Reference no: EM133450715

The context

Founded in 1971, based in Seattle, with over 30,000 locations, 330,000 employees, and annual revenues of around $25 billion, Starbucks is the largest seller of coffee in the world.

The Problem

Roz Brewer joined Starbucks' business in America as chief operating officer in 2017, the first woman and first African- American to hold such a senior position in the company. In her new role, she had a number of problems to deal with. The company's iconic founder and executive chairman, Howard Schultz, had decided to leave the company after three decades. After five years of exceptional growth, sales had stalled. In 2018, the company was accused of racial bias after a manager called police to deal with two Black men who had been waiting for a friend in an outlet in Philadelphia; they had not bought drinks and refused to leave when asked. Some customers called for a Starbucks' boycott after a social media video of the arrest went viral. When Brewer analyzed Starbucks' business operations in detail in her first three months, she found that the company was "melting down behind the coffee bar." Paradoxically, this was the result of the success of the mobile order and pay system; customers placed their orders through an app before coming to the store. But the stores were not ready for the sudden increase in orders. Crowds of customers jostled each other as they waited for their drinks, and stressed baristas struggled to keep up with the flow. She also found that 40 percent of employees' time was spent on tasks away from the customers, such as counting milk jugs three times a day and unnecessarily restocking the floor with cups. And like many other organizations, there were too many development and change initiatives being run by corporate headquarters.

The Solution

Brewer was not an obvious choice for the role at Starbucks. Her previous position was as a senior executive at Walmart. Investors were skeptical that her experience with a big-box retailer could translate to a "high touch" coffee shop business. And she preferred green tea to coffee. However, one of Brewer's colleagues at Walmart said, "Roz is a tough cookie. She's into the details. She's not a fluffy person. She gets things done." Another colleague said, "She's an operator. She's not just a person with a point of view and vision. She can execute"

Schultz had managed the company by instinct and intuition. Brewer, who trained as a chemist, focused on the numbers and sought to bring some discipline and order to the stores. Brewer and her team simplified, eliminated, or automated tasks to allow store staff to spend more time with customers. Dedicated baristas were appointed to handle the mobile orders in stores where those were popular. Cleaning was carried out when the stores were closed. Two-thirds of the corporate projects were stopped. Only those relating to three priorities-beverage innovation, store experience, and the digital business-were allowed to continue. Brewer earned a reputation for making tough decisions. For example, she asked her team to assess the benefits and disadvantages of Mercato-Starbucks' fresh food business that was introduced, with much publicity, to 1,500 stores in 2017. The assessment showed that Mercato did not fit the company's priorities, so she killed it. She also cut specialist stand- alone, time-limited offers, like the Unicorn Frappucino. These were popular with only a small number of customers, and they complicated the baristas' work. She had the development team work instead on simpler products that could be made with existing ingredients. Following analysis of the timing of customer visits to stores and focusing on converting occasional midday customers to "rewards" members (who account for 40 percent of sales), Brewer was able to grow the afternoon business, which was traditionally a slack period.

Following what became known as "the Philadelphia incident," Brewer flew to Philadelphia to apologize in person to the two men, and she organized racial bias training for 175,000 employees. Brewer also spent a lot of her time visiting the stores, talking to employees, and assessing their pride in the business. Do employees who recognize her look her in the eye? Brewer says, "If they look down at their feet, they're not proud about the store. Ninety-nine percent of the time I'm right about that" (Kowitt, 2019, p. 91). Brewer sees Starbucks' stores as more than coffee shops; they are also public spaces, like libraries, serving the needs of employees and communities. In some shops, if they think that safety will be increased, managers have been allowed to install needle boxes in restrooms, for the disposal of drug users' syringes. "Brewer wants baristas to make the perfect flat white or pour-over. But she also wants them trained in how to deal with the hardest social situations they could possibly encounter so that everyone feels like they belong in Starbucks"

1. What were the correct steps taken by Brewer?

2. Why do you think embracing change is required?

3. Why is it important to manage change effectively?