.
| Operations.. |
Starbucking the trend
Never settle for mediocrity
| What? Close every store for three hours? The recent move by Starbucks to do just that may sound crazy, but it could provide some key lessons for any company. |
Lately, things have been different at this seemingly ubiquitous coffee house chain. Starbuck's sales have not been going up. Faced with a tougher operating environment, the Board of Directors brought back its former CEO, Howard Schultz to retake his old position. The first order of business for the second Schultz regime was to implement a comprehensive turnaround strategy. Some of the key initiatives included; restoring free Wi-Fi service, stopping the warm sandwich
rollout and slowing store growth. The most significant turnaround steps included retraining its workforce on how to make coffee drinks properly. It was a big undertaking, involving 7,100 stores employing 135,000 people. You just have to love it.
|
Gene Baldwin is a partner |
Since Starbucks went public in 1992 with under 200 locations, it has grown like kudzu in Georgia. In Mr. Schultz' opinion, Starbucks had lost or damaged one of its core competencies—making exotic coffee drinks properly. It takes a lot of guts to turn down three hours of revenue in all those stores and pay all those employees to relearn their jobs. The implications of this action are extremely interesting as they will affect customers, employees and management.
First, let's discuss the implications on customers. Maybe I am giving Starbucks too much credit, but there must have been something in their research, customer comments, or focus groups that told them that core customers were no longer as satisfied with their coffee experience. Surely they would not have closed down completely for three hours without a clear indication that something was wrong and it needed to be fixed right away. Even though some customers were inconvenienced by not being able to get their Starbucks coffee fix, Schultz must have reasoned that, if a customer's recent coffee experience had not been favorable, publicizing, then executing comprehensive retraining may give those core customers an opportunity for retrial. If that strategy works then Schultz will have accomplished two goals in one action. He will have improved operations and increased customer counts. With a better experience, customers may increase their frequency of visits and overall sales volumes will return to a positive trend. For the customer, his faith in the brand may be restored as a result of this move. It simplifies and focuses his view of Starbucks as a coffee house—not a sandwich shop, music store or place to purchase coffee chachkee.
Secondly, the strategy will have a dramatic effect on employees. Over the last 15 years many thousands of employees have come and gone from Starbucks. With the original management gone and new products being introduced constantly, rank-and-file employees can lose or misplace the essential mission of the company. The retraining process galvanizes everyone's focus on excellent execution of its coffee products. It would be very interesting to know what kinds of follow up management plans for its employees to keep coffee skills as top of mind for them. Of course, the best reinforcements are recognition and money. They should be following up with awards and bonuses tied to excellent coffee execution. My guess is that they are doing this and making excellent coffee execution a way of life for Starbucks going forward.
Finally, the retraining should have a dramatic effect on all layers of management. With this move, top management has laid down the edict that Starbucks stands or falls on its coffee offerings. The CEO has set himself as the guardian of that policy and as long as he is the CEO, that will be the mission of Starbucks. It takes a special conviction to take that stand in the face of pressures to improve same store sales by whatever means possible. I am not saying increasing same-store sales is not important, but it cannot trump excellent execution, operational focus and profitability. As manager of a multi-unit operation, you can learn some valuable lessons from Howard Schultz. Who is the guardian of the products, services, core beliefs and values of your company? Who is demanding that operational excellence be the organization's watchword? Who is listening carefully to your customers to insure they receive the best shopping experience when coming to your store? Who is reviewing product offerings and prices to make sure that both present a compelling proposition to customers?
The answers to these questions are critically important to Starbucks and they should be for you as well. Working on these operational imperatives is not as sexy as opening new markets, making an acquisition or completing a public offering, but in many ways they are more important.
