Last updated: September 28, 2019
Topic: ArtMusic
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ABSTRACT

This paper discusses the leadership qualities of Howard Schultz, CEO of Starbucks Coffee, Inc. Leadership traits cited by some influential people, like John Gardner, and some organizations in their studies, were used to demonstrate the leadership qualities of Howard Schultz. This study proves that a lot of inherent characteristics of a good leader like Intelligence and action-oriented judgment, eagerness to accept responsibility,  task competence, understanding of followers and their needs, skill in dealing with people, need for achievement, capacity to motivate people, courage and resolution, trustworthiness, decisiveness, self-confidence, assertiveness and adaptability or flexibility are all present in Howard Schultz. He is in one way seen by his staff, and is proven in this report, that he is one employer and leader with a big heart and great understanding.

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What is leadership? There are particular people that others will definitely listen to and eventually follow, for whatever reason that may be. Perhaps they have a good sense of humor and people like their style, or perhaps they have what it takes to be listened.

When you look at organizing events it’s somebody who’s got what is called as ‘leadership qualities’, they are people who are willing to instruct other people on what to do and still have the respect of other people as well, or sooner or later gain that respect through actions. That is leadership.

Frequently we confuse leadership with authority. To explore this we can turn to Heifetz’s (1994) important discussion of the matter. Authority is often seen as the possession of powers based on formal role. In organizations, for example, we tend to focus on the manager or officer. They are seen as people who have the right to direct us. We obey them because we see their exercise of power as legitimate. It may also be that we fear the consequences of not following their orders or ‘requests’. The possibility of them sacking, demoting or disadvantaging us may well secure our compliance. We may also follow them because they show leadership. As we have seen, the latter is generally something more informal – the ability to make sense of, and act in, situations that are out of the ordinary. In this way, leaders don’t simply influence; they have to show that crises or unexpected events and experiences do not faze them. Leaders may have formal authority, but they rely in large part on informal authority. This flows from their personal qualities and actions. They may be trusted, respected for their expertise, or followed because of their ability to persuade.

It seems to be one of those qualities that you know when you see it, but is difficult to describe. There are almost as many definitions as there are observers. Many associate leadership with one person leading. Four things stand out in this respect. First, to lead involves influencing others. Second, where there are leaders there are followers. Third, leaders seem to come to the fore when there is a crisis or special problem. In other words, they often become visible when an innovative response is needed. Fourth, leaders are people who have a clear idea of what they want to achieve and why. Thus, leaders are people who are able to think and act creatively in non-routine situations – and who set out to influence the actions, beliefs and feelings of others. In this sense, being a ‘leader’ is personal. It flows from an individual’s qualities and actions. However, it is also often linked to some other role such as manager or expert. Here there can be a lot of confusion. Not all managers, for example, are leaders; and not all leaders are managers.

Leaders are people, who are able to express themselves fully, says Warren Bennis. “They also know what they want’” he continues, “why they want it, and how to communicate what they want to others, in order to gain their co-operation and support.” Lastly, “they know how to achieve their goals” (Bennis, 1998). But what is it that makes someone exceptional in this respect? As soon as we study the lives of people who have been labeled as great or effective leaders, it becomes clear that they have very different qualities. We only have to think of political figures like Nelson Mandela, Margaret Thatcher and Mao Zedong to confirm this.

At the age of twenty, Howard Schultz was unsure about what he wanted to do with the rest of his life. Growing up in a poor family, Schultz knew that he wanted to make a better life for himself; he did not want to be burdened with financial problems. Schultz had a unique entrepreneurial drive to try to improve himself and his standing in life, because he did not want to be part of that class of people who did not have access to the American dream

His particular dream was to create coffee stores all over America where “you can take a break, listen to some jazz, and ponder universal or personal or even whimsical questions over a cup of coffee.” Many people have such dreams. The key about Schultz though is that when he dreamt he dreamt big. He did not dream of owning one coffee store but of owning hundreds of stores. He was insistent in growing the business, adding stores at least weekly.

His poor background was important and drove him in a number of ways. He was driven particularly by a strong fear of failure. His father died of lung cancer with no savings; no pension and he never achieved fulfilment or dignity from work. Schultz was clearly determined to do better but he was also determined to take with him a set of values. He states from the day his father died he knew in his heart that if he was ever CEO of a company where he could make a difference he wouldn’t leave people behind (Schultz, 1997).

Howard Schultz was not the first person to be carried away by the aroma of a well-roasted coffee bean. However, the Starbucks Coffee Co. leader was undoubtedly the first to turn that reverie into a billion dollar retail operation.

Schultz’s adventure started in 1981 when he traveled from New York to Seattle to check out a popular coffee bean store called Starbucks that had been buying many of the Hammarplast Swedish drip coffeemakers he was selling (Frost, 2006).

It took Schultz a year to convince the Starbucks owners to hire him. When they finally made him director of marketing and operations in 1982, he had another epiphany. This one occurred in Italy, when Schultz took note of the coffee bars that existed on practically every block. He learned that they not only served excellent espresso, they also served as meeting places or public squares; they were a big part of Italy’s societal adhesive, and there were 200,000 of them in the country (Frost, 2006). The Starbucks owners resisted Schultz’s plans to serve coffee in their stores, saying they did not want to get into the restaurant business. Frustrated, Schultz quit and started his own coffee-bar business, called II Giornale. It was successful, and a year later Schultz bought Starbucks for $3.8 million.

He claims that one of his major preoccupations is building trust with his employees. For Schultz there is no more precious commodity than the relationship of trust and confidence a company has with its employees. “From the beginning of my management of Starbucks, I wanted it to be the employer of choice, the company everybody wanted to work for” (Schultz, 1997). Schultz wanted to ensure Starbucks paid more than the going wage and offered a generous benefits package. In addition, all staff who have been with the company for 6 months get stock options worth 14 percent of their salary each year (Frost, 2006). To Schultz this approach also provided Starbucks with a competitive advantage, it meant they could recruit and retain good people.

It was also values driven, Schultz says. “I wanted to win the race. But I also wanted to make sure when we got to the finish line no one was left behind.” What Schultz pushed through, even before Starbucks was making a profit, was health benefits for part-time workers. His Board was skeptical but he argued that it would lower turnover and reduce the costs of recruiting and training. Schultz was also convinced that high staff turnover affects customer loyalty and hence lower staff turnover would mean more loyal customers. Finally, he recognized the key role that part-timers played in their business. Starbucks became the only private and later public company to offer health benefits to part-timers.

Schultz emphasizes the importance of having knowledgeable, skilled workers available to consumers at all times. The Mission Statement as Howard Schultz puts it is guided by the following principles: 1) Provide a great work environment, 2) Embrace diversity, 3) Highest standards of excellence to the purchasing, roasting, and fresh delivery of our coffee, 4) Develop satisfied customers, 5) Contribute positively to our communities and our environment, and 6) Recognize that profitability is essential to our future success. Schultz has since led Starbucks to become a half billion-dollar company. Each employee must complete an extensive training program that includes product expertise, a commitment to customer service, and well-developed interpersonal skills. At Starbucks, the choices they make and actions they take are a reflection of their core values.

The payback to Starbucks was significant. Turnover was less than half that of competitor companies. Schultz also argues it made a huge difference in the attitude of employees. He argues, “When a company shows generosity toward them, employees show a more positive outlook in everything they do” (Schultz, 1997). This commitment to employees is reflected in one of the company’s six guiding principles namely “to provide a great work environment and treat each other with dignity and respect.”

One of the keys to Starbucks success was that it was not a fad. Throughout Europe, there is a strong history of coffee houses in communities and part of community life. In Italy alone, there are over 200,000 coffee bars. Starbucks embraced this legacy and sought to sell it across America. It shows how the role of Schultz changed as the company grew from a few stores to a billion dollar company. He says he had to reinvent himself at least three times. He started as a dreamer, then he moved to entrepreneur and then he had to become a professional manager. You get the sense this was not to his liking. “Managing the day to day operations of a big company was not what I wished to do. It was beyond the scope of my skills and also fell outside my interests.”

Reinventing himself, did not stop there, he also reinvents his business in all ways he thinks possible. Despite previous e-commerce failures and a lackadaisical attitude to technology, Schultz believes that high-speed wireless systems will make his stores more inviting for customers. The owner of one of the world’s most recognizable logos will not rest on his laurels while, as he realizes, “brands are fragile”. He sets up wireless internet connections to make customers’ stay at Starbucks more convenient.

Starbucks had customer feedback cards, which showed early on that customers wanted nonfat milk. “It’s getting to the point where we will do anything the customers want” (Schultz, 1997). Schultz’s number-one-priority is that Starbucks’ customers are completely satisfied (Frost, 2006).

Schultz fell in love with a single Starbucks store in Seattle. “It was my Mecca. I had arrived” (Schultz). He wanted to be part of the magic and gave up his job and moved to join the original store. The simple moral from Schultz’s story is that if you pour your heart into your work you can achieve dreams others may think impossible, that you can find fulfilment when your work truly captures your heart and imagination.

Howard Schultz has all the making of a good leader and a successful man. He has inspiration – coffee and his father. He is clearly motivated, proven by the way he speaks of his mind. He acts out his vision and formulates his plan of actions wholeheartedly and without hesitation. He looks back at the past and learns from his experiences too. He knows how to appreciate things he sees and he is very persuasive when he wants something done. Most important of all, he delivers and he does it well. Howard Schultz is not just a billion dollar success, he is too an exemplary leader of his kind.

Education World conducted a survey about the qualities that people feel like the most essential aspect of leaders. Among the qualities are : 1) Has a stated vision, 2) Helps develop the leadership skills of others, 3) Offers kindnesses and kudos that make a difference to staff, 5) Is visible, 6) Has a sense of humor, and 7) Clearly states goals, expectations, and standards. Although the survey is geared more on the leadership of school administrators, Howard Schultz got seven cited above out of fifteen traits mentioned in the survey.

John Gardner, a college teacher, a military intelligence officer, a philanthropic foundation executive, an author, a cabinet official, and an adviser to presidents, studied a large number of North American organizations and leaders and concluded that there were some qualities or attributes that appeared to mean that a leader in one situation could lead in another. These included: 1) Physical vitality and stamina, 2)  Intelligence and action-oriented judgment, 3)     Eagerness to accept responsibility, 4)   Task competence, 5)  Understanding of followers and their needs, 6) Skill in dealing with people, 7) Need for achievement, 8) Capacity to motivate people, 9)   Courage and resolution, 10) Trustworthiness, 11)  Decisiveness, 12)  Self-confidence, 13)   Assertiveness and 14)   Adaptability or flexibility (Gardner, 1990).  These traits are universal; they would work on a battlefield and in the staff room of a school.

Apparently, most of the traits stated by Gardner are present in Schultz as William Mayers pointed out in his article Conscience in a Cup of Coffee (2005). Howard Schultz’s clearly demonstrated leadership abilities amidst about 250 of his top managers in a monthly town hall meeting. The question and answer part of the meeting was said to be “frank and free” (Mayers, 2005), but Schultz, the 52-year-old chairman of Starbucks, answers them all with clarity and confidence. “Schultz, dressed casually in chinos and sweater, simply engages in a dialogue with the senior executives. He lets it all hang out–and is, by turns, sensitive, passionate, and responsive. What the managers see is what they get” (Mayers, 2005). Schultz is considered as the corporate caregiver and truth teller. What he has is a unique leadership style based on an optimism that “seems at odds with a sharp-edged global economy that has bloodied both business credibility and employee morale” (Mayers, 2005).

When the controversial topic of outsourcing comes up during the meeting, Starbucks’s technology department could eventually see jobs transferring offshore. “Like many corporate leaders, Schultz is still trying to work this emotional labor issue out, but he knows that Starbucks employees view the matter as a litmus test for corporate concern” (Mayers, 2005).

“‘There’s tension here, and I’m just trying to respond in a responsible way,’ Schultz concedes to the managers. ‘We have to balance being a competitive leader and being a benevolent employer.’” (Mayers, 2005).  Then Schultz invites the entire technology department to speak with him and senior management about outsourcing. “We’ll have an open conversation,” says Schultz, “and that will be a good thing.”

After several days, Schultz evaluates the town hall brainstorming and explains how these meetings helped him lead a fast-growing $6.4 billion global company with 90,000 employees, 9,700 stores, and 33 million weekly customers. “‘People aren’t interested in how much you know,’ he says. ‘It’s how much you care.’” (Mayers, 2005). Clearly, Schultz demonstrates a great ability to listen and to learn from what he hears based on this incident, two essential traits of a leader.

Caring is not taught in business schools and benevolence is not usually discussed in corporate planning and management meetings. However, these values secure Schultz’s leadership philosophy as he seeks to build connections between people through display of heart and conscience. “Starbucks’s baristas, for example, receive a Green Apron Book that exhorts them to ‘be genuine’ and ‘be considerate’” (Mayers, 2005). Moreover, the company works hard to treat its coffee growers in Third World countries with respect while buying their products at above-market prices.

“Howard has a 100 percent commitment to leave no one behind, and that’s rare in business leaders today,” says Kenneth Lombard, president of Starbucks’s entertainment division. Adds Schultz: “We all want the same thing as people–to be respected and valued as employees and appreciated as customers.”

“You don’t start out by saying, ‘I’m going to create the world’s largest coffee company.’ You start with a sensibility that says, ‘I’m going to create a different kind of company,’ ” explains Schultz in his latte-colored office. “And you have to follow the path of doing the right thing by making decisions that are true to your mission and cause. You refer to your heart, conscience, and memory.”

Schultz is still showing his team what is possible to achieve. Like Starbucks’s venture in  music business, for example. By creating CDs and distributing them in its stores, the coffee chain is renovating how consumers perceive music. “We didn’t have a music business several years ago, and now we have 65 people on that team,” marvels Schultz, who received a personal visit from the British rock band Coldplay several months ago (Mayers, 2005).

There’s not much question that Schultz’s other recent improvement –buying a water company and contributing a nickel from every bottle sold to organizations who get clean water to children around the world — reinforces Starbucks’s image of veracity. “‘This effort says a lot to our people and customers,’ explains Schultz. ‘It speaks to the heart of our company.’” (Mayer, 2005).

Schultz keeps on to speaking to Starbucks’s heart by continuously aiming for renewal and reinvention. He is fully aware that success would not stay there if he would not guard it carefully. “Being a great leader means finding the balance between celebrating success and not embracing the status quo,” he muses. “Being a great leader also means identifying a path we need to go down and creating enough confidence in our people so they follow it and don’t veer off course because it’s an easier route to go.”

 

“Don’t be threatened by people smarter than you. Compromise anything but your core values. Seek to renew yourself even when you are hitting home runs. And everything matters.”

– Howard Schultz

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References

Bennis, W. (1998) On Becoming a Leader, London: Arrow.

Education World (2000). 15 Leadership Qualities. Retrieved on November 25, 2006 from http://www.educationworld.com/a_admin/TM/WS_leadership_qualities.shtml.

Frost, Caroline. (2006). Howard Schultz: Profile. Retrieved on November 23, 2006 from http://www.bbc.co.uk/bbcfour/documentaries/profile/howard_schultz.shtml.

Gardner, John W. (1990). On Leadership. New York: Free Press.

Heifetz, R. A. (1994). Leadership Without Easy Answers, Cambridge, MA: Belknap Press.

Meyers, William. (2005).  Conscience in a Cup of Coffee. US News. Retrieved on November 25, 2006 from http://www.usnews.com/usnews/news/articles/051031/31schultz.htm

Schultz, Howard and Yang, Dori Jones. (1997). Pour Your Heart Into It: How Starbucks built a company one cup at time. New York : Hyperion.

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