Starbucks:setting a good example of a High Performance Organization
As follow up to the article Tools for business optimization it might be fun to take a look at a famous HP organization.Starbucks is seen, particularly by experts, as a completely up and running, fully functioning version of a modern ideal: an organization that excels on so many levels that it far surpasses the competition. How is it that Starbucks, with its more than 17,000 locations across the globe, leads the market with a product which by no means is winning based on best value for money?
Starbucks scores low
In Dutch VARA consumer watchdog program “Radar” of last January 21 conducted on train station cappuccinos were revealed. Starbucks turned out to be the highest priced of 10 cappuccinos tested and where quality was concerned, scored low at fourth place.
This illustrates once again that these types of incidental and localized surveys are of little value and not all too many conclusions can be drawn from them. The combination of “highest price, average quality” doesn’t exactly make a world market leader.
But with Starbucks one is completely aware of the fact that a nice cup of coffee alone is not enough. The location, the ambiance and the décor of each establishment is intended to create, next to the home and workplace, a third living environment which is reminiscent of the old town square. This, together with an extremely high level of service, is responsible for the success of Starbucks.
In the 90’s Starbucks did everything they could to develop the most professional formula possible:
- The company’s internal real estate specialists developed a system to select prime locations. Demographic factors taken into account with the amount of pedestrian traffic guaranteed a very low rate of failure for the new establishments.
- The in house team of architects took care that each location had exactly the right character. On top of this, with each renovation the authentic characteristics of the neighborhood were taken into consideration.
- Through central purchasing, standard contracts, carefully selected contractors, modular interior design and a computerized store layout, the construction time was brought down from 24 weeks to 18, resulting in significantly lower costs.
- Roasting of the beans was taken into private production so that consistent, high quality could be delivered.
- Extensive training of the service staff and the middle management.
- Mystery shoppers kept the service and quality in check.
Of course, these kinds of efficiency measures alone don’t set Starbucks apart from other professional organizations. But what does make Starbucks stand out, are the following elements of their policy:
- The management team is put together according to the strictest quality standards.
- By limited application of the franchise-model, the upper management remains more involved than their closest competition does, who are more dependent on the franchisors.
- The cost and intensity of the personnel training is way more than average.
- There’s a permanent team which constantly revolves around “the shop of the future”.
- Personalized customer attention in the establishment as standard policy.
- Maximum use of social media to support reputation and customer loyalty.
- Special website, My Starbucks Idea where customers can participate in generating new ideas and suggest improvements.
- The company's responsibility towards the environment, social surroundings, fair trade with coffee farmers and charity is taken very seriously.
- Loyalty program for staff and management through a stock option plan and extensive health care coverage.
HPO not an automatic guarantee
That High Performance Organizations aren’t fail-safe was proven in the crisis of 2008. Just as 97% of all economists, the top management of Starbucks didn’t see the crisis coming and they were not sufficiently prepared for the negative effects it would have on consumer behavior.
However, the team was able to react at lightning speed to the changing circumstances. In a rapid sequence, they shut down 600 unprofitable locations, trimmed excessive fat from the head office and expanded the range of food and drinks.
As you can see here, Starbucks has introduced a new concept as well. The drive-through location pictured is built from old ship containers. This way, Starbucks recycles the same sort of containers that transport her coffee beans. The grounds are watered with rain water runoff from the roof and collected. Next to this environmentally conscious initiative, they are working diligently on 100% recycled or reusable drink containers. These have to be ready for use no later than by 2015.
The modern company in today’s world is aware of the power of social media. It can be used to the benefit of the company, but on the downside, the rapid information exchange can also be detrimental in instances where the company happens to slip up.
Setting a good example
In addition to a top product or service, customers expect a social identity, fair trade, environmental awareness and a sense of community. On this level, HPO companies are at the forefront and so fulfill the important function of setting a good example.