Hamid, 2018). The substantial investment that

Starbucks makes in its staff through its extensive training program illustrates the company’s

commitment to empowering its employees. The policies that demonstrate the firm’s commitment

to becoming a responsible business hinge on hiring, workplace environment, diversity, and wage

and hour rules.

The Starbucks\ hiring policy complies with the company’s global human rights standard.

The firm’s hiring practices promote equal opportunity (Tikson & Hamid, 2018). In addition,

recruitment decisions are based on work-related standards, and the use of forced labor is not

condoned. Starbucks’ workplace environment facilitates a fair treatment through which

employees work with each other with dignity and respect. Moreover, Starbucks embraces

workplace diversity by creating and promoting an all-inclusive working environment, thus

enhancing its strategic advantage. Finally, the firm adheres to all applicable labor laws, thus

ensuring that every worker is compensated correctly.

Employee motivation is another vital consideration for any

organization since it influences workers’ behavior. Staff motivation revolves around the

psychological forces within an individual that determine their behavior in the organization, level

of effort, and resilience during hard times (“Starbucks Company Profile”, n.d.). Money plays a

significant role in work motivation. In this regard, many companies such as Starbucks offer an

attractive benefits plan. At Starbucks, employees received various special benefits such as

company’s stock dividends. The stock dividends make the employees feel like they own a part of
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the company, thus motivating them to ensure the stability of the firm’s performance and an

increase in its profit margins. Starbucks also rewards its employees with full healthcare benefits

and comprehensive training. The working environment also facilitates healthy relationships

between employees and managers. Through its interactive structure, employees at Starbucks can

learn among themselves while at their job, which motivates everyone in the firm to satisfy

themselves and achieve a new level of performance.

Change and Innovation Management Processes

Starbucks' change and innovation strategy could be analyzed using the McKinsey

Framework, as illustrated in appendix 4. The McKinsey 7-S model assists in identifying seven

internal components of a corporation that should be aligned for it to be successful. The 7-S

model addresses a wide variety of situations where it plays a crucial role in examining how

various parts of an organization work together. For instance, it can help to improve

organizational performance or determine the best approach when implementing a proposed

strategy (Rivero, 2015). Some important features of Starbucks' change and innovation processes

include redefinition of customer experience, product improvement, and business expansion.

With reference to product improvement, Starbucks has strengthened its coffee products

for its England and Ireland customers in specific products, such as cappuccino, latte, and mocha.

Starbucks is also keen on expansion. After the 2009 closure of its five stores, the firm is

expanding with twenty-six new stores currently, up from the twenty-two new stores opened in

2018 (Meyer, 2019). Besides, Starbucks plans to bolster its expansion by unveiling own stores

rather than providing licenses and franchises to others. Starbucks also capitalizes on systems to

enhance its brand value. For instance, the company has embraced the social media business to

promote its brands through popular channels such as Twitter, Facebook, and YouTube.
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With regard to shared values, Starbucks focuses on improving people’s interactions by

creating an experience in which individuals would find it comfortable and convenient to visit

their premises just to unwind. The company, therefore, seeks to create a third place apart from

work and home for individuals to hang around. Starbucks has also embraced sustainable sourcing

as a measure of countering opposition across the world, where the firm was accused of exploiting

poor farmers through unethical supply chain maneuvers (Meyer, 2019). Finally, the company

always intends to give back to the community through corporate social responsibility.

Communication (Corporate and Internal)

Starbucks values the importance of maintaining communication flow at all levels of the

organization. The commitment to this rule starts at the top level where the Chief Executive

Officer, Howard Schultz always strives to visit thirty to forty stores every week (Geereddy, n.d.).

Besides affording him an upfront view of operations in the field, partners also find an

opportunity to interact with the top manager in the company. Surveys on past employees

established that communication at the company needed a significant improvement. The managers

listened to concerns and resolved to make some changes. One of the key initial changes entailed

the adoption of an internal video newsletter to convey crucial information about corporate news

and vital announcements. Management also devised an internal communication audit that

randomly sought feedback from various stakeholders, which focused on improving company

communication.

The Starbucks’ communication channel is generally effective for its employees since it

puts much importance to everyday work. Managers schedule interviews on a weekly basis to

understand employee needs (Geereddy, n.d.). The staff members are even allowed to decide on

which policy serves them right, and the company’s directors review each employee's suggestion
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with equal enthusiasm. As the company encourages every worker to join in making and

developing its plans, employees are also motivated to work in unison towards achieving

corporate goals. Therefore, crucial policies are conveyed between workers, and their personal

opinion is highly valued.

Communication is an integral part of Starbucks’ corporate culture and organizational

success. In this regard, staff members can make decisions on their own, without the need for

clearance from top management (Geereddy, n.d.). Due to this “open system of communication,”

the corporate culture is more relaxed and supportive to the bottom line. In fact, the company

refers to every employee, both full and part-time, as a partner to ensure regular communication

among them. Starbucks’ matrix organizational structure also facilitates an effective internal

communication.

Controls and Operation Management

At Starbucks, the managers’ roles do not stop after establishing goals and organizing the

appropriate structures to pursue them. Managers are also required to monitor work activities and

ensure everything is done as planned, thus correcting any significant deviations (Geereddy, n.d.).

The company’s managers control different functions and processes to guarantee the realization of

desired performance standards at all corporate levels. One of the major reasons behind

Starbucks’ success is control of the coffee experience. The firm has always been steadfast in

providing its customers with a unique product, which is not only of high quality but also

delivered with exceptional service.

Everything done by each Starbucks partner, from the top to bottom level, contributes to

the firm’s ability to perform its functions both efficiently and effectively. Managers have

implemented various controls to help in monitoring and evaluating every vital corporate
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function. (“Starbucks Company Profile”, n.d.). Among the controls that Starbucks managers use

include security controls, transaction controls, employee controls, and corporate performance

controls.

Leadership Style of the CEO

The Starbucks’ mission statement and other espoused values insinuate a servant

leadership style at the company’s apex. In 1970, Robert Greenleaf developed the concept of

servant leadership, and he advanced his theory on the notion of mutual service. Therefore, if a

leader desires to be served, they must first serve others. In this light, employees should be

provided with good working conditions for them to work perfectly. The servant leadership style

at Starbucks is exemplified in the person of Howard Mark Schultz. Schultz is the longest-serving

CEO of Starbucks, after having served from 1986 to 2000 (“Starbucks Company Profile”, n.d.).

He served in the same capacity again from 2008 to 2017, after which he became the company’s

executive chairman till 2018. The popularity of both the company and brand name could not

have been realized without Schultz’s kind of management and his innovation strategy. Schultz

can also be described as a transformational leader after his leadership style inspired the Starbucks

team to realize the company’s goals (Chris, 2015). During his tenure, Schultz treated each

employee as a partner, thus giving them respect and dignity.

Management Issues Over the Last 10 Years and Management’s Response to Them

Starbucks has a well-developed system for maintaining close connections between

managers and workers. However, the company’s employees made understaffing complaints in

the past (Taylor, 2017). The reason for that situation could be the fact that Starbucks did not hire

more than six employees at one store at any given time. The motive behind such a minimal staff

was the hiring model that included getting coworkers to acquaint themselves with each other and
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forge deeper connections. Employees further asserted that their store managers were not

incentivized to recruit more staff. However, the top-level management addressed that reported

situation of understaffing very soon.

In another management crisis of 2018, Starbucks was put into the spotlight after two men

of African descent were apprehended at one of the company’s stores, thus leading to a public

protest outside the concerned store. A social media reprisal also followed with the

#BoycottStarbucks hashtag trending on Twitter (Park, 2018). Starbucks management, however,

reacted in a positive way, unlike the case with many organizations. First, Starbucks management

acknowledged the company’s fault and duly offered an apology (Park, 2018). The firm accepted

responsibility for the wrong treatment of the two black men saying that such an incidence should

have never happened. In addition, the company offered an official apology to the affected

customers. Of particular interest was Kevin Johnson’s (the current CEO) response in an

interview with Good Morning America (Park, 2018). The CEO portrayed an exemplary

leadership by taking full ownership of the issue, instead of blaming it on one person or a

particular store. By being sincere and understanding the issue, the CEO admitted to the existence

of bigger problems at the firm with a promise of solving them. Also, the CEO apologized to the

two men in person rather than sending a blunt corporate message. Moreover, the CEO took

action by closing the entire chain of corporate-owned stores in the US to train their staff on racial

bias.
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References

Chris, J. (2015). 7 Howard Schultz leadership style principles. Retrieved from

http://www.josephchris.com/7-howard-schultz-leadership-style-principlesю

Geereddy, N. (n.d.). Strategic analysis of Starbucks corporation. Retrieved from

https://scholar.harvard.edu/files/nithingeereddy/files/starbucks_case_analysis.pdf

Meyer, P. (2019). Starbucks coffee’s organizational structure & its characteristics. Panmore

Institute. Retrieved from http://panmore.com/starbucks-coffee-company-organizational-

structure.

Park, R. (2018). Issues management lesson from Starbucks. Retrieved from

https://medium.com/@ray.kr.park/issues-management-lesson-from-starbucks-

5a5f85e4c8a1

Rivero, O. (2015). Starbucks Corporation: Leading innovation in the 21st Century. Journal of

Alternative Perspectives in the Social Sciences, 7(1), 23-38.

Starbucks company profile. (n.d.). Retrieved from https://www.starbucks.com/about-

us/company-information/starbucks-company-profile.

Taylor, K. (2017). The vast majority of Starbucks workers say in a new survey that the chain

needs to fix a major problem. Retrieved from

https://www.businessinsider.com/starbucks-workers-say-overstaffing-continues-2017-

7?IR=T.

Tikson, S., & Hamid, N. (2018). Human resource policies and work culture: A case of Starbucks.

Jurnal Bisnis, Manajemen dan Informatika (JBMI), 15(1), 1-11.

Appendices

Appendix 1. Infographic of Starbucks showing the growth outside US.

Source: http://cargocollective.com/hricht/Mapographic
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Appendix 2: Starbucks annual number of employees since 2015

Starbucks Number of Employees since 2015

Source: macrotrends.net

Appendix 3: Sample matrix corporate structure

Source: https://www.researchgate.net/figure/Strong-Matrix-Organizational-Structure-

11_fig2_328003201
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Appendix 4: The McKinsey 7S Framework.

Source: strategicmanagementinsight.com