February 26, 2007
Has Starbucks Lost Its Soul?
Howard Schultz is concerned that Starbucks has lost its soul and is asking everyone who works for the company to remember those attributes and practices that made the company great.
In an memo from Feb. 14, as reported by The Seattle Times, Mr. Schultz wrote that unnamed people are calling the company’s stores “sterile, cookie cutter, no longer reflecting the passion our partners feel about our coffee. In fact, I am not sure people today even know we are roasting coffee… we desperately need to look into the mirror and realize it’s time to get back to the core and make the changes necessary to evoke the heritage, the tradition, and the passion that we all have for the true Starbucks experience.”
The issue as identified by Mr. Schultz is spot on, according to some within the company. The problem, as many see it, stems from two areas. First, the company has altered how it produces drinks in stores. The example given was Starbucks’ switch to automated espresso machines in 1999 and the change to keep beans in flavor-locked packages instead of inside bins.
The other more critical issue, some say, are the levels of middle management in the company that have resulted in a communication cutoff between baristas in stores and executives such as Mr. Schultz and company CEO and president Jim Donald.
The managers are so focused on sales and expenses that some call several times a day to find out how a certain beverage is moving or why a given employee worked an extra hour.
“A lot of people they’ve brought into the company think they know what the Starbucks experience is, but what they’re bringing are the tactics and types of business that they came from,” said a five-year store manager who asked The Seattle Times not to divulge his identity.
The focus on keeping hours down has had some unintended negative consequences. Some have complained in online forums and in interviews that cutting hours (and costs) means that baristas coming to work for the company today have less time to learn their about coffee and their trade.
The company’s attempt to diversify its product offerings to areas such as food, some employees have said, is also leading Starbucks away from its coffee heritage.
“When you add the sandwich,” a manager said, “God only knows what else we’re going to get.”
Discussion Questions: Has Starbucks lost its soul? What are your thoughts on some of the criticisms expressed in The Seattle Times piece such as cookie-cutter stores, less frequent updating/remodeling, too much middle management, reduced time for training and customer interaction, hiring practices, etc.?
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Starbucks is facing what our data shows every single business organization in the world faces: a Master System that is generating a culture that is shifting away from what Starbucks wants.
As is the case with every other business organization, Starbucks’ Master System has a couple of contradictions that are creating a number of problems for the company:
– Performance measures built into the operations of the company a number of years ago (especially financially-based ones) are in conflict with the culture Mr. Schultz, and other executives, desires.
– The hierarchy of the organization is now generating political, face-saving, turf-protecting routines, which are in conflict with the culture management desires, and which are in growing conflict with rewarding work conditions at all levels of the organization.
– These conflicts are becoming increasingly embedded and obscure, so that company management is likely to find these routines harder to see and address as time goes on.
Every organization we have ever studied (over 1200 to date) has this same fundamental problem. There are two ways organizations address this problem:
– Say that it is part of “the way the business world works,” and give up trying to make significant changes to the situation.
– Enter a cycle of interventions designed to make a difference. The cycle generally follows the pattern of: management becomes passionate that changes can be made and installs high-profile training, exhortations, structural changes, and/or personnel changes, which ultimately cost a great deal of money, disrupt the organization in undesired ways, and fail to make the difference hoped for; then a period of disappointment and regrouping, followed by a period of low-level and sporadic incremental adjustments that also fail to make much of a difference; followed by more disappointment; and then a period of high passion that starts the cycle again. Many organizations that repeat this pattern a couple of times adopt the give-up routine I mentioned above.
The Master System can change, but not by these methods. I wish Starbucks all the success in the world. It is a wonderful company doing wonderful things in dozens of ways, all over the world. This is one of the few companies I really believe in.
Starbucks hasn’t lost its soul, but it’s in danger of losing its culture. For many years there was a certain look of pride and individuality in those working in Starbucks and in the attitudes of its associates. Now it’s quickly becoming just another large multi-unit, multi-national food service operator. Unfortunately, bureaucracy and the constant eye on the bottom line is beginning to stifle the organization. Profit is good, but then a company begins to lose some of the things that originally made it successful; maybe it’s time to regroup and go back and look at some of the basics that originally made it so.
I have always found the staffers at Starbucks to be one of their huge advantages. They usually display a good sense of humor and seem to enjoy working there and being part of a team. They truly are “the culture” to the customers and create the Starbucks experience. If the company loses this and focuses too much on the bottom line, then they will only offer consumers a very “vanilla” experience. And that would be bad for business.
The once fresh, distinct “never-to-be-missed” experience offered by Starbucks has, for many, devolved into a disappointing trip to a run-of-the-mill coffee shop with expensive coffee that is no better than the McDonald’s brand. Starbucks’ exponential expansion over the last decade has made Starbucks coffee a desired commodity. But keeping a commodity interesting and exciting is a challenge that requires ongoing innovation not only of the product, but in the realm of the retail experience. Does Starbucks have a unique product? Do they offer an experience for consumers different than other coffee shops? Small innovations matter in shaping consumer perceptions, and Starbucks is no exception–the shape of the cup, coffee packaging, and employee courtesy…they all matter.
An interesting question is whether or not Starbucks’ culture is something they can unilaterally change. Starbucks is so much about experience that the customer has “co-created” the experience and the culture. Dare we say that the customers who go to Starbucks and for whom it has become a part of their daily life…dare we say they (should) own the culture of the store as much as the company does?
Just being provocative on a Monday….
Mid-management is strangling Starbucks. Point of sale training is lacking and honest business decisions are dismissed in favor of “enforcing” budget guidelines.
I agree with the last few comments that Starbucks is long past the point where it can recapture an “indie” feel. It is mainstream, it has a formula, and it works. When I was in college traveling abroad, I recall thinking that it was nice to know that if I wanted to (and I tried not to, but…) I could pop into a McDonald’s almost anywhere in the world and get the same fries and a Coke I would get at home. Consistency can be a virtue.
That said, McDonald’s is about value and Starbucks is about the experience, so Starbucks had better always be working on the experience. The smell of coffee beans in a bin, the pull of an espresso machine lever arm; if they are no longer efficient, then something has to replace them. A passion for coffee and the skill of preparing it are what should separate a Starbucks barista from a McDonald’s fry cook.
Starbucks must remember that it is selling a 50 cent cup of coffee for $3.50, and the extra $3 is the experience.
They have gone from a niche specialty player to a “mass marketer” and like it or not many, many people just go in to buy a cup of coffee and the “experience” is not relevant…they just want to buy the cup of coffee and get out and get to work…and they buy it from the “help” not from baristas. If they long for the good old days, then they never should have gone public and they should have kept growth to 5 or 10 manageable new shops per year.
Starbucks is Starbucks. They need to stay their course. They are not independent coffee houses, they are Starbucks Coffee shops.
Critics aside, Starbucks is doing a lot of business with a lot of regular people in a lot of locations every day. We hear this criticism of almost every company that expands and we need to listen carefully to what is noise and what is a problem that should be fixed.
Just because the critics get tired of seeing the same things, that doesn’t mean Starbucks regulars are. I don’t have a regular Starbucks but frequent them wherever I travel. The experience is not as warm and personal for me as it is for a lot of the people I see who are regulars for the particular Starbucks I happen to be in that day.
As a traveler without a “my Starbucks” I enjoy knowing that I’ll get a consistent product, in a consistent environment, convenient to where I am. It is easy to decide to go to Starbucks and hard to decide to go into an independent because you don’t know what coffee, what mess on the table and in the bathroom, who will be serving, or how you’ll be treated. This is a key attribute of any chain. McDonald’s, likewise, is a different class of restaurant, but always consistent.
The basic decor of Starbucks has been around a long time for many of us, and has been nearly copied in style by many others. It is time for a freshening up of the look, and that will cost a bundle if they aren’t careful. I’m not saying a total renovation will be needed. Maybe the introduction of some accent colors with paint, wallpaper, and easy to change things such as furniture.
Long live Starbucks! They’re doing a lot of things very right–still.
Starbucks’ challenges are proof that size does matter in chain retailing. Its stores’ traditionally intimate feel and simple, dependable experience have been conflicted by the wider menus and performance-oriented standards.
Rapid growth statistics satisfy investors, but control always suffers under such conditions. When management reflexively reaches for greater control, as by imposing performance and cost-control standards, front-line employees naturally feel hemmed in and commoditized.
Starbucks has been an undeniably great story until now, but even its exemplary culture may be dented by the intrinsic messages sent by management decisions aimed at trimming costs and driving productivity. It’s a fine line to walk, since even store associates enjoy marking performance improvements. But too much scrimping and scripting could make the job feel more like fast food than fast track.
I miss the regular old espresso machines. Years ago, going to a Starbucks was an “event” with the barista pounding out the spent coffee pucks and yelling out your order when it was ready. I think the drinks actually taste better with the old machines. Now, with the automatic machines, they can hire anyone who can press a button. There’s no thought process anymore into making a drink; therefore, the barista’s attitude has become numb. And when the barista is bored there is no customer interaction. Last week, I watched a barista at the airport use of one these machines and she looked bored has heck.
For whatever reason, I feel part of the problem is with these new machines…bring back some of the “liveness” of making a drink and your employees will reciprocate.
Coffee shops can be a lot like alternative, indie music. When they hit the mainstream, look out–people are going to accuse you of selling out. In music, artists that reinvent themselves have some success sticking around. Starbucks may need to reinvent themselves too with their branding…maybe break some branding rules and think about how to localize the look of the coffee shops and how to personalize the experience. Do they allow local artists to perform at their locations? Display art of local artists–make it hip again. Maybe some allow local music; the one I visit only seems to sell national CDs to enhance their image. Put some faith in their local managers to manage and know their customer and not have someone tell them exactly how to run it from afar. Consumers are fickle–look at the demise of ‘in’ restaurants that fall by the wayside when the newer hipper ones replace them.
As a company grows, keeping the culture is extremely difficult. One of the tenets of the original seems to be end-consumer contact. With a larger company and more levels of bureaucracy, end-consumer contact is no longer direct and distance between management and store workers grows.
Consumers have come to think of Starbucks as a source of coffee when they want it, the way they want it. Waiting in line can be frustrating for some. So here’s a dilemma: how do you keep the experience original with the smell of the coffee beans and individually prepared item balanced with the demand for speed when the line is growing long and people are walking away and management is calling to determine sales every hour.
Growth may have been too fast to maintain the core culture. Now the challenge is to recreate the culture.
Long after Harlan Sanders sold KFC, he publicly protested about the management. Needless to say, it was very embarrassing. There’s no doubt that Starbucks has changed, and will continue to change. Culture = destiny. Retaining positive cultural elements is a very controversial issue. When Home Depot reduced its reliance upon recruiting home improvement professionals, tremendous cultural leverage was lost. If Chick-fil-A or Hobby Lobby get sold and the new owners start running them on Sundays, the cultures will change. For years, Fred Smith, founder of FedEx, told the pilots they needn’t join a union because they’d get union compensation anyway. When this promise was broken, FedEx pilots got unionized and labor relations got hostile. It’s easy to calculate the cost of a special culture, so it’s always going to be questioned. It’s hard to calculate the value.
It’s inevitable that as a company grows as rapidly as Starbucks, it contends with the costs of that growth. Not the economic costs as much as the price paid by the “culture of the company” that made it a success in the first place. Every retailer struggles with this question at some point in its history if it becomes big enough and successful enough; think Wal-Mart as the best-known example.
This is probably not the first time that Starbucks has grappled with the issue of “cultural preservation,” so it needs to study its own history. New ventures such as drive-through, added breakfast sandwiches and its growth in China are all worth tackling if the company wants to maintain its organic growth rate. The key is to manage the growth in ways that are invisible to consumers, so that they can continue to feel a personal connection to the barista and to Starbucks as a whole. Without that personal connection, it’s hard for Starbucks to continue charging the premium prices at the center of its business model.
It seems like “Scaling Up = Dumbing Down.”
As an organisation starts to scale up, the challenge is getting everyone to work the same way as earlier. And Process with a capital “P” takes over.
In the absence of inspiring and totally involved leadership, it often is just a hop and a skip from Bureaucracy.
If a lot of people feel the same way, there may yet be hope for small businesses and the more personalized touch.