Essay: Report On Howard Schultz's Executive Leadership.

Howard Schultz

Describe about the Report for Executive Leadership of Howard Schultz.

Leadership is the most important element of business management. George (2015, p. 43) stated that the success of a business organization depends on the leadership qualities of its leader or owner. Leadership is a very sensitive element that has direct impact on the employees of the organization. In this context, Hellriegel and Slocum (2011, p.16) mentioned that behind the success of every large business organization, there is huge contribution of its leader. For example, Apple is one of the top most companies in the Smartphone manufacturing industry in the international market; but the company has achieved success because of the active contribution of Steve Jobs, Steve Wozniak and Ronald Wayne, the leaders and owners of Apple Inc (Northouse, 2016, p.15). 

However, this study aims to discuss on the leadership of Howard Schultz, the CEO of Starbucks. In the beginning, the study provides a brief description of Howard Schultz. After that the study evaluated the leadership strategies that Howard Schultz has taken during his leadership (Sendjaya, 2015, p. 118). Critical evaluation of the strategies is done. At the same time, the study also identifies the impact of the strategies taken by Howard Schultz on the performance of Starbucks in the past years (Mathias & Smith, 2016, p.215).

Howard Schultz

In the year of 1982, Howard Schultz joined Starbucks, when the organization was operating its business at small scale (Aiello & Dickinson, 2014). Howard Schultz belongs from a Jewish family in United States. He started his work life with Xerox just after completing his education (McQueen, 2014, p.47). After working for few years with Xerox, Howard Schultz joined Perstorp AB, which was Swedish house ware manufacturing company. After few years, the marketing skills of Howard Schultz were noticed by the owner of Starbuck and he offered job to Howard Schultz in the retail and marketing department at Starbucks. After joining Starbucks, Howard Schultz came up with several innovative marketing strategies that helped Starbucks expanding its business in international market (Bookman & Martens, 2013, p.303).

Leadership styles adopted by Howard Schultz

In the bibliography of Howard Schultz, it can be identified that after joining Starbucks, Howard Schultz made Starbuck’s mission as the mission of his own life. In the year 1983, Howard Schultz visited at Italy and found that in Italy, the coffee stores or coffee bars are not just the places, where the people come to drink coffee, but these are the places, where the sense of community can be observed. People come at the coffee centres for various purposes other than drinking coffee. At the same time, Howard Schultz also noticed that the way of providing service is also different. The behaviour of the staffs is much polite and they provide personalized services so that the customers feel free at the coffee center. Along with that, he also noticed that the leadership styles in those coffee centers are very friendly, which provides employees the scope to express their views (Cornett Erhemjamts & Tehranian, 2015. P.54).

Leadership styles adopted by Howard Schultz

Noticing the business styles of the coffee bars in Italy, Howard Schultz understood that if Starbuck wants to grow further, it needs to implement proper leadership strategy. Howard Schultz focused on the democratic and transformational leadership strategies. He believed that friendly working atmosphere can be built within the organization only when the relationship between employees and employers or managers becomes friendly (Pollitt, 2014, p. 21-23). Democratic and transformational leadership styles are the most effective in building better relationship between the management and employees.

Democratic leadership is such a leadership style, under which, the management or the employer provides the scope to its employees for expressing their opinions or views regarding any particular situation of the organization (Rubin, 2013, p. 59). Howard Schultz believed that this type of leadership style is very effective for motivating the employees towards organization’s goal (Cornett, Erhemjamts & Tehranian, 2015, p. 12-14). Employees feel that they are valuable to the company because the management considers their views before taking any particular decision or strategy. Pangarkar (2015, p. 295-297) stated that Howard Schultz considered the democratic leadership style because he thought that he can get different ideas from his sub-ordinates, which can help him in taking any particular decision. However, Schiffrin (2015, p. 639) argued that due to the adaptation of democratic leadership style, Howard Schultz faced several challenges and these were as follows:

As in democratic leadership style, leader needs considers much time taking a particular decision; Howard Schultz felt difficulties while taking any such decision that are against employees’ interests. For example, during the recession, that is during 2008, when there was financial crisis in the market, Howard Schultz had to take the decision of employee reduction (Schultz & Gordon, 2011, p. 234-238). While taking this decision, Howard Schultz could not consider the views of employees, which created negative impact on the business of Starbucks.

Due to the use of democratic leadership style, Howard Schultz faced much conflict in some situation. For example, after the recession, when Howard Schultz took the aggressive expansion strategy, he faced conflicting situation. Many people within the organization did not support the decision of Howard Schultz.

In order to overcome the loopholes in the democratic leadership style, Howard Schultz came up with the transformational leadership style during 2010. The main idea in the transformational leadership style is to lead the people with the help of high level of motivation and morality. Weinzimmer and Esken (2016, p. 333) commented that the transformational leadership style helped Howard Schultz to motivate the employees in a better way. Adopting this particular leadership style, Howard Schultz was able to re-build the trust and faith in the employees. Before the adaptation of transformational leadership style, there was much internal chaos at Starbucks related to the organization’s internal strategies. However, with the help of transformational leadership style, Howard Schultz became able to influence the creativity of his sub-ordinates (Leavy, 2016, p.21).  

Life Journey

At this time, Howard Schultz came up with several new products and successfully expanded its market in Eastern countries. Bookman and Martens (2013, p.290) considered that the decision of Howard Schultz to implement the transformational leadership style was very effective for Starbucks because from 2011 onwards, the performance standard of Starbucks was much improved than before. The revenue of the company increased from USD 10707 million in 2009 to USD 13276 million in 2012. The gross margin of the company also increased from 55.8% in 2009 to 58% in 2011 (Neac?u & B?rbulescu, 2015, p. 26). These financial figures are clearly indicating that the performance standard of the company was improved after implementation of transformational leadership style.

Executive leadership signifies the capabilities of directing or managing the employees of an organisation for motivating or influencing the individuals. The effective leadership style ensures the establishment of the team motivation that automatically creates the performance efficiency. He was born in 19^th July, 1953. He was born in a poor family. His parents were unaware of the fact that their son could become the wealthiest person in United States. He belonged to a family where the monthly income was average. Due to such reason, he has the idea about the difficulties that the low-income families face to overcome such monetary obstacles (Flamholtz & Kannan-Narasimhan, 2013, p. 37). When he was a little boy, he often saw that his father had been struggling to find a job and faced the financial difficulties throughout their lives.  Recalling such memories, he shared his feelings by stating, “I saw my father losing his sense of dignity and self-respect. I am sure that this was caused mostly by the fact that he has been treated as an ordinary working man”.

Mr. Schultz got his first job at the age of 12. At the initial stage he used to sell newspapers and then he was appointed in a local cafe. When he turned 16, he faced numerous hardships and difficulties. He even worked in fur store where he used to stretch the leather that is a much troublesome work. He set his aim to be much successful by bearing all such toil and hardships. The exhausted scenario made him stronger to achieve his purpose. He was physically strong and was rewarded with the athletic scholarships. He completed his Bachelor’s degree in Communications from Northern Michigan University in the year of 1975. He was appointed as the sales manager at Xerox after he completed his graduation. After leaving this company, he started working at Hamamaplast in Sweden. He used to sell home appliances as well as the grinders to the businesses like Starbucks. He observed that Starbucks used to purchase maximum number of coffee machine than many other renowned companies (Aiello & Dickinson, 2014, p. 308). At that point of time, he decided to meet the owner of Starbucks and travelled to Seattle.

Starbucks is the US based global coffee company. The coffeehouse chain is based in Seattle, Washington. The company was found by three college friends Jerry Baldwin, Gordon Bowker, and Zev Siegl. These people presented their passion for coffee and together started the coffee shop. However, it was noticed that the shop was started in a most inconvenient time. At the end of 60’s, most of the Americans lost their interest on instant coffee. They preferred other typed of coffee instead of instant coffee. However, Howard Schultz tasted the coffee and instantly was impressed with the uniqueness. He then exclaimed, “I went outside whispering to myself: Oh my Gosh! What a wonderful business, what a wonderful city! I want to be a part of this”. The major feature that has made the company more successful is the credo that the procedure of making the workers aware of preparing coffee. The art of making coffee is the most impressive way that attracts the customers towards the taste and texture (Martins, Rindova & Greenbaum, 2015, p. 101). It invoked the interest of Schultz who was just 29 years old then.

In order to get a job at Starbucks, he literally started begging to the director. He started persuading him to open more stores that may derive much profitability to the company (Lephart & Kleiner, 2015, p. 4). On the other hand, Baldwin feared that if the company started concentrating on rapid expansion, it might affect the business. In such time, Schultz presented his proposal by stating, “Well, let’s do it all gradually, in your usual pace, but let’s also create something truly significant”. He was offered for the post of marketing director and his salary was less than the half of his previous salary (Di Giuli & Kostovetsky, 2014, p. 160). However, after recognising the effective potentiality of the business, Howard Schultz decided to associate with Starbucks and develop his career in this company. In the year of 1982, he moved to Seattle for accomplishing his wish.

In the year of 1983, he went to Milan to find the exclusive recipe of Cappuccino coffee, which was much beneficial for Starbucks’ Sales ratio. It was noted that introducing such recipe, the company could triple the amount of sales in a year. The most impressive concept to Schultz was the Italian Cafe, which was a place for leisure and social meeting as well. It is noted that in United States, most of the people spend the quality time in fast food restaurants or cafe. In order to create an innovative network, Schultz started exploring different concepts that can be presented in front of Baldwin. However, it was noticed that the CEO of the company frequently refused many of his proposals regarding such concepts (Lemus et al., 2015, p. 25). They perceived that if these concepts are applied to the business functionalities, it might lose the individuality. The traditional thinking was quite responsible behind such refusals. In such regards, Schultz remarked, “Only those who go by unexplored roads, creating new industries and new products, can build strong, long lasting company and inspire other to achieve great results”. It is to be indicated that the efficient leaders must follow the trait of exploring the risky and innovative way. If there is no challenge, it will not be able to maintain the uniqueness anyhow. Being an efficient leader he was ready to take such risks and apply the innovative initiative for the future growth of the company (Doerr & Gue, 2013, p. 728-729).

It was noted that Mr. Schultz needed almost $1.7 million for establishing the new entity of the store. He then partly borrowed the money and the remaining balance he lent from the bank. In the year of 1986, he opened the new store of Starbucks in Seattle. The new name of the cafe was ‘Il Giornale’. This initiative was a great success for the company. At the initial stage almost 300 customers in the first working day. After a year, it was noted that the owner of Starbucks were eager to sell the company including the brand and roasting factory due to the inefficient management functionalities. The owner offered to sell the company in $4 million, which was much interesting for Howard Schultz. He directly went to the creditor for taking loans. It is important to note that in the initial stage, Bill Gates was the major investor of Starbucks. Howard Shultz became the only owner of Starbucks.

In the modern Starbucks, there was a bar counter for every single store. The professional baristas were appointed for grounding, brewing, and serving fresh coffee. The local coffee shops in Italy were much impressive and fascinating for Howard Schultz. The impressive presentation of Barista was also much attractive. One of the workers in Barista was pouring espresso in one hand and whipping cream by another hand. In fact, the worker was chatting with the customers simultaneously. Such attractive presentation of coffee mesmerized Mr. Howard for the second time when he went there and brought the menu and photographs of such presentation. The new Starbucks was then associated with the efficient workers who could show such attractive presentation. He personally used to provide training to the staffs that was considered as the major success story of Starbucks.

Coffee is one of the most demanding products, which create much addiction among the customers. Schultz took the advantage of such preferences and started applying the different concepts of selling such products. Due to such reasons, Schultz is sometimes called an adventurer. He promised the creditors to open almost 125 stores in next five years. Within the year of 1992, he could introduce more items that were never planned. Initially, he opened the store in Chicago and Boston. Eventually, he opened another store of Starbucks in California (Flamholtz & Kannan-Narasimhan, 2013, p. 76). The similar franchising system like McDonalds was adopted for creating the new corporation business. He kept his focus on strategic implementation that was concentrating on the quality, quantity and publicity. Even though such strategy was quite adventurous, he could take the risk for being an efficient leader.

As a leader, Howard Schultz has always treated his employees as his partners in Starbucks. It is to be indicated that the company is renowned for building the effective relationship with the employees. The major task of the company was to provide the positive environment and vibes to the employees to bring the effective outcome. An efficient workplace experiences satisfies the employees in a significant manner. The company constantly supports and respects the associated staffs. It is quite helpful for the employees to generate motivation and bring out the performance efficiency. The proactive actions of taking care of the employees are undertaken by the company. The comprehensive benefits are provided to the employees. The eligible employees work for 20 hours per week. In fact, the flexible working hours are also much appreciable for the employees. The employees receive the competitive wages that are offered by the company. Howard Schultz believes in appointing the efficient people who are much fond of providing the best efforts and effective outcome (Stead & Stead, 2016, p.26). Howard has set aim to identify and train the employees to generate the appreciable outcome that is beneficial for the company. In order to maintain the employee welfare, Howard Schultz introduced the employee stock purchase plan (Shefsky, 2014, p. 156). The employees will be able to contribute almost 10% of their basic salary for purchasing the common stock of the company. They will receive almost 85% discounts on the market price of the stocks. Such of these extra benefits provided to the employees were much beneficial for signified the decreasing turnover rate. The reports derived from the researches on the leadership styles of Howard Schultz are highlighting that the leader genuinely care about his employees.

Even though it was noticed that the leadership style undertaken by Howard Schultz is completely democratic, there are some of the exceptional thinking involved as well. However, the styles and attributes were completely in support of the employees. It was always in his mind that he requires several innovative ideas to deal with all the troubles coming in front of the company. The different types of the ideas are needed to be gathered to develop the professional and personal skills. He is always known for his democratic leadership style. The attitude he maintains while leading the entire organisation is much appreciable. Even when he resigned from his post, it was noticed that it affected the organisation in a significant way. His absence was much harmful for the company, which was noticed during the frequent failures. Some of the stores were decided to close due to such loss. However, when he returned to his post, he again proved his efficiencies of being the most inspirational and skilful leader.

The effective leadership style is necessary for bringing the efficient performance outcome that is considered as the success factor of the company. A particular leadership style is needed to be adopted by the leader in order to motivate the employees more significantly. If concentrated on the leadership attributes of Howard Schultz, it can be seen that there are several requirements associated for becoming an efficient leader. The following characteristics of the leader are needed to be evaluated.

• Self-concept
• Leadership motivation
• Personality
• Drive
• Knowledge of the business
• Emotional intelligence
• Cognitive and practical intelligence
• Integrity

The effective leaders need to adopt such characteristics for leading the entire team or the associated employees within an organisation. It is noted that Howard Schultz believes in adopting the people-oriented leadership styles. Her commitments towards the employees’ welfare are much remarkable. He provides the medical benefits to the existed employees and other stock options. These attributes are generally motivating the employees in a significant manner (Prabhakar et al., 2013, p. 22). When the employees have been receiving such effective benefits while they are working in an organisation, it automatically contributes efficiencies to their morale. The enhancements of employee morale are thus effective enough to perform better and increase organisational productivity. The major focus of the company is to provide the customers appreciable experience while they are spending their quality time with the social friends. The involvement of the employees is thus one of the most necessary criteria.

If concentrated from the perspectives of leadership, it can be noted that Howard Schultz has been maintaining the democratic or participative leadership style. The leadership style signifies that the employees will be able to participate during the decision making process. The leader consults with the employees for bringing different innovative ideas that are beneficial for the organisational future (Cornett, Erhemjamts & Tehranian, 2015, p. 238). The supportive leadership style specifies the collaboration of the employees, which is often termed as the ‘people-oriented’ leadership. He listens to the concerns presented by his employees. Accordingly, he takes the feedback as well as suggestion to shape the future functionalities of the organisation. When the leader pays much attention to the benefits and welfare of the employees, it is the responsibility of the employees to be much committed towards their organisational benefits. In fact, while the employees have been receiving the chance work in a hygienic workplace by utilising flexible time schedule, it motivates them more significantly.

Employees are considered as the forefront to Schultz that holds the special priority at Starbucks. The comprehensive health care provided to the employees is the major motivation for the associated workforce. The psychodynamic approach has made the company much employee-focused. Apparently, it can be considered that such treatments have been the driving force for the development of the professional attributes of the employees. Howard Schultz is the leader who is much fond of building the remarkable interpersonal relationship with the associated workforce (Rowe, 2014, p.2). The value based working benefits are much significant for keeping the employees motivated. The establishment of the transparent communication process is also signifying the appreciable leadership style adopted by Howard Schultz (Perera et al., 2012, p. 145). It has been noted that even during the crisis time, he performed his duty of an efficient leader. The further section of this study will shed lights on the crisis scenario that brought challenging situations for the companies along with other associates.

In the year of 2000, Schultz announced his retirement from Starbucks. It was quite difficult moment for Starbucks, because Starbucks initiated many business expansions while he was the CEO of the company. The expansion process had been too fast. The store number tripled in a very short span of time. It was noticed that after his departure, the quality of coffee brewing decreased that created negative impact on customers. Moreover, it was noticed the reputation of the company was also hampered. It was noticed that the company became much focused on maintaining bureaucracy style. The customer focus was shifted after his departure. Previously, the customers used to receive the positive and impressive benefits, which became invisible during the departure of Howard Schultz. Reviewing such ineffective management practices, the company felt that the company needs Schultz back (Hutt, 2016, p.24). He returned to the position of CEO when America had been struggling with financial crisis. He showed his efficient leadership attributes to overcome such crisis scenario.

On January 8, 2008, he returned to his previous CEO post after a long gap of eight years. He replaced Jim Donald to capture the position of an efficient CEO. He has the enormous experience about the company since it was established in the year if 1982.  During the year of 2008, he found that the company had been struggling with the greater loss in economic factors. The worsening economic condition in US was affecting the business expansion in a significant manner. Moreover, emergence of the direct competition with McDonalds was also creating the hazardous situations for Starbucks. Once Schultz got back to his position and joined the office, he immediately sent letters to all the employees. He wrote, “The Company must shift its focus away from bureaucracy and back to customers”. His major objective was to increase the emotional attachments with the potential customers. It was noted that the previous leadership mainly blamed the economic crisis, which increased the costs of the dairy products for the slum in business. In fact, this was considered as the reason for the hikes in pricing structure (Cornett, Erhemjamts & Tehranian, 2015, p.35). Schultz, on the other side, presented his contradictory view of such crisis scenario. He stated, “The Company shouldn’t just blame the economy; Starbucks’ heavy spending to accommodate its expansion has created a bureaucracy that masked its problems”. In order to involve innovative strategies, Schultz eliminated the previous conventional strategies. He kept his focus on developing the technological sources for implementing new strategies. The technology-oriented strategies proved to be much beneficial for bringing changes in the organisational scenario that may contribute more profitability during crisis scenario. During the implementation of such strategy, the employees received the opportunities to explore their ideas and think freely to share such innovative ideas with management. As the outcome, there is the string community based concept was developed

During March, 2008, it was noticed that the customers even received the opportunities to share their innovative ideas about the perceived benefits. This initiative was known as “My Starbucks Idea”, which was rolled out for exchanging ideas with the company. The customers started sharing their feedbacks with the company. The feedbacks or suggestions provided by the customers were based on different segments, such as services, products, layouts, corporate social responsibilities, or advertisement process.  It was found that almost 1.3 million users in social media presented share their ideas. The page view increased up to almost 5.5 million per month. Such initiative was much beneficial for rebuilding the relationship with the customers (Weinzimmer & Esken, 2016, p. 336). It also highlighted the care and concerns for the community and environment, which was much beneficial for strengthening the sustainable business position. It was noted that this ‘My Starbucks Idea’ was directly connecting the customers to headquarter of Starbucks. The higher authority even paid the attention on such feedbacks and implemented the changes accordingly. The company implemented almost 100 ideas by providing the customers chance to voice their concerns. The random tweets coming from the communities highlighted that the company is much admired and appreciated for dealing so efficiently even at such crisis scenario.  

It was informed that almost 600 coffee shops of Starbucks will be closed due to the insufficient profitability. It was noticed that the growth of the global economy grinds to halt. The consumer became much worried about saving their money and reduced their visit to Starbucks. If calculated, it was found that the profit fell almost 28% in compare to the profit gained last year at the same time. Therefore, the CEO announced that they need to close some of the stores of Starbucks that have the less profits or poor performance. The resources spent on such stores were the potential loss for the company since it failed to generate the expected profitability. The further investigation identified that the ineffective management functionalities were the major reasons behind such failure (Schiffrin, 2015, p. 643). The enormous financial crisis all over the country was also much responsible for such situational uncertainties. When Howard Schulz got back to his previous position, the company overcame all such uncertainties. The focus on the customer preferences brought stability. The enormous ideologies of Howard Schultz are thus much remarkable.

It was evident that the leadership attributes of Howard Schultz is much appreciated. In an interview of Howard Schultz, he expressed his efficient traits of a successful leader. He is considered as one of the most successful and iconic leaders of a fastest growing firm like Starbucks. It was noticed that he fought with every upcoming challenges with his keen ability and inspirational motives. In his interview, he maintained several courtesies that proved him as the inspirational character. Firstly, he frequently used the phrase “I am responsible” while describing the trouble faced by the firm. Most of the troubles were found to be occurred when he departed from the company. After his departure, the company faced the trouble due to the inefficient management process (Day & Moorman, 2013, p. 20). It affected in the operational activities as well. Hence, the company struggled through many of the obstacles and financial crisis.

When he returned to his position, he threw the previous management functionalities started re-structuring the activities. It is important to note that the procedures undertaken by this leader was much beneficial for coping with such crucial moment. He always thought that the company is associated with the good people who deserve to be rewarded. In fact, the company requires the advices and suggestions from these people. The innovative ideas will be much helpful for gathering the values of the effective organisational process. The efficient leaders even need to gather more innovative ideas to maintain the uniqueness of the company. He admitted in the interview that the company never faced much competition. However, the emergence of the new strategic position of McDonalds became the major threat for the company. In fact, it was necessary for the company to implement several relevant strategies that would have been beneficial for the survival in the competitive scenario. However, the lack of inefficiencies in the management decision after the departure of Howard Schultz, the company somewhat failed to cope with such situation. It has always been the major concern to enhance the integrity (McQueen, 2014, p. 47). However, the effectiveness of the leadership attributes is much appreciable for the future of the company. The way he has utilised to lead the company towards success was truly inspirational. In fact, reviewing his life journey, it is ensured that he has faced much difficult times, which proved to be the most energetic influence for his life. He faced all such difficulties to set the string motto of life. Accordingly, he provided his most efforts to fulfil his determinations. He took every possible risks that one efficient leader would take to reach at the peak of success. While other leaders think of the benefits, he undertook every odds and aggressive business expansion process. It was noted that the first preferences provided to the customer and employees’ needs. Such set of priorities led him towards immense success. He started recognised as the most appreciable and inspirational leaders in today’s date.

Conclusion

The study has been focusing on the leadership journey of Howard Schultz, the owner of Starbucks. He belonged to a very poor family and he was completely aware of the difficulties. Struggling with several hardships and obstacles, he started continuing his life journey. He started working in different stores and dealt with many difficulties. Finally, when he ended up working in the cafe of Starbucks, he started thinking of generating new ideas for the business growth. When each of his proposals was rejected by the owner, he opened a new cafe all by himself. Soon he started developing his business in a significant way. He proved to be the most efficient and inspirational leader in today’s world. His democratic leadership attributes provided enormous supports to the employees. Moreover, he set his priorities to give importance to the customers’ preferences. With the supports of the employees, he could manage generating more profitability for strengthening the organisational position. In fact, it was noted when he resigned from his post, it was quite difficult for the management to cope with the crisis situation. When he returned back to his post after eight years, the company started mending the loss. Hence, he is proved to be the most inspirational and successful leader in this competitive world.

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