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Starbucks: Growth, Trust, and Risk

Posted by Mark Bennett on March 1, 2008


A lot of questions have already been asked on what PR/Marketing effect Starbucks’ brief barista re-education will have. However, there are also other things to consider regarding how these actions affect their frontline employees. In particular, consider how decisions regarding talent impact on their strategic success are affected by operational and marketing decisions. For instance, how does introducing an automatic espresso machine that could theoretically reduce line wait for your customers affect in unintended ways the crucial interaction between the barista and customer? How does introducing an expanded breakfast menu affect not only the customers’ experience directly, by replacing the aroma of ground coffee with burnt cheese, but also the employees’ ability to bring a quality experience to customers when their time is spent cleaning ovens?

Starbucks’ strategy hinges on trust; not only customers’ trust that Starbucks will deliver a high-quality product and a high-quality experience, but on Starbucks’ trust in its employees to be the key element in the successful delivery of that product and experience. “Beyond HR: The New Science of Human Capital“, by John W. Boudreau and Peter Ramstad, shows how Starbucks connects the culture of trust with employees as a key element towards achieving strategic success in their attempt to simultaneously grow and yet also maintain the unique differentiators that set them apart from their competition. Much of that trust is manifested in giving baristas a lot of decision power in how they deliver a quality experience to customers. The result had fit very well with Starbucks’ original strategy of high growth while at the same time not becoming commoditized as a result of scale. Lately, though, signs of this commoditization began to show and revenue and stock price were reflected in it. The barista re-education was in part a response to that, but the question is whether this was an effective response, given the other data around what issues are really affecting customers.

On the one hand, a re-education announcement can reassure customers of Starbucks’ commitment and re-energize employees by devoting the time to their development. On the other hand, a mixed message about what the problem is that’s being addressed by the re-education runs the risk of confusing both customers as well as employees. The law of unintended consequences holds here. Customers can end up hearing only about “quality problems in product and experience.” Employees can end up feeling like they’ve been singled out for public pillory, when it’s actually operational decisions driven by cost efficiency, market penetration, etc. that have undermined the very strategic differentiator that Starbucks had so carefully nurtured. Given that the special interaction between barista and customer is so important, not only should it receive attention, but the attention should be very carefully considered. The problem may really lie in the operations that should be in support of that relationship but actually work against it.

6 Responses to “Starbucks: Growth, Trust, and Risk”

  1. Meg Bear said

    you forgot to mention the impact of having Starbucks closed for a few hours on the customers. How did everyone manage?

  2. Amy said

    Mark – this is a very interesting perspective … that employees will react negatively. I had spoken to a friend of mine who is a manager (not a barista) and she was very positive about the new employee culture and the attention back on the customer experience. That said, “re-education” and “quality problems” aren’t necessarily the right word to be using with your most important asset.

    Do you see any parallels between this and Dave Duffield’s camelot return to PeopleSoft? Can this really work?

  3. Mark Bennett said

    Meg: Agreed that the store closings had an impact on the customers, and I thought that this topic had been sufficiently covered elsewhere. I was focusing on the impact on talent, which seemed to not be getting as much attention as things like customer inconvenience, highlighting quality issues, and publicity stunt topics, and so on, which takes me to…

    Amy: Right, the *way* in which this was rolled out raised the question that frontline employees may not all see it in as positive a light. The re-education event brought the spotlight on the barista and quality, almost implying remediation. However, many of the complaints were not about the ability of the barista to “…pull the perfect espresso shot…” Many were about completely different things such as long line wait, overpowering smell of burnt cheese, cookie-cutter stores, etc., that barista re-education would not address.

    The “Return of the Founder” can sometimes do good, sometimes not, and it often has little to do with the founder themselves. There are of course, honeymoon effects, morale boosts, and so on. You wonder, though, how much of the vision/core values/etc. the returning founder tries to reinvigorate gets sand thrown in the gears during execution. Folks whose operational choices had negative impact on core strategic differentiators might distract attention to other, more media-friendly events.

  4. Mark-

    Great post. I think everyone, myself included, has read alot into Starbucks ultimate intentions. Frankly, looking back a few weeks, I think Starbucks intentions were true — getting back to the core which is delivering great coffee with a unique customer experience. I would venture to say, Starbucks most recent CEO got lost with Wall Street’s demands to increase revenue per customer. Anyone that has been to a Starbucks recently can argue the customer experience has been overshadowed by cluttered merchandise, CD trays, and subpar food offerings such as microwavable breakfast sandwiches (I do like that parfait while rushing through the airport, though).

    Coffee is the core. What Starbucks need to do now is find a way to offer products, services, and a re-energized experience to compliment the core…not overshadow it!

  5. […] Starbucks: Growth, Trust, and Risk […]

  6. […] this is achieved by having a highly engaged call center workforce. This engagement is enhanced by Trust in allowing employees a great deal of freedom in how they deal with customers, backed by 4 (paid) […]

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