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.