Questions Are Brewing at Starbucks
March 30, 2011, marked the fortieth anniversary of Starbucks’s first store opening for business in Seattle, Washington. From its humble beginnings, Starbucks grew to become the largest coffeehouse company in the world while stressing the importance of both financial and social goals. As it created thousands of stores across dozens of countries, the company navigated many interesting periods. The last few years were a particularly fascinating era.
In early 2007, Starbucks appeared to be very successful, and its stock was worth more than $35 per share. By 2008, however, the economy was slowing, competition in the coffee business was heating up, and Starbucks’s performance had become disappointing. In a stunning reversal of fortune, the firm’s stock was worth less than $10 per share by the end of the year. Anxious stockholders wondered whether Starbucks’s decline would continue or whether the once high-flying company would return to its winning ways.
Riding to the rescue was Howard Schultz, the charismatic and visionary founder of Starbucks who had stepped down as chief executive officer eight years earlier. Schultz again took the helm and worked to turn the company around by emphasizing its mission statement: “to inspire and nurture the human spirit—one person, one cup and one neighborhood at a time” (Starbucks). About a thousand under-performing stores were shut down permanently. Thousands of other stores closed for a few hours so that baristas could be retrained to make inspiring drinks. Food offerings were revamped to ensure that coffee—not breakfast sandwiches—were the primary aroma that tantalized customers within Starbucks’s outlets.
By the time Starbucks’s fortieth anniversary arrived, Schultz had led his company to regain excellence, and its stock price was back above $35 per share. In March 2011, Schultz summarized the situation by noting that “over the last three years, we’ve completely transformed the company, and the health of Starbucks is quite good. But I don’t think this is a time to celebrate or run some victory lap. We’ve got a lot of work to do” (Starbucks, 2011). Schultz retired a second time in 2017 and was replaced by the COO, Kevin Johnson. Starbucks has continued its dominance, opening its 30,000th store in March, 2019, in Shenzhen, China. During the COVID-19 pandemic of 2020, Starbucks and Johnson were praised on how the organization handled the crisis. Phase 1: Mitigate and Contain, was implemented, limiting access to only drive-thru and delivery. Employees were paid whether they worked or not. Then Phase 2: Monitor and Adapt was implemented, with the gradual reopening of stores. The decision to open stores was made locally, not by corporate headquarters. Johnson emphasized the principles of prioritizing the health and well-being of its staff and customers and playing a positive and constructive role with the communities and government officials where they serve.
Starbucks. Our Starbucks mission statement. (n.d.). http://www.starbucks.com/about-us/company-information/mission-statement.
NPR. (2011, March 28). Starbucks CEO: Can you ‘Get big and stay small’? http://www.npr.org/2011/03/28/134738487/starbucks-ceo-can-you-get-big-and-stay-small.
Bariso, J. (2020, April 20). Why Starbucks CEO’s Letter to Employees About Covid-19 Wins. Inc. https://www.inc.com/justin-bariso/starbucks-ceos-letter-to-employees-about-covid-19-is-a-master-class-in-emotional-intelligence.html.
The Importance of Vision
“Vision animates, inspires, transforms purpose into action.” – Warren Bennis
Knowledge, skills, and abilities separate effective strategic leaders like Howard Schultz from poor strategic leaders. One of them is the ability to inspire employees to work hard to improve their organization’s performance. Effective strategic leaders are able to convince employees to embrace lofty ambitions and move the organization forward. In contrast, poor strategic leaders struggle to rally their people and channel their collective energy in a positive direction.
As the quote from Warren Bennis suggests, a vision is one key tool available to executives to inspire the people in an organization (Table 2.1). An organization’s vision describes what the organization hopes to become in the future and helps guide its strategies. Well-constructed visions clearly articulate an organization’s aspirations. Avon’s vision is “to be the company that best understands and satisfies the product, service, and self-fulfillment needs of women—globally.” This brief yet powerful statement emphasizes several aims that are important to Avon, including excellence in customer service, empowering women, and the intent to be a worldwide player. Like all good visions, Avon sets a high standard for employees to work collectively toward. Perhaps no vision captures high standards better than that of aluminum maker Alcoa. This firm’s very ambitious vision is “to be the best company in the world—in the eyes of our customers, shareholders, communities and people.” By making clear their aspirations, Alcoa’s executives hope to inspire employees to act in ways that help the firm become the best in the world.
The results of a survey of 1,500 executives illustrates that creating an inspiring vision creates a tremendous challenge for executives. When asked to identify the most important characteristics of effective strategic leaders, 98% of the executives listed “a strong sense of vision” first. Meanwhile, 90% of the executives also expressed serious doubts about their own ability to create a vision (Quigley, 1994). Not surprisingly, many organizations do not have formal visions. Many organizations that do have vision statements find that employees do not embrace and pursue the visions. Having a well-formulated vision employees embrace can therefore give an organization an edge over its rivals.
That aspirational goal of what the company wants to become is the driver for the strategies that are developed. Accomplishing the strategies and goals drives the organization toward achieving its vision. Thus, there should be alignment between the vision of the company, its mission, values, structure, culture, and the strategies its leaders’ select. As discussed in later chapters, for example, certain structures are better for achieving organizational objectives.
An organization’s vision describes what the organization hopes to become in the future. Visions highlight the values and aspirations that lay at the heart of the organization. Although vision statements have the potential to inspire employees, customers, and other stakeholders, vision statements are relatively rare and good visions are even rarer. Some of the visions being pursued by businesses today are offered below.
|Alcoa||To be the best company in the world—in the eyes of our customers, shareholders, communities and people.|
|Avon||To be the company that best understands and satisfies the product, service and self-fulfillment needs of women—globally.|
|Chevron||To be the global energy company most admired for its people, partnership, and performance.|
|To provide access to the world’s information in one click.|
|Kraft Heinz Foods||To be the best food company, growing a better world.|
|Proctor and Gamble||Be, and be recognized as, the best consumer products and services company in the world.|
In working to turn around Starbucks, Howard Schultz sought to renew Starbucks’s commitment to its mission statement: “to inspire and nurture the human spirit—one person, one cup, and one neighborhood at a time.” A mission such as Starbucks’s states the reasons for an organization’s existence, its purpose. Well-written mission statements effectively capture an organization’s identity and provide answers to the fundamental question “Who are we?”. While a vision looks to the future, a mission captures the key elements of the organization’s past and present (Table 2.2).
While a vision describes what an organization desires to become in the future, an organization’s mission is grounded in the past and present. A mission outlines the reasons for the organization’s existence and explains what role it plays in society. A well-written mission statement captures the organization’s identity and helps to answer the fundamental question of “Who are we?”. As a practical matter, a mission statement explains to key stakeholders why they should support the organization. The following examples illustrate the connections between organizations and the needs of their key stakeholders.
|Harley Davidson||We fulfill dreams through the experiences of motorcycling, by providing to motorcyclists and to the general public an expanding line of motorcycles and branded products and services in selected market segments.|
|Internal Revenue Service||Provide America’s taxpayers top quality service by helping them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all.|
|Starbucks||To inspire and nurture the human spirit – one person, one cup, and one neighborhood at a time.|
|Netflix||We promise our customers stellar service, our suppliers a valuable partner, our investors the prospects of sustained profitable growth, and our employees the allure of huge impact.|
|Nike||To bring inspiration and innovation to every athlete in the world.|
|Walmart||To save people money so they can live better.|
Organizations need support from their key stakeholders, such as employees, owners, suppliers, and customers, if they intend to be successful. A mission statement should explain to stakeholders why they should support the organization by making clear what important role or purpose the organization plays in society. Google’s mission, for example, is “to organize the world’s information and make it universally accessible and useful.” Google pursued this mission in its early days by developing a very popular internet search engine. The firm continues to serve its mission through various strategic actions, including offering its internet browser, Google Chrome, to the online community, providing free e-mail via its Gmail service, and making books available online for browsing.
The organization’s mission is an umbrella under which all strategic management functions occur. If strategies and goals do not align with the firm’s mission, purpose, and vision, they need to be dropped, modified, or the mission needs to be revised.
Mission statements are often short and concise. Years ago, mission statements might have been several paragraphs long. The problem that companies encountered was that employees could not remember or verbalize the mission. In the evolution of mission statements, they have become short and easier to remember. Knowing and living their organization’s mission helps employees’ engagement and satisfaction.
One of Abraham Lincoln’s best-known statements is that “a house divided against itself cannot stand.” This provides a helpful way of thinking about the relationship between vision and mission. Executives ask for trouble if their organization’s vision and mission are divided by emphasizing different domains. Some universities, for example, have fallen into this trap. Many large public universities were established in the late 1800s with missions that centered on educating citizens. As the twentieth century unfolded, however, creating scientific knowledge through research became increasingly important to these universities. Many university presidents responded by creating visions centered on building the scientific prestige of their schools. This created a dilemma for professors: should they devote most of their time and energy to teaching students, as the mission required, or on their research studies, as ambitious presidents demanded via their visions? Some universities continue to struggle with this trade-off today and remain houses divided against themselves. In short, an organization is more effective to the extent that its vision and its mission target employees’ effort in the same direction.
Pursuing the Vision and Mission through SMART Goals
An organization’s vision and mission offer a broad, overall sense of the organization’s direction. To work toward achieving these overall aspirations, organizations also need to create goals—narrower targets that should provide clear and tangible guidance to employees as they perform their work on a daily basis. The most effective goals are those that are specific, measurable, attainable, realistic, and time-bound. An easy way to remember these dimensions is to combine the first letter of each into one word: SMART (Table 2.3). Employees are put in a good position to succeed to the extent that an organization’s goals are SMART.
While missions and visions provide an overall sense of the organization’s direction, goals are narrower aims that should provide clear and tangible guidance to employees. The most effective goals are those that are SMART (specific, measurable, attainable , realistic, and time-bound). SMART goals help provide clarity, transparency, and accountability. As detailed below, one SMART goal is Coca-Cola’s aim to “improve our water efficiency by 20%, compared with a baseline year.”
|S||Specific: Coca-Cola is seeking to improve its water efficiency by a specific amount—20%. In contrast, goals such as “do your best” are vague, making it difficult to decide if a goal is actually reached.|
|M||Measurable: Water efficiency can be calculated, so Coca-Cola is able to track its progress relative to its 20% target. If progress is slow, more resources can be devoted to achieving the goal.|
|A||Attainable: A series of research studies have established that performance is strongest when goals are challenging but attainable. Reaching a 20% improvement will require aggressive work by Coke, but the goal can be reached.|
|R||Realistic: If Coca-Cola’s water efficiency goal was 95% improvement, Coca-Cola’s employees will probably react with surprise. Reaching a goal must be feasible in order for employees to embrace it. Unrealistic goals make most people give up and basing goals on impossible clichés, such as “give 110%” creates confusion.|
|T||Time-bound: Coca-Cola is seeking to achieve its 20% improvement. Some universities, such as Texas Tech University, provide incentives, including preferred scheduling for students who sign contracts agreeing to graduate on a four-year schedule. Deadlines such as these are motivating and they create accountability.|
The period after an important goal is reached is often overlooked but is critical. This is an opportunity for a strategic decision: will an organization rest on its laurels or will it take on new challenges? The US space program again provides an illustrative example. At the time of the first moon landing, Time Magazine asked the leader of the team that built the moon rockets about the future of space exploration. “Given the same energy and dedication that took them to the moon,” said Wernher von Braun, “Americans could land on Mars as early as 1982” (Time, 1969). No new goal involving human visits to Mars was embraced, however, and human exploration of space was deemphasized in favor of robotic adventurers. Nearly three decades after von Braun’s proposed timeline for reaching Mars expired, President Barack Obama, in 2010. set a goal of creating by 2025 a new space vehicle capable of taking humans beyond the moon and into deep space. This would be followed in the mid-2030s by a flight to orbit Mars as a prelude to landing on Mars (Amos, 2010). Time will tell whether these goals inspire the scientific community and the country in general (Table 2.4).
Many of the principles for effective organizational vision, missions, and goals apply to individuals too. Here are some ideas that might help you think differently about your own aspirations and how you are working to reach them.
|Vision||Young children often have grandiose visions, such as “I want to be the president of the United States.” Now that you are in college, what do you aspire to become? Is your education setting the stage for you to reach this vision?|
|Mission||Is your mission in life simply to accumulate as much wealth as you can? Or do you also place value on your role in a family and as a member of society?|
|Specific||Do you create explicit rather than vague goals for yourself? This can help you to target your energy toward what is important.|
|Measurable||Quantifying your goals allows you to track your accomplishments over time and can help reduce stress. For example, meeting a goal of “write a page every day” might prevent panic the night before an important project is due.|
|Attainable||Creating challenging, but attainable educational goals (e.g. maintaining a 3.5 GPA) is likely to lead to higher performance than minimal goals (e.g., pass all my classes).|
|Realistic||To better understand your prospects in the job market, consider researching what kinds of jobs are common for your major and experience level.|
|Time-Bound||Time management is a challenge in today’s world. If you tend to procrastinate, setting interim deadlines for yourself might help you to stay on schedule.|
In addition to constructing vision and mission statements, firms also develop corporate value statements. These are explicit principles that the company endorses and lives by, and expects their employees to embrace. Values related to integrity, diversity, and customer service are often seen on company websites. An information technology company might include innovation as one of its values. Manufacturers may also have sustainability or ecology related values.
Why are values statements important for a firm? They demonstrate to their employees and other stakeholders the important principles that the organization lives by. Employees who do not uphold corporate values may see their employment short-lived at the company. Values also show customers and potential customers what the firm stands for. Some customers may choose a company based on how its values resonate with theirs.
What do values statements have to do with strategic management? An organization should seriously consider their values statement when developing its strategies and goals. If a potential strategy conflicts with one of its values, they need to drop or modify that strategy to ensure the company conforms to their corporate values as they move their organization forward.
|Guided by good: service to the customer, respect for the individual, strive for excellence, act with integrity|
|Harley Davidson Motorcycles|
|Integrity, be accountable, encourage creativity, inspire teamwork, individuality, and diversity|
|Be bold, Focus on impact, Move fast, Be open, Build social value|
A Simple Intro to Mission, Vision, and Values [03:08]
The video for this lesson explains the relationship of mission, vision, values, and strategies/goals.
You can view this video here: https://youtu.be/7mWQh_7fK3U.
- Strategic leaders need to ensure that their organizations have four types of aims. A vision states what the organization aspires to become in the future. A mission reflects the organization’s past and present by stating why the organization exists and what role it plays in society. Goals are the more specific aims that organizations pursue to reach their visions and missions. The best goals are SMART: specific, measurable, attainable, realistic, and time-bound. Corporate values are key principles that a company endorses and lives by.
- Take a look at the website of your college or university. What is the organization’s vision, mission, and values? Were they easy or hard to find?
- As a member of the student body, do you find the vision, mission, and values of your college or university to be aligned with the decisions the university makes? Are they motivating and inspirational? Why or why not?
- What is an important goal that you have established for your career? Could this goal be improved by applying the SMART goal concept?
Amos, J. (2010, April 15). Obama sets Mars goal for America. BBC News. http://news.bbc.co.uk/2/hi/8623691.stm.
National Aeronautics and Space Administration. (n.d.). Key documents in the history of space policy: 1960s. http://history.nasa.gov/spdocs.html#1960s.
Quigley, J. V. (1994). Vision: How leaders develop it, share it, and sustain it. Business Horizons, 37(5), 37–41.
Time. (1969, July 15). The moon: next, Mars and beyond. Retrieved from http://content.time.com/time/subscriber/article/0,33009,901107,00.html.
Figure 2.1: Fusebok. “Starbucks in Seoul, South Korea” Public Domain. Retrieved from https://commons.wikimedia.org/wiki/File:Starbucks-seoul.JPG.
Figure 2.2: Gardner, Alexander. “Abraham Lincoln” Public Domain. Retrieved from https://commons.wikimedia.org/wiki/Abraham_Lincoln#/media/File:Abraham_Lincoln_O-77_matte_collodion_print.jpg.
Figure 2.3: Armstrong, Neil. “Buzz Aldrin removing the passive seismometer from a compartment in the SEQ bay of the Lunar Lander.” Public Domain. Cropped. Retrieved from en.Wikipedia.org/wiki/File:Apollo_11_Lunar_Lander_-_5927_NASA.jpg.
Flextalk. (2015, June 10). A simple intro to mission, vision, and values [Video]. YouTube. https://youtu.be/7mWQh_7fK3U.