3/30/2020

HOWARD SCHULTZ
CHAIRMAN & CEO OF STARBUCKS CORP.
FOUNDED: 1971

SANOBER KHAN
ASSIGNMENT Assigned by
Dr. Shahnawaz Adil

NO. 1
Table of Contents
Howard Schultz ....................................................................................................................................... 2
LEADERSHIP CHARACTERISTICS AND TRAITS: ......................................................................................... 3
Transformational Leadership:(Chapter 1)........................................................................................... 3
Proactive Leadership (Chapter 2)........................................................................................................ 4
Charismatic Leadership (Chapter 2) .................................................................................................... 5
Connection with the leadership skills in the book .................................................................................. 6
Conclusion ............................................................................................................................................... 6
References ............................................................................................................................................... 7

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Howard Schultz
Chairman & CEO of Starbucks Corp.
Founded: 1971
"I always wanted to do something to make a difference."-
Howard Schultz
Everyone knows Starbucks, the ubiquitous retail chain that, in the 1990s, turned coffee
drinking into a national pastime. But few know Howard Schultz, the self-effacing chairman,
CEO and mastermind behind Starbucks' astonishing growth. By bringing Italy's "coffeehouse
culture" to the United States and packaging it for mass consumption, this maverick marketer
transformed a little-known four-store chain in the leading retailer of specialty coffee in North
America.
Born in 1953, Schultz was raised in the rough and tumble Bay View housing project in
Brooklyn, New York. His mother worked as a receptionist and his father held a variety of
jobs, none of which paid much or offered such basic benefits as medical coverage for him
and his family. When Schultz was 7, his father lost his job as a diaper-service delivery driver
after breaking his ankle. At the time, sick pay or even legally mandated disability assistance
were luxuries to those in low-paying jobs, and in the ensuing months, the family was literally
too poor to put food on the table. It was a memory that Schultz would carry with him into
adulthood.
Determined to build a better life for himself, Schultz channeled his energy into high school
sports and earned an athletic scholarship to Northern Michigan University. After graduating
with a bachelor's degree in business in 1975, Schultz immediately began working in the sales
and marketing division of Xerox Corp. Schultz excelled at Xerox, so much so that he
attracted the attention of the Swedish housewares company Perstorp AB, which recruited him
at the age of 26 to be vice president and general manager of their American subsidiary,
Hammerplast USA.
While at Hammerplast, Schultz noticed that a small Seattle company named Starbucks (after
the first mate in Hermann Melville's classic Moby Dick) was buying an unusually high
number of Hammerplast's espresso machines. Intrigued, he flew to Seattle to investigate and
found four Starbucks outlets. Originally founded in 1971 as a single store near Seattle's
famed Pike Street Market, Starbucks sold freshly roasted gourmet coffee beans as well as
teas, spices and various coffee-making accessories.
Impressed by Schultz's energy and marketing skills, Starbucks owners Gerald Baldwin and
Gordon Bowker-who possessed very little business knowledge-asked Schultz to become part
of their operation. Enticed by their offer, which included part ownership, Schultz joined
Starbucks as head of its marketing and retail operations in 1982.
A year later, during a vacation in Italy, Schultz had what he has described as an "epiphany."
While sitting at one of Milan's many espresso bars, he realized that the coffee shop played an
integral role in the social life of most Italians. It was a focal point for the neighborhood,
where friends met, mingled and lingered at all hours of the day. "Seeing this, I thought to
myself, 'Why not open a coffee bar in Seattle?' " Schultz recalls in an interview in The New
York Times.
Returning to Seattle, Schultz shared his epiphany with his fellow Starbucks owners. Although
coffee was brewed in the shops, it was done so only at the request of customers and dispensed
as free samples, and Baldwin and Bowker were unwilling to move beyond the stores' core
product offerings.

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Convinced he had hit upon something big, Schultz left Starbucks in 1986 to open his own
espresso bar called Il Giornale (The Daily). The venture was a hit. Schultz wanted to open
more shops, but didn't have the funding he needed to expand. In a quirky twist of fate, a year
later he learned that Baldwin and Bowker wished to sell their outlets, so after rounding up
investors from the Seattle area, Schultz purchased the original Starbucks chain for $3.8
million and merged the stores with his own.
Once in charge, Schultz set out to completely overhaul Starbucks according to his vision. In
addition to the $1-per-cup "basic" brew, he expanded Starbucks' offerings to include more
exotic coffee beverages such as espresso, cappuccino, café latte, iced coffee and café mocha.
He also sought to create a more appealing atmosphere for his customers-the proverbial
"clean, well-lighted place" where they could relax and enjoy their coffee in comfort.
But the most radical change Schultz made was to improve the way his company dealt with its
employees. Convinced that friendly, efficient service would boost sales, he instituted a
training program designed to groom knowledgeable employees who would enjoy working
behind a counter, an occupation considered by many to be menial labor. "Service is a lost art
in America.it's not viewed as a professional job to work behind a counter," Schultz says. "We
don't believe that. We want to provide our people with dignity and self-esteem, so we offer
tangible benefits." Among the benefits Schultz offers is complete health-care coverage to
both full- and part-time employees, as well as stock options, practices that are virtually
unheard of in corporate America. As a result of Schultz's vision, Starbucks experienced
unprecedented growth throughout the 1990s, blossoming from 425 stores in 1994 to more
than 2,200 stores in 1998. And the company is on target to break the $2 billion in the year
2000.
With annual sales topping $1.7 billion in 1999, Starbucks Corp. reigned as the nation's No. 1
specialty coffee retailer. Quite an impressive achievement for a blue-collar kid from the
projects. But despite Starbucks' phenomenal success, what Howard Schultz seems most proud
of is not how much he has earned, but the kind of company he has created. "My dad was a
blue-collar worker," Schultz explains in an Inc. magazine interview. "He didn't have health
insurance or benefits, and I saw firsthand the debilitating effect that had on him and on our
family. I decided if I was ever in the position to make a contribution to others in that way, I
would. My greatest success has been that I got to build the kind of company my father never
got to work for."

LEADERSHIP CHARACTERISTICS AND TRAITS:

Transformational Leadership:(Chapter 1)
Schultz has a transformational system of leadership that he implements through various
frameworks. These ensure that his leadership is effective in reaching not only his goals but
also ensuring the satisfaction of his followers.
Maslow Abraham’s hierarchy of wants states the categories of necessities including
personal actualization, belonging, security, and physical wants.
Transactional leadership focuses more on the efforts put to enhance communication towards
the physiological and safety needs. However, the transformational leadership applied by
Schultz focuses on meeting the needs meant to motivate the total person.
Schultz strongly believes in the employee base as one of the main areas of competitive
advantage in the market. He, therefore, strives to meet the physiological needs by giving
them a favorable pay with a barista in the company earning approximately $34,000 annually.

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To satisfy the employees’ security need, he ensures that the employees have a healthcare
package, options for acquiring the company stock, and counseling on career issues. These
enable the employees to work smarter and harder thereby ensuring the success of the
company. Schultz refers to the Starbucks staff as partners instead of employees. He is quoted
to have said that if you treat employees as a family, they will become loyal to the company
thereby giving all they can to the company (Hackman & Johnson, 2009).
The need for self-esteem is also taken care of by programs, which ensure that employees are
recognized, educated, and trained. The partners get the coffee education and learning as a
builder of confidence in their jobs.
Schultz also ensures that the last need in the Maslow’s hierarchy named the self-actualization
needs is met by constantly seeking the opinion of the partners to use in building a common
purpose for the company.
He makes phone calls and sends emails to the individual stores seeking feedback and advice
on processes, procedures and products. The strategy ensures the recognition of the inner core
values of the employees thereby achieving satisfaction for their self-actualization needs.
A transformational leader should possess five characteristics that include visionary,
passionate, empowering, interactive, creative and innovative.
Schultz shows his visionary characteristics by communicating with the stakeholders of
Starbucks about the obtainable and desirable vision of the company so that they understand
the direction in which the organization is headed.
The attribute helps to create a bridge between the present and the future, creates levels of
excellence, gives meaning to the followers, energizes the stakeholders, and attracts
commitment among them.
Schultz shows his innovative nature by regularly challenging the existing situations through
working constantly towards new processes, products, and ideas. The stakeholders from within
and without agree that he is skillful in articulating and defining new concepts and ideas.
He is also involved in empowering the stakeholders of the company through promoting their
involvement and participation. He always encourages them to make suggestions through
several interactive forums one of them being an online platform called mystarbucksvisit.com.
Schultz has a high passion for the organization. The enthusiasm and passion he holds for the
company motivates other partners to work hard for the success of the company.

Proactive Leadership (Chapter 2)

Howard Schultz is a proactive leader. Howard Schultz spent the most of him working time at
the Seattle four stores. He try to tasting all the different flavor of coffee beans, work behind
the counters, get the coffee beans feedback from customers, and teaching himself about the
coffee business retail aspect. Schultz also practice himself for the roasting coffee process.
Schultz seeks feedback from both internal and external stakeholders through Starbucks
website which a web-based interactive forum where stakeholders can make suggestions and
vote on them.

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 Schultz very proactive of effective communication on aligning his partners to Starbucks
direction and future. He believes that “being a great leader also means identifying a path we
need to go down and creating enough confidence in our people so they follow it and don’t
veer off course because it’s an easier route to go” For example, to make a successful and
efficient communication in an organization, he would keep monthly meeting with his top
managers and keep atmosphere more casual so that the ideas and the discussion can flow
smoothly. Schultz also frequently to visit the stores to share his enthusiasm to motivate them
to work harder.

Charismatic Leadership (Chapter 2)

Schultz also possesses characteristics of charismatic leadership. The first characteristic of
charismatic leaders is a strong desire for power. Schultz demonstrated this by retaking the
control of Starbucks in the year 2008. He felt that the company was slowly drifting into an
average performing company that was not its mission..
Charismatic leaders also target the fears, frustrations, and hopes of the followers in order to
create feelings of adventure and excitement.
On his return to Starbucks in 2008, Schultz understood that the changes that he was going to
bring in the company were going to have several impacts on the dreams and livelihoods of
several external and internal stakeholders of the company.
He used a letter written on the company web to tell the stakeholders of the passion and
commitment that he had 25 years earlier when he gained control of the company and how he
still had the same passion to ensure that the company moved forward.
The first internal memo that he wrote was also done with an intention of creating raised
sensitivity levels between the company and himself.
Since his return, all his memos have been ending with the same word “onward” that shows
the confidence and passion that he possesses in advancing and overcoming any challenges
that may come in the process.
Several memos also contain the recognition of the involvement of various employees in
making decisions for the changes in the leadership and management of the company.
Others outlined the strategies and visions that he had to ensure that the business foundation
was given a long-term adjustment and the emotional bond with the customers was reignited
(Hackman & Johnson, 2009).
Power can be defined as the ability to influence others. Schultz makes use of the power he
has to influence others by changing their behaviors and attitudes to achieve his visions and
promote his leadership strategies.
Schultz also makes use of referent authority by acting as a role model for his followers. The
followers admire his personal and leadership traits and desire to follow suit. They show him
high levels of respect, esteem, and affection.
The power, however, is not very effective as others (expert, legitimate, reward or coercive
power) in gaining obedience from the followers. In understanding this, Schultz makes sure he
utilizes all the five categories of power for effective running of Starbucks.
Starbucks sets up its brand around three desires of its consumers, which are economical

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successful, smart, and sophisticated.
The company continues making adjustments in their brands to ensure the desires of the
customers are met. The employees also offer replacement services to a consumer if he is
unhappy with the beverage that he is consuming.
In addition to this, Starbucks offers a reward card, a mobile application, wireless internet, and
entertainment to ensure that the consumers get a wonderful experience.

Connection with the leadership skills in the book

Dubrin, in his book, Leadership, states that there are characteristics that leaders need to
possess to enable them act as inspiration and motivation to their followers in order to ensure
the success of the institutions that they lead.
The characteristics that Dubrin states in the book include a leader with a drive, optimism,
charisma, and the desire to lead. All these can be shown under the leadership of Howard
Schultz. According to Dubrin, the behaviors of task orientation and people orientation are
needed for the success of an institution.
The leader or other people in the system must show concern for the followers using the
system. The case is evident in the leadership style of Schultz as depicted in his commitment
to ensuring that the needs of the employees outlined in the Maslow’s hierarchy of needs are
met so that they are motivated to achieve organizational goals.
Dubrin states another factor that contributes to success as motivation and empowerment. In
the case of Schultz, it has been demonstrated how he ensures that the employees are well
remunerated and provided with several other benefits.
The employees are also given additional education and training by the company, in addition
to several recognition programs set in place. He also consults them to get their ideas on the
way forward for the company and ensures that their ideas are incorporated in running
Starbucks.

Conclusion
The transformational leadership style of Shultz has enabled him to build a globally successful
brand. He ensured that he stayed true to his core values, mission and vision thereby bringing
out a leadership style that is admired by his peers and followers.
His commitment to his principles has resulted in high profits for the company, devotion from
customers, and high productivity from the employees of the company. He understands the
core concept that is to remain relevant and influential in the industry he must listen to the
contributions of all the internal and external stakeholders. However, in the process a leader
must not lose focus on his core values for Starbucks.
He is an inspiration to all. If I were to put in the same situation I would definitely follow his
leadership style.

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References
DuBrin, A. J. (n.d.). Leadership: Research Findings, Practice and Skills, Eighth Edition.
Daft, R. (2011). The leadership experience. Boston, MA: Cengage learning.
Hackman, M. & Johnson, C. (2009). Leadership: A communication perspective. Long Grove,
IL: Waveland Press, Inc.
Schultz, H. (2011). Onward: How Starbucks fought for its life without losing its soul.
Hoboken, New Jersey: John Wiley & Sons.
E., M. (2019, June 24). Howard Schultz Biography [Blog post]. Retrieved from
https://ivypanda.com/essays/howard-schultz-biography/