Howard Schultz CEO and Transformational Leader Howard Schultz

Howard Schultz, CEO and Transformational Leader Howard Schultz has been a change agent and a visionary for both the Starbucks Coffee Company and the U. S. coffee industry as a whole – by definition, he is a transformational leader. Mr. Schultz began his career in sales at Xerox and shortly became the VP and General Manager of Hammerplast. There he was introduced to Starbucks, a small Seattle based coffee roaster which had been purchasing large quantities of plastic cone filters from him. He visited Starbucks in Seattle and a year later, he took a considerable cut in salary to become their director of operations and marketing. The following year, Mr. Schultz traveled to Milan, Italy on a buying trip and it was at that moment he had an epiphany… espresso bars, baristas and high-quality arabica beans were an important part of the daily culture and this relationship with coffee, comfort and community could become a part of the American scene as well. He had to leave Starbucks to realize his dream in another operation, Il Giornale, until the opportunity to buy Starbucks materialized.

IDEALIZED INFLUENCE l From the founding of Il Gorniale through its subsequent combination with Starbucks, Schultz performed any task which needed doing, setting the example for his team of managers and employees to follow and emulate. l Appearing at times to be workaholics, Schultz and his team were building the business while revolutionizing the domestic coffee industry, so they spent a lot of time evaluating what was working and what needed improving in their operations, but never forgetting the team, which drove the desire for success throughout the organization. l Under Schultz’s leadership, Starbucks has promoted itself as a good corporate citizen, supporting “Fair Trade” coffee producers, enhanced employee benefits when compared with other “fast food” outlets and sharing its worldwide social agenda for the good of all.

INSPIRATIONAL MOTIVATION l Despite obstacles in raising expansion capital, Schultz demonstrated his commitment to national expansion and continuously shared this vision with his investors and management team members. l As the number of stores openings continued to grow, the new director of store operations, Howard Behar, highlighted the importance of the baristas and their relationships with customers as success keys, promoting team spirit within the organization. l Building upon the positive inertia being created, Starbucks also recognized the importance of catering to customer special requests with its “Just Say Yes” program, noting “as long as it is moral, legal and ethical, we should do whatever it takes to please the customer”.

INTELLECTUAL STIMULATION l Schultz continued to challenge conventional wisdom in the area of human resources, reasoning that happier employees passed the spirit along to customers in tangible ways that would bring them back, such as remembering their favorite coffee beverage and offering another beverage should the customer not be satisfied. l Happier employees were more likely to remain with the company longer, reducing turnover costs. Keeping employees happy included offering health insurance for employees working 20 hours per week versus the 35 hour week norm and training courses in “brewing the perfect cup”, “coffee knowledge” and retail skills”. l Schultz was driven “to build the kind of company his father never got a chance to work for. ”

INDIVIDUALIZED CONSIDERATION l Mr. Schultz and his management team regard training and other human resource programs as strategic commitments which are critical to the company’s identity and culture. l After an employee survey highlighted aspirations to own a stake in Starbucks, Schultz implemented Bean Stock, an employee stock option plan. l Mr. Behar implemented open forum meetings for employees four times per year where regional issues and company business are discussed. Employees have the opportunity to ask questions, make suggestions, discuss grievances and relay customer feedback to management. l Employee turnover is dramatically less than what is experienced at other fast food outlets.