{"id":124990,"date":"2024-08-07T08:54:32","date_gmt":"2024-08-07T12:54:32","guid":{"rendered":"https:\/\/www.shortform.com\/blog\/?p=124990"},"modified":"2024-08-14T09:16:05","modified_gmt":"2024-08-14T13:16:05","slug":"starbucks-management-strategy","status":"publish","type":"post","link":"https:\/\/www.shortform.com\/blog\/starbucks-management-strategy\/","title":{"rendered":"Starbucks&#8217;s Management Strategy Under Howard Schultz"},"content":{"rendered":"\n<p>What was Starbucks&#8217;s management strategy after Howard Schultz&#8217;s return? Why did the company&#8217;s management need to be overhauled?<\/p>\n\n\n\n<p>After returning to Starbucks, one of Schultz&#8217;s initial turnaround strategies was to completely overhaul the company\u2019s management. There were three major changes Schultz made to accomplish this strategy: hiring new executives, securing emotional buy-in from executives and managers, and reaffirming key values in Starbucks\u2019 management strategy.<\/p>\n\n\n\n<p>Continue reading to delve into these three major changes.<\/p>\n\n\n\n<!--more-->\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-1-hiring-new-executives\">1. Hiring New Executives<\/h2>\n\n\n\n<p>Schultz explains that he hired several new executives during his tenure as CEO, some promoted from within and some brought in from outside organizations. He carefully selected these new hires on the basis that they shared Starbucks values, could provide a much-needed fresh perspective on Starbucks\u2019 problems, and would work tirelessly to find solutions. Schultz also explains that hiring new executives sent an important message to external stakeholders. For example, when the chief financial officer resigned shortly before an important presentation to financial analysts, Schultz promoted the senior vice president of global marketing to take over the position, which he felt communicated that money-making changes were underway.<\/p>\n\n\n\n<p>(Shortform note: In <a href=\"https:\/\/shortform.com\/app\/book\/built-to-last\" target=\"_blank\" rel=\"noreferrer noopener\"><em>Built to Last<\/em><\/a><em>, <\/em>Jim Collins and Jerry Porras argue that <a href=\"https:\/\/shortform.com\/app\/book\/built-to-last\/chapter-8\" target=\"_blank\" rel=\"noreferrer noopener\">it\u2019s best to hire executives from within the company<\/a> because they\u2019re more likely to have internalized the company\u2019s core philosophy (guiding values). But other experts, like Ben Horowitz (<a href=\"https:\/\/shortform.com\/app\/book\/the-hard-thing-about-hard-things\/1-page-summary\" target=\"_blank\" rel=\"noreferrer noopener\"><em>The Hard Thing About Hard Things<\/em><\/a>), disagree because <a href=\"https:\/\/shortform.com\/app\/book\/the-hard-thing-about-hard-things\/1-page-summary#hiring-executives\" target=\"_blank\" rel=\"noreferrer noopener\">outside hires can bring new knowledge<\/a> to the table. External hires might be especially prudent when it\u2019s clear that the status quo is no longer working, as was the case when Schultz took over as CEO. If you\u2019re faced with a tough hiring decision, experts recommend focusing on <a href=\"https:\/\/hbr.org\/2009\/05\/the-definitive-guide-to-recruiting-in-good-times-and-bad\" target=\"_blank\" rel=\"noreferrer noopener\">whether your candidates are truly qualified for the job<\/a> above all else, especially if your company is struggling like Starbucks was.)<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-2-securing-emotional-buy-in-from-executives-and-managers\">2. Securing Emotional Buy-In From Executives and Managers<\/h2>\n\n\n\n<p>Schultz explains that under his direction, Starbucks held several important conferences for executives and managers that were intended to secure their emotional buy-in. It was important to Schultz that every Starbucks leader truly believed in the company\u2019s <a href=\"https:\/\/www.shortform.com\/blog\/unique-value-understanding-michael-porter\/\">unique value<\/a> and potential for greatness because feeling connected to their work would inspire peak performance. Many of these conferences were expensive, and Schultz experienced pressure to cancel them due to Starbucks\u2019 financial troubles, but he refused because he believed their potential to inspire was worth the cost.<\/p>\n\n\n\n<p>(Shortform note: In <a href=\"https:\/\/shortform.com\/app\/book\/carrots-and-sticks-don-t-work\" target=\"_blank\" rel=\"noreferrer noopener\"><em>Carrots and Sticks Don\u2019t Work<\/em><\/a><em>, <\/em>organizational psychologist Paul Marciano sheds some light on the importance of employees\u2019 emotional buy-in. Marciano explains that <a href=\"https:\/\/shortform.com\/app\/book\/carrots-and-sticks-don-t-work\/chapter-2\" target=\"_blank\" rel=\"noreferrer noopener\">when you\u2019re only motivated to work by the prospect of a reward<\/a>, like your paycheck, you can\u2019t truly commit to and appreciate the work itself. This leads to poorer employee performance and corporate outcomes. In contrast, <a href=\"https:\/\/shortform.com\/app\/book\/carrots-and-sticks-don-t-work\/chapter-3\" target=\"_blank\" rel=\"noreferrer noopener\">when you\u2019re <em>engaged <\/em>in your work<\/a>, you genuinely believe that what you do has value, so you\u2019re more likely to do your best and contribute meaningfully. Research demonstrates that having <a href=\"https:\/\/www.shortform.com\/blog\/how-to-keep-employees-engaged\/\">engaged employees<\/a> financially benefits an organization, so it was strategic for Schultz to secure leaders\u2019 emotional buy-in during the Great Recession.)<\/p>\n\n\n\n<p>The most notable conference Schultz mentions was a $30 million managers\u2019 conference held in New Orleans, Louisiana. The conference took place in 2008, three years after the powerful Hurricane Katrina devastated the area, its inhabitants, and its business scene. Schultz says that in his eyes, Starbucks and New Orleans were in similar situations, since both were recovering from major disasters. The conference featured several galleries underscoring Starbucks\u2019 value (for example, one focused on employee-customer connections), and attendees spent a total of 50,000 combined hours volunteering to help serve and rebuild the local community. Schultz also asked his friend, the musician Bono, to introduce Starbucks\u2019 partnership with his nonprofit (RED), which provides AIDS relief in Africa.<\/p>\n\n\n\n<p>(Shortform note: This conference illustrates the benefits and pitfalls of <em>voluntourism<\/em> (where tourism and volunteer work intersect). Voluntourism is often criticized as <a href=\"https:\/\/www.nytimes.com\/2022\/06\/17\/learning\/high-on-helping-the-dangers-of-voluntourism.html\" target=\"_blank\" rel=\"noreferrer noopener\">self-serving<\/a> and <a href=\"https:\/\/www.worldvision.ca\/stories\/voluntourism-the-good-and-the-bad\">inefficient<\/a>, since attention and resources are diverted from local needs to incoming volunteers. Starbucks\u2019 voluntourism generated positive publicity during a time Starbucks lacked that, which could prompt questions about Schultz\u2019s motivations. (In his memoir, <a href=\"https:\/\/shortform.com\/app\/book\/surrender\/1-page-summary\" target=\"_blank\" rel=\"noreferrer noopener\"><em>Surrender<\/em><\/a><em>, <\/em>Bono explains that <a href=\"https:\/\/shortform.com\/app\/book\/surrender\/1-page-summary#the-white-savior-problem\" target=\"_blank\" rel=\"noreferrer noopener\">many have similar doubts about celebrity activism<\/a>, so it\u2019s integral to amplify the voices of those you\u2019re trying to help.) However, Starbucks collaborated carefully with local nonprofits to ensure volunteering efficiency, and <a href=\"https:\/\/www.nola.com\/news\/10-000-starbucks-employees-volunteer-while-in-town-for-convention\/article_5c2470d8-3a92-55c7-969d-1b2dccaf259b.html\" target=\"_blank\" rel=\"noreferrer noopener\">some locals said Starbucks made a positive impact<\/a>.)<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-3-reaffirming-key-values-in-starbucks-management-strategy\">3. Reaffirming Key Values in Starbucks\u2019 Management Strategy<\/h2>\n\n\n\n<p>By hiring new executives who shared Schultz\u2019s vision for Starbucks and securing executives\u2019 and managers\u2019 emotional buy-in, Schultz ensured that key players would enact the company\u2019s key values (uplifting humanity by providing unique value to stakeholders). Schultz also reaffirmed these values by containing Starbucks\u2019 scope. For example, he briefly considered a deal with the creators of the video game <em>World of Warcraft<\/em> to capture the young adult male market. But the feelings the game evoked didn\u2019t align with Starbucks\u2019 <a href=\"https:\/\/www.shortform.com\/blog\/clarifying-your-values\/\">core values<\/a>. Instead, he pursued partnerships with better-aligned creators, whose products Starbucks customers would have exclusive access to when they were inside the company\u2019s stores.<\/p>\n\n\n\n<p>(Shortform note: Although the collaboration with <em>World of Warcraft <\/em>didn\u2019t pan out, the Starbucks executive who spearheaded that project explains that it did lead to <a href=\"https:\/\/www.forbes.com\/sites\/stevebanker\/2023\/10\/04\/gamification-is-badly-overhyped-but-it-really-can-work-in-retail\/\" target=\"_blank\" rel=\"noreferrer noopener\">an increasingly <em>gamified <\/em>Starbucks experience<\/a>, which is in line with Starbucks\u2019 key values. Gamification occurs when you introduce <a href=\"https:\/\/www.shortform.com\/blog\/what-are-game-mechanics\/\">game mechanics<\/a>, like points accrual or competition, to a system like retail\u2014and marketing expert Jonah Berger (<a href=\"https:\/\/shortform.com\/app\/book\/contagious\" target=\"_blank\" rel=\"noreferrer noopener\"><em>Contagious<\/em><\/a><em>)<\/em> says that <a href=\"https:\/\/shortform.com\/app\/book\/contagious\/chapter-1#applying-game-mechanics\" target=\"_blank\" rel=\"noreferrer noopener\">since gamification inspires feelings of achievement<\/a>, companies can use this strategy to boost sales or use of a product or service. Starbucks gamified customers\u2019 experience by developing an <a href=\"https:\/\/octalysisgroup.com\/2016\/09\/playing-the-starbucks-game-an-analysis-through-the-octalysis-lens\/\" target=\"_blank\" rel=\"noreferrer noopener\">app-based loyalty program<\/a> that enhances consumer engagement\u2014one of Starbucks\u2019 key values.)<\/p>\n","protected":false},"excerpt":{"rendered":"<p>What was Starbucks&#8217;s management strategy after Howard Schultz&#8217;s return? Why did the company&#8217;s management need to be overhauled? After returning to Starbucks, one of Schultz&#8217;s initial turnaround strategies was to completely overhaul the company\u2019s management. There were three major changes Schultz made to accomplish this strategy: hiring new executives, securing emotional buy-in from executives and managers, and reaffirming key values in Starbucks\u2019 management strategy. Continue reading to delve into these three major changes.<\/p>\n","protected":false},"author":14,"featured_media":128492,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[45,14],"tags":[1510],"class_list":["post-124990","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","category-management","tag-onward","","tg-column-two"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v24.3 (Yoast SEO v24.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Starbucks&#039;s Management Strategy Under Howard Schultz - Shortform Books<\/title>\n<meta name=\"description\" content=\"Managers keep companies afloat when CEOs can&#039;t divide their attention. 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