Consulting Project for a local branch of Starbucks addressing employee moral in uncertain economic times.

1. “Diagnosing Organizational Effectiveness
During Difficult Economic Times”
Management 842
Seminar in Organization Design and Change
Professor Mitchell Marks
May 12, 2009
.
TEAM 2:
Seth Breedlove
Valentinos Themistocleous
Ian Kerwin
Zishan Xu
(Net) Manatsanan Anunatmatee
Sivaporn Ratanavilaiwan

2. Table of Content
Introduction ....................................................................................3
Presenting Opportunity .............................................................4
Measures .........................................................................................6
Result from Observations ..............................................................7
Result from First round interviews ..............................................8
Congruence Model .......................................................................... 9
Hypotheses ..................................................................................11
Expectancy Theory of Motivation ..............................................14
Surveys ..........................................................................................16
Findings Applied to the Congruence Model ...............................16
Work ........................................................................................................................16
People and the Informal organization .....................................................................19
Formal Organization ...............................................................................................21
Findings Applied to the Expectancy Theory ..............................23
Findings in terms of correlation...................................................26
1. Performance management ...................................................................................31
2. Communication ...................................................................................................34
3. Career Development.............................................................................................35
Conclusion ..................................................................................... 36
References: ................................................................................... 38
Appendix A: Agreement...............................................................41
........................................................................................................ 43
Appendix B: Raw Data from First Round Interview Responses
......................................................................................................... 44
Appendix C: Raw Data from Second Round Interview
Responses ......................................................................................49
Appendix E: Starbucks Surveys Question...................................51
Appendix F: Congruence Model .................................................54
Appendix G: Performance Management.....................................55
Appendix H: Result from Expectancy Theory............................56
Appendix I: Mean and Standard Deviation................................57
Appendix J: Summary of Survey Results (See attachment).......58

3. Introduction
Since opening their first location in Seattle in 1971, Starbucks has amassed to
over 16,000 locations worldwide. According to the Specialty Coffee Association of
America, in 1983 the specialty coffee market to which Starbucks belongs, represented
less than 4% of the $6.5 billion U.S. coffee market. In 1994, that market share reached
31%, and in 2001, specialty coffee represented 53% of the U.S. coffee market.
Modeled after the renowned coffee houses of Italy, Starbucks provides much more
than just a cup of coffee. Starbucks strives to provide an experience that includes a
friendly gathering place, merchandise, music, recently announced high speed Internet
access with AT& T, and of course of gourmet coffee. Starbucks mission statement
summarizes their approach to "conquering" the specialty coffee segment- "Establish
Starbucks as the premier purveyor of the finest coffee in the world while maintaining
our uncompromising principles while we grow" (Starbucks, 2009)
As the largest retail coffee company in the world, Starbucks is not only
famous for social responsibility, but was also named number 7 of the 100 best
companies to work in 2008 by CNN.com (2008). The company’s reputation as an
employer is often accredited to its human resource strategies, corporate culture and
employee benefits. To many employees, it is a place to build long-term careers or to
enjoy job stability while pursuing other goals. It was through Starbucks' “Employees
First” policy that the company built a strong psychological contract with its
employees. Howard Schultz, Starbucks' CEO, has stated, “The customers always
come second -- the employees matter more.” While this is not a traditional approach
towards customer service, Starbucks has proved its effectiveness as demonstrated by
its success and dominant market share within the industry. Schultz goes on to
illustrate that employee happiness is projected onto the customer in the form of
enthusiasm (H.R. Spectrum, 2003).
Our client organization, located at 390 Stockton Street, San Francisco, is the
second largest revenue producing Starbucks in Northern California. Jon Smiley, our
client and contact, is the store manager of this location and has been with the
company for over twelve years. The organizational structure of this location is
comprised of 1 store manager, 2 assistant managers, 4 shift supervisors and more than

4. 15 additional employees, or partners as they are referred to internally. It takes a
minimum of 3 employees to run the store at any given time during business hours,
which for this location are from 5:00am to midnight. This store is unique in the sense
that it is located in the company's top geographic pay scale, and has an additional
assistant manager compared to most locations. The first and third regional revenue
producing stores are located within blocks and this store has the flexibility to share
employees with neighboring locations to fulfill staffing needs.
Presenting Opportunity
After initially contacting and meeting with our client, they expressed a true
interest and commitment towards the scope of our project (See Appendix A:
Agreement). However, our collaborative efforts to identify a problem or concern
within this particular location were unsuccessful as the manager continued to express
that although things could always be done better, he felt all areas of his organization
were running smoothly. As a result of this, we decided to move forward with our
diagnosis based on two assumptions that we were confident would remain constant
for the duration of our research. The first assumption is that there is always room for
improvement and efficiency, no matter how well an organization and its employees
may seem to be operating. With this concept in mind, we derived our second
assumption that lower business volumes, resulting from the current economic
downturn, would provide this store with the time and human resources necessary to
examine and improve the efficiency of their operations. By combining these two
assumptions, we entered into our diagnosis of this organization with a plan to identify
the concerns of Starbucks' employees and make recommendations regarding how to
satisfy those concerns, thus resulting in an overall increased organizational
effectiveness.
Starbucks Corporation is one of the great growth stories on Wall Street.
Starbucks has undergone a rapid expansion since it went public in 1992. It went from
125 stores in 1992 to approximately 15,000 stores in 44 countries by 2008 (Flynn,
2008). Since then, the U.S. and Global Economy has experienced a recession with
declines that have not been seen in decades. Facing the current economic situation,
Starbucks is going to have to make some changes about their operating structure. To
combat this decline, Starbucks is planning to close 600 under performing stores in the

5. U.S. and another 100 globally throughout 2009. In addition, Starbucks has been
downsizing and restructuring across the organization to compensate for the weakened
economy, including the elimination of almost 1,000 non-retail jobs as part of its bid to
re-energize the brand and boost its profit (Marcus, 2009). However, in the same year
the company intends to open 140 other stores in the U.S. and 170 internationally in an
attempt to reduce operating costs while maintaining their market share. While the
decision to close these stores was mainly to avoid overlapping territories, the opening
of additional stores is a result of the company’s strategy to expand and effectively
compete on a global scale. In an open system model, people, work, formal
organization and informal organization are generally considered to be of equal
importance. Starbucks current strategy of both downsizing and expansion has cast
uncertainty about the relevant influence these elements will have in the future.
Downsizing and restructuring within an organization can have a profound
effect on its environment, with specific regards to a firm’s psychological contract. For
a psychological contract to exist there must be mutual expectations between the
employee and employer. This contract includes the “beliefs, values, expectations and
aspirations of employer and employee, including beliefs about implicit promises and
obligations”. These do not need to be written, but rather can be implicit and based on
good faith between the two parties (Wellin, 2009). Consequently, a psychological
contract can be re-negotiated and change over time. This re-negotiation does not need
to verbalized, but rather can be perceived, by either employer or employee.
Given the change to Starbucks’ operating environment over the past 18
months, there is a possibility that the psychological contract between the organization
and its employees has been augmented as well. Through the process of data
collection and analysis of our client store, we aim to determine if such a change is
indeed evident and to what effect. If this relationship has not changed or remained
healthy, we seek to determine the reasons for this, so that Starbucks may capture this
advantage at the organizational level. We also seek to determine what affects this has
had on the store culture and in turn, what affect this has had on the store’s
performance.
Our diagnosis is development-oriented. We will assess the current functioning
of Starbucks Coffee as an open system, analyzing their strengths and weaknesses, in

6. congruence with corporate strategy. Given current economic conditions, we plan to
pay considerable attention to emerging trends and the direct effects they have on the
operating environment of our client organization. We will perform a diagnostic
analysis of both the individual and group performance capabilities and review the
impact each has on the organization’s strategy. We will also use our findings to target
specific functional areas that show an opportunity to maintain and improve
effectiveness. Our findings will be summarized and delivered to our client, along with
a recommended course of action necessary to operate with highest level of
organizational effectiveness.
Measures
In order to perform an accurate diagnosis of our organization, we will use a
variety of data collection methods to extract relevant information. By using the range
of methods detailed below, we are facilitating data collection that represents a
combination of foundation information, real life observations, and direct responses
from members of the organization. More detailed descriptions of our data collection
methods are described below;
1. Unobtrusive measures: Starbucks will provide store relevant information
including compensation programs and performance evaluations. In addition, we will
analyze customer satisfaction surveys conducted by the company that examine items
such as overall satisfaction, friendliness, cleanliness and speed of service.
2. Observations: We will observe organizational behavior three separate times
during various store shifts including rush hour, in order to collect data and better
understand the company culture, employee relationships and customer satisfaction
levels. We will be observing as regular Starbucks customers. These observations will
take place before the first round of interviews and our formal introductions with the
staff to not influence their behavior by the knowledge that they are being observed.
3. First round Interviews: In an attempt to gain more knowledge about the
organization and uncover presenting problems and issues, the first round interview
will be conducted with 6 employees (1 assistant store manager, 2 shift supervisors and
3 baristas) at roughly 25 minutes per interview during business hours. These will be

7. short interviews asking some background questions as well as some open-ended
questions to further develop issue identification. Please refer to appendix 1.
4. Surveys: A store-wide confidential survey will be distributed to 22
employees during their respective shifts. These will be surveys to assess more
comprehensive organizational characteristics including quantitative comparison and
evaluation. Moreover, they also can vary in the extent to the focused issues based on
findings we discover during the first round of interviews. This survey can be
completed at the employee's discretion and returned to the consultant team within a
specified period of time.
5. Second round Interviews: After analyzing the results from our initial
interviews and survey, we will conduct a second round of interviews to get in-depth
information regarding presented issues. The second interview will provide us an
opportunity to validate the results of our analysis from the first interview, feedback
the results of our survey, and seek more detailed information from the interviewee.
After collecting data from the two interviews and one survey, we will analyze
the data, by applying both quantitative and qualitative analysis techniques. First, for
qualitative tools, we will use content analysis to summarize all data from interviews
into meaningful categories in order to discover any issues or attitudes among the
group. Second, for quantitative tools, we will calculate the means, standard
deviations and relevant correlations to summarize the survey data in order to better
gauge what issues the employees value most, and to examine any variance in their
responses.
Result from Observations
We went into Starbucks during a Saturday morning shift and a Thursday
evening shift, which had similar findings. Employees enjoy their positions and
working with each other. The store was well kept and clean and they were responsive
to employees and gave service with a smile. When the store was slow, they promptly
focused on tasks to keep up the store appearance.

8. Result from First round interviews
In general, our first round interviews were both comprehensive and successful
(See Appendix B: Raw Data from First Round Interview Responses). They were
conducted in the lobby of the downtown San Francisco Starbucks store during
business hours. Following some initial unobtrusive observations, we decided that after
9:00 at night was the most appropriate time to conduct our interviews based on
business levels. The atmosphere of the store was inviting and friendly and our
interviewees seemed naturally comfortable in this environment. Upon introducing
ourselves to each employee, we briefly described the details of our project and
proceeded to ask them 12 predetermined questions. Each interview lasted roughly 20
minutes on average.
Our sample population included 1 assistant manager, 1 shift supervisor and 4
baristas, an accurate representation of the store's 23 employees, whom have worked
this store for between 15 to 30 months. Based on each employee's willingness to
participate, detailed responses and genuine interest in the scope of our project, we are
confident that we have gathered enough data necessary to continue with our
diagnostic analysis.
To make a broad generalization, each employee’s response seemed to be
positive regarding their experience working at Starbucks, with work environment,
including co-workers, and flexibility repeatedly being cited as major attributes to job
satisfaction. When asked what motivates employees to stay with the company, just
about every interviewee had something to say about the competitive compensation
package offered by their employer, and gratitude for employment given the current
economic situation. Similarly, almost everyone made a positive comment about their
co-worker relations, interaction and the overall culture within the store. They cite
Starbucks as a fun place to work where people treat each other with dignity. While a
third of our first round interview responses mentioned the desire to advance within the
company, the remainder viewed their employment as a flexible source of income,
while they pursued other things. Several interviewees were students whom are granted
full-time benefits for a part-time commitment.

9. Consequently, every employee was asked to describe his/her dissatisfaction in
working for the company, and responses were less consistent including product lines,
hours of operation, and dress code. Some responses talked about difficult customers
as motivation to prefer working in the back rather than interacting directly with
customers. A lack of internal communication was a prevalent negative response,
especially among the baristas interviewed. Criticisms regarding communication arose
again when we asked the employees to comment on any communication relevant to
the company’s plans to restructure, as well as their trust in the corporation as a whole.
While most employees seemed to be unaware of the company’s plans, the assistant
manager informed us of a web portal that gives employees access to company news
before it is released to the public. However, this service is not made available to any
barista within the company.
In conclusion, we found that employees at this store enjoy their jobs and the
people they work with, regardless of their position. The positive aspects of the job,
employees and culture were clearly communicated to our team in these interviews.
Everyone seems to enjoy the pay and his/her coworkers. The position entitled barista
provides a flexible and economic opportunity for some, while positions with greater
responsibility offer a path to career advancement as a primary motivator. One
emerging negative trend that we have identified relates to communication, evident
within this store, and pertaining to Starbucks as an organization. Based on our initial
interviewing, there are some evidences that the quality or content of communication
varies among positions. While some of the information being communicated may not
be relevant to an entry-level position, some of it absolutely is and can have a direct
effect on the performance and commitment of all parties involved.
Congruence Model
To analyze this particular location, we will be applying the concepts and
theories of the congruence model (See Appendix F: Congruence Model). We have
chosen this model because Starbucks fits within the underlying assumption that the
organization is an open system. An open system is comprised of three major
interactive components, which are inputs (environment, resources, and history),
through puts (task, individual, informal organization, and outputs (organization,
group, individual) (Falletta, 2005). The open system is dependent on the surrounding

10. environment for resources, information and feedback. The feedback helps to seek
equilibrium, and to provide feedback on the transformation process (Nadler and
Tushman, 1980). We will use the feedback function to measure the alignment of this
process and identify potential strengths and weaknesses. Based on our diagnosis, we
will make recommendations to our client detailing which design components
maximize effectiveness and which ones are having an adverse affect.
The congruence model is a valuable assessment tool because it helps to
identify focus areas, such as task, individual, informal organization, and formal
organizational arrangements to improve performance and integrate changes within an
organization. This model proposes that the effective change management means
considering all four transformation elements and striving to reach the greatest
congruence between them (Falletta, 2005). In applying this definition to the model,
which assumes that the organization’s strategy is effective, we can conclude that
greater observed congruence correlates to a better performing organization.
Given that a greater congruence or alignment regarding an organization’s
elements of transformation shows effectiveness, we will need to examine what
situations will result directly in a lack of congruence. A general limitation of
organizational effectiveness is the lack of congruence between corporate strategy and
the functions utilized in reaching their strategic goals. In a more detailed sense, a poor
fit between two or more functional elements can have a negative impact on an
organizations output (Eiser, A. & Eiser, B., 1996). When a lack of congruence occurs,
energy that builds in the system can be released in the form of resistance. Resistance
comes from a fear of the unknown, such as a change imposed from the outside, or a
need for things to remain stable.
By analyzing the congruence of our client's organization, we can identify the
strengths and weaknesses that exist within the transformation process and recommend
embracing or correcting them as needed. We believe this model can help Starbucks to
enhance organizational effectiveness, even in a difficult economy, and to maintain its
performance as the second largest store in terms of revenue in Northern California.

11. Hypotheses
Upon entering into this diagnostic analysis, the initial presenting opportunity
for our client organization was how to enhance organizational effectiveness during the
current economic downturn. Based on the model that we plan to apply to Starbucks,
organizational effectiveness can be measured by the congruence or alignment that
exists between the strategic components of the organization. As a result, we must
analyze the current state of alignment, with the economic situation held constant, to
expose weaknesses in the congruence between work, people, the formal and the
informal organization and make recommendations that will improve alignment and
result in a more effective operation. By posing questions that relate directly to our
hypotheses, we can use the questionnaire as a test to identify potential issues that need
to be addressed.
As mentioned in our introduction, Starbucks has built its success first on
employee’s attitude and second on customer relationship (Starbucks) (H.R. Spectrum,
2003). This employee first policy has created a strong and positive psychological
contract between employer and employee. However, for this to remain strong, the
mutual expectations must be clear, consistent and based on good faith between the
employer and employee (Wellin, 2009). Our initial first interviews with the
employees revealed that, while for the most part the psychological contract has
remained positive, there has been indication of damage and weakening of the good
faith of the corporation. This has led to some employees indicating that they do not
perceive a future with the company. Most of this damage appears to have its root in
the poor state of the economy. However, some remedies may lie in better
communication, employee development, awareness of entire benefits package and the
self-efficiency of employees to succeed in goals internal and external to the
company.
H1: There is a positive correlation between employee self-efficacy (the ability
to exceed in a specific situation including their outside goals) and their expressed
intent to remain at Starbucks. Employee turnover is a process, not an event. It occurs
over time as the employee becomes less engaged with his/her employer, a process that
can take days or even years (Branham, 2005). Career planning, growth and learning
opportunities are the three top reasons for employee retention (Evans and Kaye,

12. 2003). It is the perceived lack of opportunities in a company, or the lack of support
the company provides for external opportunities that create the most employee
turnover (Withers, 2001).
H2: There is a positive correlation between employee awareness of their
Starbucks compensation package and benefits and their expressed intent to remain at
Starbucks. An employer that can help an employee achieve his/her goals will have
employees that are more motivated to stay with the employer if that employee
perceives a reward for doing so (Kaliprasad, 2006). According to our initial
interviews, not all employees were familiar with the entire benefits package such as
tuition reimbursement. The development of personal goals and ability to use their
employment at Starbucks to achieve those goals should develop other skills for
present or future use. It is shown that individuals who continually acquired new skills
demonstrated greater satisfaction and better work performance (Lantz, 2002).
H3: The communication gap between management levels and baristas can
adversely affect employee motivation and trust. For example, by not clearly
communicating employee benefits to baristas, and the process to retrieve and manage
them, can result in dissatisfaction and reduced commitment. Training employees and
empowering them will motivate them to exceed customer expectations and contribute
to organizational goals. Development programs will bring personal goals and
aspirations of employees into alignment with the organization's goals. The issues
presented in our hypothesis promote ineffectiveness. The ideal result of this diagnosis
is to reveal these issues and correct them, resulting in increased organizational
effectiveness.
H4: There is inadequate communication between management levels and
baristas regarding many aspects of the organization. Low level employees are kept in
the dark about Starbucks' direction and immediate plans, which creates different
levels of uncertainty and trust issues at work. Within an organization, people often
feel shared emotions and are passionate and compelled to achieve that organization’s
goals in the presence of stability. "They want job security and opportunities for
personal expression in exchange for a fair day's work. They also prefer working at a
place where they feel they are being treated fairly, communicated with, and
contributing to the attainment of a clear and inspiring vision" (Marks, 2003).

13. H5: There is a positive correlation between the level and frequency of
employee development and their goals, whether they are internal to Starbucks or
external goals, and the employee’s expressed intent to remain at Starbucks. While the
responsibility for the cause of an employee’s lack of awareness of the entire
Starbuck’s benefits package or the lack of goals may not lie with management, it is
the responsibility of management to initiate and follow through with employee
development (Kark and Shamir, 2000). Management must take responsibility for
implementation of such programs. Managers who work to build “a solid foundation of
shared goals” experience increased employee loyalty and satisfaction (Koch, 2004).
These goals, as long as they are not in conflict with the employee’s performance, can
be external to Starbucks as well, such as an employee’s educational goals (Yuki,
2002). An employer that encourages and fosters an individual’s personal
development helps to create a positive work culture (Kouzes and Posner, 2001). In
addition, an employer that understands its employees’ goals will better understand
what retains them with the company (Stock, 2001).
For employees to achieve higher levels of performance, their personal goals
must align with the organization's goals. For this to happen, job stability is essential.
Ultimately, they are the ones facing the customers and representing Starbucks.
Management needs to be transparent with employees and communicate at all levels.
Change management is reinforced by constant communication. The company should
not only focus on employee’s strengths during hiring, but also develop them through a
continuous systematic process. Consequently, employee development will motivate
employees to pursue careers in the organization, be enthusiastic and constantly strive
to excel. A process is needed to develop all employees and to align their goals with
the organization. Communication of employee benefits and responsibilities should be
an on-going event. Employees should be also heard and their concerns should be
timely addressed. As a result, there will be workers ready to take initiative and willing
to go the distance to exceed expectations. Employee empowerment can significantly
enhance Starbucks' effectiveness.
H6: There is a positive correlation between the openness and amount of top-
down communication regarding the company’s plans and employee’s expressed intent
to remain at Starbucks. Employees that perceive that top-down communication and

14. information is being limited will experience stifled creativity and a lack of trust. The
employees may sense a loss of control, an unwilling dependency and an ‘us against
them’ attitude (Ackerman, Ball and Squire, 2002). A perceived instability and lack of
freedom to choose their futures, on behalf of the employees, will lead to problems in
employee retention for the organization in the future.
An empowered workforce can help the organization enhance competitiveness
and achieve goals. Mitchell Marks, in his book "Charging back up the hill: Workplace
recovery after mergers, acquisitions, and downsizing", wrote “Already in the twenty-
first century, we have seen that organizational efforts to achieve, maintain, or enhance
competitiveness have been affected by the availability of a well-trained and highly
motivated workforce.” To compete in this environment, Starbucks needs to manage
the relationship with the workforce on a store-by-store basis. As employees, people
seek not only financial compensation, but also psychological rewards because the
people need to be loyal to the company. And, once the economy recovers they will
stay and not go look for other places and jobs. After a downturn there is an upturn.
Expectancy Theory of Motivation
The hypotheses derived from findings of the first round interview introduces
additional dimension to help understand the organization. Employee satisfaction and
motivation play an important role in improving organization efficiency. The
motivation model deals with motivation and management. An employee's
performance is based on individual factors such as personality, skills, knowledge,
experience and abilities. It proposes that employees in an organization will be
motivated if they have certain expectations. When employees believe that putting in
more effort will yield better job performance, better job performance will lead to
organizational rewards, such as an increase in salary or benefits. The employees in
question value these predicted organizational rewards. The motivation model
emphasizes self-interest in the alignment of rewards with employee's wants and the
connections among expected behaviors, rewards and organizational goals.
From the employees’ perspective, internal communication appears weak at
Starbucks. Lacking effective communication within all employee levels leads to
several organizational problems. Lower-level employees who are not included in the

15. communication process may feel dissatisfied and reduce their commitment to the
company. Additionally, it is difficult for employees to connect their personal goals to
unclear organizational goals. Employees can also face unclear direction in terms of
self-development and motivation. Productivity can be increased through improved
employee communication, motivation and skills and abilities. Productivity can also be
affected through increased worker satisfaction, which in turn results in productive
employees joining and remaining within the organization.
As a result, we have elected to apply the motivation model in addition to the
congruence model to better analyze the organization's situation. Since we believe that
if the employees' motivation is enhanced, Starbucks can achieve higher level of
efficiency. Vroom's (1964) Expectancy theory consists of three components: Valence,
Expectancy, and Instrumentality. First, the term valence refers to the feelings of
satisfaction people derive from their preferred outcomes should performance be
achieved. When people have preferences of attaining certain outcomes, the outcomes
have positive valence. On the contrary, if negative valence exists, people have the
desire to avoid the outcomes at all expense. The valence has no value if people are
indifferent to attaining or not attaining the outcomes. Second, Expectancy is defined
as “the probability or degree of certainty people estimate on how well a particular
alternative action will indeed lead to a desired outcome" (Miner, 2005). The desired
outcome depends not only on the choices that the person makes but also on the
circumstances that are out of the person's control. Third, Instrumentality is regarded
as means people have to successfully achieve their preferred outcomes. In order to
successfully achieve the desired outcomes, people must have the experience,
knowledge, physical ability and the right machinery tools as well as external support
such as the appropriate job design, organization structure and work procedure.
The expectancy theory formula is as follows: Motivation Force =
Expectancy * Instrumentality * Valence. Because this theory is based on the
product of the probabilities of these three components, there will be no motivation, if
any of these has a value near or equal to zero. Vroom suggested that an employee's
beliefs about Expectancy, Instrumentality, and Valence interact psychologically to
create a motivational force such that the employee acts in ways that bring pleasure
and avoid pain.

16. Surveys
The next phase in the diagnosis of this organization is to create a short survey
that we will use to further explore our hypotheses (See Appendix E: Starbucks
Survey Question). Using the congruence model as a guide, we developed hypotheses
that test the alignment of the congruence components. The questions in this survey
pertain to the congruence model and help to reject or validate each hypothesis, as well
as to measure the degree of fit related to model component relationships. The
questions on this survey will be tailored to expose some of the areas, based on our
hypotheses, that we believe are causing this organization to come out of alignment
and affect employee motivation. This survey will allow us to gain feedback from
every member of the organization in a completely confidential forum. The format of
this survey will consist of 37 questions and will ask the respondents to rate from
'strongly agree' or 'strongly disagree', on a scale from one to six, with each statement
we have presented them with. Included in this survey is also a short section of
demographic questions primarily designed to create a summary profile of the typical
respondent. This survey was distributed to all 22 employees, of which 15 were
returned to us.
Findings Applied to the Congruence Model
Work
In consideration of the results of our first round of employee interviews, the
concept of work seemed to be lacking very little based on employee responses. This
particular throughput of the transformation process seemed to be operating efficiently
with no consistent complaints or concerns voiced by the sample of employees
interviewed. These initial findings were not a surprise to our group as Starbucks is a
largely successful company operating close to 14,000 stores worldwide. Given the
size and nominal success of the company, it is fair to assume that they have devoted a
great deal of consideration regarding job design and the employees who perform such
tasks. (See Appendix I: for Mean and Standard deviation)
However, while employees may praise job design, the congruence model leads
us to not only to analyze the individual components of the transformation process, but
also to measure their alignment with regards to the organization’s overall strategy. An

17. individual’s work values can have a significant impact on their interpretation of their
surrounding environment (Adkins, Ravlin & Meglino, 1996). With this idea in mind,
we chose to move forward with the assumption that all employees are happy with
their role in the transformation process. In holding this assumption constant, that task
structure is properly aligned with Starbucks strategy, we were able to form a set of
hypotheses and test them by implementing a store-wide survey.
Of the six hypotheses that we aimed to test with our employee survey, two
were directly related to the work function of the transformation process (See
Appendix I: Summary of Survey Results). We created a theory that an employee’s
ability to succeed and their intent to remain at Starbucks would be positively
correlated. This is important to companies who offer limited types of work because
they need to consider the future of their employees, including moving past the limits
of their current position and growing in their work. Employee retention is often
supported by the opportunity to succeed through self-improvement (McConnell,
2003).
The second related hypothesis presents the idea that an empowered workforce
can help an organization to achieve its goals and to operate effectively. Empowering
employees can improve attitudes surrounding motivation, job satisfaction and loyalty
as well as impact performance values such as employee productivity and effectiveness
(Greasley, Bryman, Dainty & Price, 2008). Again, rather than directly examining job
design at Starbucks, the purpose of our survey was to analyze its alignment with the
other elements of the Congruence Model; people, formal organization and informal
organization.
In order to perform this analysis, we attempted to better define the relationship
between Starbucks and its employees in terms of what each party contributes to the
other. The specific concepts targeted by our survey include motivation, loyalty,
expectations and resources. Initially our primary unit of measurement for this survey
was the degree to which each employee agreed of disagreed with the statement that
we presented to them. However, based on the range of standard deviations we have
decided to include the correlation between questions as an additional measurement to
analyze responses.

18. In terms of motivation, 93% of those surveyed agreed that they were satisfied
with the compensation package offered by Starbucks although there was some
discrepancy surrounding the number of respondents who were thoroughly explained
these benefits at the time of their hire. Of those who regarded themselves as informed,
there was a strong correlation to those who felt encouraged to make important
decisions and expressed and interest in making those decisions. Consequently, among
those who felt uniformed regarding the company’s benefits, there was a direct
correlation to part-time employees or those who would leave Starbucks for a
comparable position with another employer.
This is a small percentage of the staff interviewed; however, as more than 65%
indicated that they would not even consider leaving Starbucks if offered a similar job
elsewhere. Additionally, all but two responses agreed that they would encourage their
friends to work for this company. Of those who demonstrated this type of loyalty
there was a positive correlation towards personal growth and career advancement.
Adversely, of those who wouldn’t recommend Starbucks as an employer or
demonstrated disloyalty, most cited a lack of training, opportunity and personal goals.
Regarding company expectations, there is a divide where just over half of the
employees surveyed express a motivation or incentive to meet or exceed these
expectations. Those who seek to exceed expectations also hold expectations of their
employer in terms of growth and empowerment opportunities. On the other hand,
employees who have little or no reason to exceed expectations repeatedly blame the
lack of potential for career advancement, rather than being poorly compensated.
Lastly, in order to meet expectations described by a job, it is necessary for the
employer to provide the proper resources. Of the employees who participated in this
survey, every one of them agreed that Starbucks provides the necessary training
perform the functions of their job properly. With this unanimous response, there was a
positive correlation to those who agreed that their employer was aware of their goals.
More specifically two-thirds of the partners questioned felt that Starbucks provides
the resources needed to advance their careers. Of those who agreed, several felt that
they had the power to choose their future with the company and also agreed that their
personal growth was being supported.

19. By analyzing the responses to these questions and correlating them to other
questions on the survey, we can see some distinctive patterns regarding the alignment
of Starbucks transformation process. There is a direct link between the motivation to
meet or exceed expectations and the perceived resources that are made available to
accomplish this. Additionally, the degree of loyalty demonstrated by employees can
be viewed as an indicator of the level of motivation that is present.
People and the Informal organization
The concept of people consists of knowledge, skills, needs, expectations and
relationship of the employees in the organization. It is important to identify the salient
characteristics of the people responsible for the ranges of tasks involved in their core
work. Starbucks highly values its employees. The company’s reputation for being an
employer of choice has been recognized countless times. The congruence model
leads us to develop a store-wide survey to get further information that helps us better
understand people at Starbucks. The survey findings did not surprise us since
Starbucks employees' opinions related to the concept of people shows a multitude of
positive feedback. In calculating the mean and standard deviation, we found that 95%
of employee feedback surrounding their environment was positive, offering support to
the initial opinion posed by the store manager.
A total of 93% of employees agreed that they get the respect from other
coworkers. We can conclude that respect between partners is strongly perceived. The
high correlation shared with the following statements; “My supervisor keeps
subordinates informed about store operations” and “If I consistently perform well at
my job, I will be rewarded” indicates that there is a relationship between what
employees contribute to their organization and what they receive in return. This also
allows us to conclude that people are treated fairly and generally grateful for their
employment at Starbucks.
The survey result also shows that employees feel satisfied working at
Starbucks. Part of that can be attributed to the job security (87% satisfied) and
company’s benefit package (93% satisfied). However, it is not just the benefits that
attract employees. They indicate that personal growth and development are also
important to them. For example, there are a lot of part- time employees who work

20. there while pursuing other things, such as education. While more than half of their
employees recognize that Starbucks supports their personal growth, 73% reported that
the company allows them to work on their outside goals. Starbucks culture supports
employee's growth and development which result in higher levels of their
performance. All employees also agree that Starbucks provides necessary training to
perform their jobs properly. This makes employees feel that Starbucks pays attention
to their goals and helps them develop their knowledge and skills.
87% of employees also appreciate the opportunity to take part in company
decision-making. Even though employees feel that they are treated of equal
importance, 54% of them felt they were not allowed to participate in the process of
revising company policies. Second round interviewing indicated that only store
manager and assistant manager can make important decisions. Employees at this store
are not a big part of this decision making process. Even though they can make
suggestion to improve store performance and effectiveness, the final decision would
be in the responsibility of store manager or management level. Employees also
mentioned that the store manager is a key person involved with the level of employee
participation. The more the store manager shows consideration to their employees'
suggestions, the higher level of employee involvement.
When reviewing the summary of employee responses, there is consistent
evidence of employee loyalty at Starbucks. Close to 80% of our sample agreed that
the success of Starbucks is important to them, and view their job as more than just a
means to an income. Additionally, 66% of current employees would not even
consider leaving the organization if they were offered a comparable position with
another company. More than just being loyal, there is a sense of pride and ownership
in the company shown by the 86% of employees who agreed that they would
recommend Starbucks as a great place to work to their friends.
Moreover, 47% of employees also question the career path Starbucks
provides. Baristas who perform their job well will get promoted to move to a higher-
level position. The career path seems to stop at the position of store manager which is
the highest level at the store. There is a little chance that an employee at Starbucks
store could be promoted to work in the corporate operation. While only 67% of
employees feel they are provided with the tools necessary to advance their careers, a

21. total of 74% admit that Starbucks gives partners the freedom to choice regarding
career options. There is a direct correlation between those who recognize this choice
and those who feel the resources necessary for advancement have been made
available to them. This doubt about their career path correlates with the motivation to
exceed company's expectation. It indicates that employees do not have a clear picture
of their career path at Starbucks, which results in the decrease in their motivation to
go over company's expectation.
In conclusion, applying findings from the survey and interview to the
congruence model, we found that people at Starbucks seems to be in general
positively aligned with organizational structure. Their knowledge and skills are
comprehensive and are developed continuously. Their needs and preferences are
served by the company appropriately, in terms of personal and financial rewards. To
strengthen its performance and effectiveness, Starbucks should plan to increase
employee involvement and provide a clearer career path to its employees.
Formal Organization
We examined the alignment of the congruence components relation to the
formal organization. The fit of the congruence model components with the formal
organization component is determined. The alignment of the following strategic
components is tested; Individual-formal organization, work-formal Organization and
formal organization-informal organization. The results point to a slight misalignment
of Individual-Formal Organization component.
There is a positive correlation between employee awareness of their Starbucks
compensation package and benefits with the clarity of the career path Starbucks
provides to the employees. It can be inferred that employees who see clear rewards
and benefits are motivated to further pursue their careers at Starbucks. However, 28%
responded that they are not fully aware of their benefits package. The survey results
show that 93% of partners want to be continuously updated about the company's
current situation. Employees who have a clear career path, are aware of their benefits
and are communicated with by management more often are motivated to take
initiative to address issues as they arise and/or suggest new ideas for improvement to
Management.

22. Employees get a sense of job security when they know whether they are doing
their job well. At Starbucks, 87% of those surveyed reported a good sense of job
security. However, 37% answered that they didn't know whether they were doing
their job well. Job security also positively correlates with partner awareness of career
direction options to choose from. Interestingly, 67% answered negatively to the
awareness of career direction options to choose from in Starbucks. This misalignment
of the formal organization with the individual can have negative impact on employee
motivation and trust. To support this, even further only 61% of those surveyed
responded positive to being aware of their compensation package. This question
positively correlates with the partners' perception of company provision of a career
path for them. Only 54% of the partners surveyed agree that the company provides
them with a clear career path. Partners who believe there is good communication of
benefits and career paths would also like to participate in company decision-making.
Good communication clearly contributes to motivated and loyal employees. To
remedy this misalignment, systematic communication should be enhanced and
employee development programs need to be improved.
60% of those responded agreed that their personal goals were not aligned with
Starbucks goals. But only 26% agree that they don't have the option to choose their
future at Starbucks. Goal alignment and freedom to choose future careers correlate
with how often partners feel that their job is stressful. 34% agreed that their job is
stressful with another 27% on the verge. Development programs will bring the
personal goals and aspirations of employees into alignment with the organization's
goals. This alignment will make employees aware of the opportunities they can
pursue within the company. Their jobs will be meaningful working towards clear
goals and consequently less stressful. The 67% of employees who feel that Starbucks
provides them with the tools to advance their careers also believe that Starbucks
supports their personal growth. That motivates them to want to work full time because
their goals are aligned with Starbucks. "My employer knows what my goals are"
positively correlates with "working at Starbucks helps me work on my outside goals".
This result is achieved with development and communication.
Employees are motivated to exceed company expectations when they feel that
Starbucks supports their personal growth. Moreover, they are motivated to excel when

23. they feel that they have several options to choose from regarding their careers at
Starbucks. Employee development provides a sense of fairness because employees get
a better organizational perspective. Communication and development enhance trust
between employer and employee. The employee feels part of a "family" and that their
employer knows what their goals are. The survey results show that 100% of the
employees believe that adequate training is provided at Starbucks to motivate
employees to achieve desired outcomes. When partners feel that Starbucks
management knows their goals, they are motivated to contribute to Starbucks'
attainment of overall goals and not just work for the benefits and paycheck. Employee
personal growth correlates with Starbucks employee development. When employees
believe that Starbucks provides them with the necessary training to achieve desired
outcomes, they are motivated to develop careers in the company.
Findings Applied to the Expectancy Theory
Of the 37 questions on our survey, 14 were related to the expectancy theory.
The objective of this paper was to examine the motivational factors of Starbucks’
employees and the relationship between their motivations and their intention to
perform better. We had analyzed the data into each component of the expectancy
theory as followed.
First, expectancy is effort-performance relationship. It is the belief that
increased effort will lead to increased performance. This is affected by having the
right resources available, having the right skills to do the job and having the necessary
support to get the job done. We have calculated the mean, standard deviation, and
response correlation to interpret the level of expectancy at Starbucks Table 1 in
Appendix H The collected data shows that all employees at Starbucks believed that
they receive necessary training to help them achieve desired outcomes and perform
job properly. In addition, 93 % of them believed that their supervisor helps them to
develop their necessary skills to improve their performance. The data from the
correlation also showed that for these people, once they believed that their supervisor
supported them, they are likely to be motivated to exceed company’s expectation.
In addition, we also conducted a second round interview to assess whether
work harder will result in better performance (See Appendix C: Raw Data from

24. Second round Interview). We found that all of the interviewees agreed that if they put
more effort, not only could they outperform their partners, but they could also help
their branch to increase revenue, attract more customers and increase customer
loyalty. In conclusion, by weighing the data collected from each source, we concluded
that the expectancy score of Starbucks is very high.
Second, Instrumentality is performance-reward relationship. It is the belief
that if you perform well that a valued outcome will be received. We would like to
uncover to what extent does the individual expect that the outcomes are associated
with good performance differ from those outcomes associated with poor performance.
This is affected by clear understanding of the relationship between performance and
outcome, trust in the people that decide who gets what outcome, and transparency of
the process that decides who gets what outcome. At Starbucks, employee
performance is measured every six months; the data from the survey in Table 2 in
Appendix H showed that all employees agreed that they were treated fairly. It is a
positive sign that shows trust between Starbucks and its employees, they know they
will be rewarded fairly by their supervisor. Being treated or rewarded fairly is just one
of the components of instrumentality.
On the other hand, some of the survey responses signaled some negativity
toward instrumentality. The employees answered differently when we asked if they
consistently perform well at their jobs, would they be rewarded. Since the coefficient
between mean and standard deviation of the question was a bit high (50%), we
decided to perform the second round interview to examine this variance. To our
surprise, the result of the second round interview showed that all interviewees agreed
that if they do a good job, there is some good outcome for them, which was
inconsistent with the survey result. Then, we figured out that the variance came from
different the attitude toward expected rewards or outcomes they would receive; each
employee valued these rewards or outcomes differently. For example, the students
who work in Starbucks part-time might not be interested to get more working hours.
However, for some full-time employees, being scheduled for more hours can be a
measure of compensation or a representation of their worth to the organization. Or,
during this economic downturn, having a job is considered big reward for some
employee. In employees’ point of views, the expected rewards can be an increase in

25. working hours, an increase in pay rate, an increase in their own reputation, flexibility
in working hours, recognition from their supervisor, or a promotion.
From all sources of the data collected, we drew the conclusion that the
instrumentality score of Starbucks is quite high. The 6-month evaluation feedback
system in Starbucks is designed to reflect employee performance. The employees
reported noticing that if they work harder, they will receive a better reward. One of
the interviewees told us that he felt proud that he receives higher pay rate than other
partners, reflecting on his motivation to continue doing a good job. So, we can
conclude that employees at Starbucks strongly believe that there are some good
outcomes waiting for them if they consistently perform good work and are treated
fairly.
Last, valence is the importance that the individual places upon the expected
outcome. The data from the survey in Table 3 in Appendix H showed that 74% of the
employees agreed that working at Starbucks helps them pursuing on their outside
goals, and 93% of them were satisfied with compensation package offered by
Starbucks. In general, we can conclude that most employees at Starbucks were
satisfied with the overall benefits and compensations they got from working at
Starbucks. However, all employees are eligible for these rewards as long as they are
Starbucks’ employees, regardless of how much effort they demonstrate.
In order for partners to exert more effort in achieving better performance is
dependent on how they value the expected outcome they will get, and how they prefer
the outcomes associated with good performance. If the employees at Starbucks
believe that putting more effort will lead to outcomes that are attractive to them, then
they will find that contributing more effort is attractive. However, as we mentioned
earlier regarding the variance as it pertains to instrumentality, the collected data
showed us that the degree of matching individual needs and the respective rewards is
not that high. As a result, we conclude that the level of valence at Starbucks is
medium.
In conclusion, according to Vroom’s expectancy theory, the product of
valence, expectancy, and instrumentality is motivation. It can be thought of as the
strength of the drive towards a goal. After combining all three components together,

26. the motivation force for Starbucks is considered almost high. We can conclude that
there is a motivation force within Starbucks. Its culture is one of the most important
components that can motivate the employees to achieve higher performance. As one
employee reported to us that he did not want to be a partner that no one would like to
work with. Although both intrinsic and extrinsic motivation within Starbucks is quite
high, it still has a room for improvement. The more Starbucks can motivate its
employee, the more Starbucks can improve its effectiveness.
Findings in terms of correlation
Correlation Scale
• r = 0.74 - “My employer knows what my goals are.”
• r = 0.71 - “Starbucks provides partners with a clear career path.”
• r = 0.62 - “I am motivated to exceed company’s expectations.”
• r = Negative 0.51 - “I only want part-time employment at Starbucks."
Employee self-efficacy:
H1: There is a positive correlation between employee self-efficacy (the ability to
exceed in a specific situation including their outside goals) and their motivation to
remain at Starbucks.
Independent Variable Question “My supervisor gives me the incentive to exceed
expectations.”
• r = 0.72 - “M supervisor encourages partners to participate in important
decisions.”
• r = 0.76 - “I do not have an opportunity to take part in making decisions.”
• r = 0.59 - “Working at Starbucks helps me work on my outside goals.”
Compensation Package Awareness:
H2: There is a positive correlation between employee awareness of their Starbucks
compensation package and benefits and their motivation to remain at Starbucks.
Independent Variable Question “The individual who hired me thoroughly explained
my benefits package at the time of hire.”

27. • r = 0.59 - “I would encourage my friends to work for this company."
• r = 0.56 - “Starbucks provides employees the tools to advance their career.”
• r = 0.64 - “My supervisor encourages partners to participate in important
decisions."
• r = 0.71 - “I would like to participate in the company’s decision making."
Employee Goals:
H5: There is a positive correlation between the level and frequency of employee
development and their goals, whether they are internal to Starbucks or external goals,
and their intent to remain at Starbucks.
Independent Variable Question “The success of Starbucks is NOT really important to
me.”
• r = Negative 0.55 - “Starbucks supports my personal growth."
• r = Negative 0.67 - “Starbucks provides employees the tools to advance their
career."
• r = Negative 0.62 - “I am treated fairly.”
• r = 0.62 - “If I were offered a comparable position, I would consider leaving
Starbucks.”
• r = 0.70 - “Starbucks does NOT provide the necessary training to help me
achieve desired outcomes."
Independent Variable Question “My supervisor helps subordinates develop their
skills.”
• r = 0.74 - “My employer knows what my goals are.”
• r = 0.71 - “Starbucks provides partners with a clear career path.”
• r = 0.62 - “I am motivated to exceed company’s expectations.”
• r = Negative 0.51 - “I only want part-time employment at Starbucks."
Communication:

28. H3: The communication gap between management levels and baristas can adversely
affect employee motivation and trust. For example, by not clearly communicating
employee benefits to baristas, and the process to retrieve and manage them, can result
in dissatisfaction and reduced commitment.
H4: There is inadequate communication between management levels and baristas
regarding many aspects of the organization.
H6: There is a positive correlation between the openness and amount of top-down
communication regarding the company’s plans and employee’s expressed intent to
remain at Starbucks.
Independent Variable Question “There is good communication between partners at all
levels.”
• r = 0.80 - “My supervisor gives me incentive to exceed expectations.”
• r = 0.74 - “Starbucks supports my personal growth."
• r = 0.70 - “I feel I have several options to choose from regarding the direction
of my career at Starbucks."
• r = Negative 0.63 - “I do not have the freedom to choose my future at
Starbucks."
• r = 0.59 - “Working at Starbucks helps me work on my outside goals.”
• r = Negative 0.62 - “The success of Starbucks is NOT really important to me.”
Independent Variable Question “I would feel better if I were continuously
updated about the company’s current situation."
r = Negative 0.53 – “I am treated fairly”
Independent Variable Question “My supervisor keeps subordinates informed about
store operations."

29. r = Negative 0.74 “The success of Starbucks is NOT really important to
me."
Based on our findings we have chosen the following course of actions
regarding our originally stated hypotheses. We have chosen to reject two hypotheses,
specifically those that relate to self-efficacy and communication regarding the
company’s plans to restructure and a positive correlation towards an employee’s
intent to remain working at Starbucks. The reason we have chosen to reject these
hypotheses is not that there wasn’t enough evidence to support them, employees
definitely have the ability to succeed and would prefer to hear about the restructuring
plans, but there was no link between these instances and employees leaving their
employer.
Of the six hypotheses that we created following our first round of interviews,
our group has chosen to accept for of them as problems existing within the
organization. Two of these were related directly to the quality of communication
between various positions or management levels. Our hypotheses stated that
employees prefer higher levels of communication and that they often reinforce a trust
surrounding the people of the organization. After analyzing our survey responses it
was clear to us that employees were concerned about the reasoning behind a lack of
communication between certain groups, and they consistently agreed that they would
like to see more communication in the workplace. By eliminating these concerns the
organization could benefit from more engaged employees who truly feel that they are
part of the big picture.

30. Another hypothesis that our survey was designed to test was the correlation
between employee awareness of their benefits and their expressed intent to remain
with the company. We have chosen to accept this hypothesis based on the fact that
those who mentioned they were well aware of the benefits available to them also cited
their desired to advance in the company and their overall satisfaction with these
benefits. The final hypothesis we chose to accept is that there is a positive correlation
between employee development, their goals and their intent to remain at Starbucks.
Our support for this acceptance came from responses that indicated employees who
feel their skills are recognized and developed also see a future with the company.
However those who do not feel they are encouraged to grow personally and with the
company, also seem to work part-time or do not recognize their employment as a long
term opportunity. By increasing employee awareness of their benefits and presenting
them with opportunities to reach their goals through growth and development the
organization will benefit from increased retention of employees, willing to continually
improve themselves and as a result overall organizational effectiveness.
Recommendations
After conducting a careful diagnosis at this Starbucks store, focusing on the
presenting issues of quality or content of communication among positions, Starbucks
should focus on its human resources issues as an area of improving productivity. In
applying human resource management interventions, Starbucks would operate more
efficiently, improving its performance and effectiveness. These interventions focus on
employees by developing, integrating and supporting people in the organization,
believing that organizational effectiveness results from improved practices for
integrating employees into organization (Cummings and Worley, 2008).

31. 1. Performance management
Performance management interventions are designed to improve and
strengthen human resources in the organization (See Appendix G: Performance
Management). Performance management is an integrated process of defining,
assessing, and reinforcing employees work behaviors and outcomes (A. Mohrman, S.
Mohrman and Worley, 1990). It includes practices and methods for goal setting,
performance appraisal and reward systems. Goal setting specifies the kinds of
performances that are desired, performance appraisal assesses those outcomes and
reward systems provide the reinforcement to ensure that desired outcomes are
repeated (Cummings and Worley, 2008). These practices jointly influence the
performance of individuals and work groups.
1.1 Goal Setting
Goal setting is a powerful way of motivating people. This change program
involves setting clear and challenging goals. From the survey, some employees at
Starbucks mentioned that their personal goals are not aligned with Starbucks' goals.
This practice will help improve organization effectiveness by establishing a better fit
between personal and organizational objectives. Goal setting describes the interaction
between managers and employees in jointly defining member work behaviors and
outcomes (Cummings and Worley, 2008). They periodically meet to plan work,
review accomplishment and solve problems in achieving goals. When applied to jobs,
goal setting can focus on individual goals and reinforce individual contributions and
work outcomes. Goal setting can affect performance in several ways. Starbucks could
influence what its employees think and do by focusing their behavior in the direction
of the goals. Realistically developed, stated, and implemented goals can be the
guiding principle for increased effectiveness and continued growth.
The store manager and subordinates at Starbucks should jointly establish and
clarify employee goals. First, a goal setting meeting should be conducted annually to
develop challenging but realistic goals. This formal meeting increases employee
perceived challenge and enhances the amount of effort to achieve goals. Having
employees participate in goal setting process can increase motivation and
performance. Participation can also convince employees that the goals are achievable

32. and can increase their commitment to achieving them. The goals could be established
depending on organization objectives and strategies, such as "improving customer
satisfaction" or "minimizing customer waiting time". Second, the manager needs to
clarify a system of goal measurement among employees to reduce ambiguity about
manager's expectation and focus their energy on appropriate behaviors. It is important
to define the goal operationally to be sure that the measure can be influenced by
employee behaviors. For example, a productivity goal could be defined by waiting
time per customer or the number of wrong order per employee.
1.2 Performance appraisal
Performance appraisal is a systematic process of jointly assessing work-related
achievements, strengths and weaknesses. It can also facilitate career counseling,
provide information about the strength and diversity of human resources in the
company and link employee performance with rewards (Cummings and Worley,
2008). Performance appraisal represents an important link between goal setting and
reward systems. By collecting and disseminating performance data, the company
provides performance feedback to individuals. Since some employees said they
seldom know whether they are doing their job well or not, feedback will allow them a
chance to know how they are seen by others, to consider their skills and style, and
improve work outcomes. A good review system could help to improve
communications, while aiding people to increase their own effectiveness and to
clarify their own jobs and responsibilities. It will not only increase the performance of
the staff, but also help them to work together, with common goals and fewer
obstacles.
All employees at Starbucks store are currently evaluated by their store
manager every six months. This formal, semi-annually evaluation results in an
increase in pay or promotion depending on employee performance. Although
Starbucks might not be able to increase the number of formal appraisals, they can
increase the frequency of informal feedback. The store manager can help the
organization achieve better performance by increasing the frequency of feedback and
reinforcement to employees. We suggest that the store manager introduces monthly
"five-minute meeting" feedback program. This informal, ongoing basis program will
be used to define employees' performance, strengths and weaknesses. From the survey

33. result, only 34 % reported that they know whether they are doing a good job. So, by
having a chance to talk to their manager personally, employees can share ideas,
feelings and opinions about their jobs, and they can ask where they stand in the
company. This program also enhances employee involvement. Since some employees
mentioned that they would like to take part in decision making, they could take this
opportunity to make comment or suggestion on improving performance and
effectiveness. The manager will receive input from those who actually perform the
task. The success of two-way communication from this program will enhance the
participation, commitment and productivity of Starbucks members.
An immediate praise for a job well done is motivating. If the employees get
feedback on how well they have done their jobs, they will do better. The store
manager should acknowledge employees’ performance by personally congratulating
them, offering an incentive or celebrating the success. An immediate praise for a job
well done is motivating. A positive reinforcement will stimulate a person to do better
(Anonymous, 2009). On the other hand, if they do not perform well, they will know in
which area they have to improve. The sooner they know, the better the end result will
be. They will continuously improve their performance until they are formally assessed
by the company in semi-annually assessment. Feedback from manager helps
employees understand their performance and the way to adapt their work behaviors to
align with manager's expectation and company goals. Lack of reinforcement can
result in a decrease in motivation (Anonymous, 2009). Without reinforcement, they
are uncertain of their progress toward the company's objective and even their own
goals.
1.3 Reward systems
Reward systems involve the design of organizational rewards to improve
employee satisfaction and performance (Scott, Farh and Podsakoff, 1988). It elicits
and reinforces desired behaviors and work outcomes through compensation and other
forms of recognition. The reward systems approach includes innovative approaches to
pay, promotions and fringe benefits.
According to Vroom’s Expectancy theory, this theory emphasizes the need for
organizations to relate rewards directly to performance and to ensure that the rewards

34. provided are those rewards deserved and wanted by the recipients. However, there are
many reasons that can negatively affect employee motivation. One of the reasons is
rewards do not match expectations (Anonymous, 2009). An employer must not
assume that all employees want the same things. Giving something that a person does
not highly value will do little in terms of motivation. From our findings, the
expectancy theory also showed that there are some contradictions between expected
and actual rewards in which the overall motivation force at Starbucks was decreased.
Since humans have different needs, each employee has her own expectations and
expects appropriate rewards (Anonymous, 2009). From collected data, we found that
some employee at Starbucks may expect a salary increase, some may expect having
flexible working hours, another would want a promotion while someone else would
love to feel important and be praised with recognition. As a result, first we suggest
Starbucks to achieve the ideal outcomes that the employees desire by matching
reward expectations to actual rewards. However, this does not mean that Starbucks
has to meet all the employees’ needs. Starbucks just has to understand their individual
needs and use this knowledge to keep them motivated. All motivation is self-
motivation, and each individual is motivated by their specific needs.
Second, we suggest that Starbucks clarify the rewards systems that were
covered during the hiring process. Starbucks has already done a great job to
communicating its compensation package to its employees; however, the survey result
shows that 21% of the employees still are not well aware of the benefit package. As a
result, Starbucks can improve both the store performance and the employee'
motivation by clearly informing its compensations and benefits during the hiring
process
2. Communication
Starbucks was hurt by the economy going sour and decided to close 600 of
their under-performing stores in the US over 2008 through the first part of 2009.
These closings eliminated an estimated 12,000 jobs. Although the company said they
will place employees in other stores that are remaining open if possible, surviving
employees still worry about the next wave of layoffs. Downsizing has an unavoidable
and unpredictable effect on the employees who remain with an organization. As stress
rises, positive energy declines. The inescapable results are lowered morale, reduced

35. productivity and energy, and diminished effectiveness. A workplace recovery plan
will help the survivors move through the pain of change and accelerate their return to
productivity and positive morale.
Although this store is not directly affected by the downsizing program,
negative rumors are still present and have an effect on employee performance and
satisfaction. Employees have almost no clue about the company's next decision plan.
To restore employee confidence and energy, the store manager should engage people
by communicating as much as possible. During and following a downsizing,
communication should be improved both in frequency and in thoroughness (Marks,
2003). This is not easy when leaders are stretched thin by the demands of running an
organization in tough times. Staying in touch with employees demonstrates that the
manager is genuinely aware of the stress employees are experiencing and concerned
about them. The leader should also strengthen internal communication within the
organization by providing information received from the corporate level to his staff
whenever possible. The store manager should include in their monthly meeting any
updates regarding company news, overall strategy plan and important information
effecting to employees and their benefits. Keeping people in the know through
frequent and thorough communication enhances organizational effectiveness and
employee satisfaction.
3. Career Development
As we mentioned in People part, the career path seems to stop at the position
of store manager, the highest level at the store. The doubt about the employee’s future
career path can correlated with their motivation. It can result in the decrease of their
motivation to exceed company's expectations. Starbucks can increase nationwide
performance by providing an opportunity to promote some outstanding employees
from within the company. Starbucks should create this incentive for the employees. If
they perform well, they should have a chance to be promoted to work in the corporate
operation. Their future will not get stuck at store manager level. When an
organization emphasizes promotion from within, its employees have an increased
incentive to strive for advancement. As they witness their promotions occurring
within the company, employees become increasingly aware of their own opportunities
(Caruth, Donald L., Handlogten, 1997). Consequently, a promotion-from-within

36. policy enhances motivation and leads to a relatively high level of morale. A company
that frequently goes outside to hire the people it needs pays a price: a persistent
erosion of the loyalty of the people already on its payroll (Lewis, B. 1999).
However, this recommendation is out of the store’s manager control. Giving a
chance to promote from within seems to be top management’s decision. To make it
happen, the store manager should report to top management at corporate level to
realize the benefit of this fact in order to strengthen its performance and effectiveness,
and to increase employee involvement by providing them a clearer career path.
Conclusion
In conclusion, our experience diagnosing this organization has been a learning
experience. An opportunity that began as challenge to identify how Starbucks could
increase organizational effectiveness has with ended with a slightly different set of
recommendation for our client. We entered into our contract with an assumption that
everything was operating smoothly and our goal was to capture the things that were
promoting this effectiveness so that they could be even further approved upon.
However, in the course of our diagnosis, some issues and concerns were expressed by
employees that indicated that things were not as positive as they could be.
Specifically, we received repeated criticism regarding communication and motivation
with the store environment.
This is not to say that things were not satisfactory as far as company policy,
but these were the areas that seemed to concern employees the most. As a result, our
group has made a set of recommendations to our client that we feel, based on our
academic research, will help to meet the expectations of their employees. Finally, if
these issues are resolved and expectations are met, the positive result will be evident
in terms of performance and morale. If our recommendations are implemented, we
feel that we will have succeeded in increasing organizational effectiveness for our
client, which was our original goal, however it is necessary to first correct some issues
within the organization before we could proceed to this improved state.

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41. Appendix A: Agreement
Consultant team Agreement
This agreement dated 03 March 2009, is made between the students of San
Francisco State University (Valentinos Themistocleous, Zishan Xu, Sivaporn
Ratanavilaiwan, Seth Breedlove, Ian Kerwin and Manatsanan Anuwatmatee),
whose address is 835 Market St, San Francisco, CA, referred to as
“Consultant team”, AND Jon Smiley representing Starbucks whose address
is 390 Stockton Street, San Francisco CA 94108.
1. Consultation Services: Starbucks at the above address allows the consultant
team named above to provide consulting services in accordance with the
general expectations set forth in this agreement: This agreement is non-
binding, revocable and may be renegotiated at anytime by either party.
2. This agreement will begin 3 March 2009 and will end 12 May 2009.
3. Time Devoted by Consultant team: It is anticipated the consultant team will
spend approximately 10 weeks in fulfilling its obligations under this contract.
The particular amount of time required by the client may vary from day to
day or week to week. The consultant team will conduct two rounds of
interview sessions in early March and mid April, and administer one
questionnaire in late March. In the time immediately prior to and following
these interviews the consultant team will perform some random observations
of the business environment of Starbucks to its duties in accordance with this
agreement.
4. Accessibility: The Starbuck’s manager agrees to provide the accessibility
needed by the consultant team with the objective of obtaining valid data.
This access includes providing advance notification to employees, space and
time needed by the consultant team to conduct one on one interviews, on-site

42. observations, and providing relevant documents such as work schedule, job
description, evaluation criteria, company reward programs, discipline rules,
when needed for diagnosis. In addition, the company allows the consultant
team to deploy a company-wide written survey to be voluntarily completed
by all willing employees. All interviews will be conducted in the lobby of the
store during business hours. The specific amount of time we need from the
company's employees will be as follow:
· 1st Round Interviews: 10 partners (one assistant store manager, two
shift supervisors and seven baristas) at roughly 25 minutes per employee,
during business hours.
· Store Wide Survey: Surveys will be distributed by the consultant
team to all partners during their respective shifts. This survey can be
completed at the employee's discretion and returned to the consultant
team within one week's time.
· 2nd Round Interviews: 10 partners (one assistant store manager,
two shift supervisors and seven baristas) at roughly 25 minutes per
employee, during business hours.
· The consultant team and store manager will arrange time to
communicate informally to discuss research progress and feedback on a
weekly basis or as needed.
· The store manager agrees to acknowledge phone or email
communication requests within 48 hours. The consultant team agrees
likewise.
5. Confidential Information: The consultant team agrees that any information
received while providing its services which concerns the personal, financial
or other affairs of the company will be treated in full confidence and will be
shared only with Professor Mitchell Marks, and the students of Management
0842 on the presentation day, May 12th. Please note that individual
responses are completely confidential—at no time will we ever reveal any
individual’s responses. The only feedback will be aggregated at the group
level.

43. 6. Voluntary Participation & Notification: Participation in this project is
completely voluntary. No partner can be forced to participate. Partners will
receive at 24 hours notification before any interviews and surveys are
conducted
7. Deliverables: Starbucks will receive a report from the consultant team at the
time the service has ended, on or before May 12th. The report will indicate the
diagnosis of presented problems or opportunity with an appropriate model
applied, and alternative solutions that can be implemented to improve or
continue the effective management of the client’s business. It is strongly
suggested that the company provide feedback to employees. The feedback
can be a short summary report and not necessarily the full presentation. It is
helpful to determine the method of feedback as soon as possible, and to have
an answer prepared for when employees pose the question asking whether or
not they will be presented with our findings.
8. Signatures: Both the Starbucks manager and the consultant team agree to the
above contract.
The Company
Date: Name (_____________________)
Signature ( )
The Consultant team
Date: Name
(______________________)
Signature ( )

44. Appendix B: Raw Data from First Round Interview Responses
1) How long have you worked here?
• 18 Months.
• 17 Months.
• 2 years at this store, 3 total with the company.
• 1 year currently and 1 year previously.
• 1 year and 2 months.
• 2 and half years .it is a good company.
2) What do you like best about working here?
• The environment, location. Being downtown is very exciting.
• My Co-workers, we have fun and I like dealing with the customers, we have
nice regulars.
• I also get to meet interesting people; if you are pleasant to your customers they
return the courtesy, making it not boring.
• Simplicity, motivating work that keeps you busy, great company
communication, get to work with people I may not otherwise befriend, multi
task job, high energy.
• It is flexible with my second job; I work part-time and get full time benefits.
• Just having fun and interacting with a lot interesting customers.
• They are very good at working around your schedule and be flexible with
school hours. And work is really fun. He has clear view of expectation while
at work.
3) What is your motivation to stay with the company?
• Flexibility during school, fun, being in the city/downtown.
• The shape of the current job market and that I enjoy the people I work with.
• Easy to advance, good pay.
• I enjoy the store and the pay is good.
• Benefits and pay.
• Job has flexible hours and the pay is better than any other coffee shop.

45. 4) What to you like the least about working here?
• The lack of hours; having to work at other stores for a full work week.
• The repetition of the job and dealing with certain customer attitudes.
• Nothing.
• Minor conflicts with co-workers.
• Opening really early and closing really late.
• Sometimes, working really early or super late, there are a lot grouchy
customers.
5) If you could, what is one thing you would change about the organization?
• Communication between management tiers, everybody needs to be on the
same page regarding expectations.
• The dress code.
• Decisions regarding product lines should be made at the store level.
• Improve the Quality of products (merchandize). But the drink quality is good.
• Change the hours, because sometimes it’s not busy and there are people idle.
Nothing structural or cultural needs changing.
6) What do you think about when you are preparing for a shift?
• The staff on my shift, what I'll have to do to accomplish every responsibility
during the shift.
• The time commitment that I'm entering into.
• My role as a manager takes over as soon as I walk in the door
• I like to open the store, sometimes I think about whether I want to work with
the customers (front) or production (back).
• Customer flows and what task needs to be done.
• The type of customer I will be dealing with. I will choose bar over register.
Sometimes would like less interaction with customers.
7) How would you describe the relationships among the employees at this store?
• Generally we all have a good working relationship; every manager has at least
one person that they don't see eye to eye with.

46. • I like everyone but some don't take the job as serious, we are friends but only
at work.
• We are 98% on the same page.
• Everyone is happy and I like the manager. We occasionally socialize outside
of work.
• Very close. We hang out with each other.
• Really close. Same age partners. A few go to San Francisco State. Some of
them have two jobs. Easy to get shifts covered.
8) Has there been any communication regarding the company's plans to restructure?
• They made some initial cuts after the holiday season last year, and now there
has just been a shortage in hours, but everyone seems grateful for their job.
• Communication overall is good. There is an internal portal that gives
employees (except baristas) access to company news ahead of the press.
Employees with different position level rarely go hang out together.
• No, but the communication is good at our meetings.
• No. They don’t communicate with the employees.
• Yes. There was training for transformation last year. During the meetings
partners were well informed about new policies.
9) Do you trust the corporate side of this organization?
• Yes, I have faith in them. Every company is dealing with the economy.
• Yes but they kind of keep employees in the dark. They don't communicate
with them.
• Yes.
10) How do you see your future with Starbucks?
• Two or more years, while I complete school.
• No Real Future. I might go back to school.
• I have talked with management about becoming a store manager within six
months. Starbucks fits the other aspects of my life (school).
• I will continue to work here.

47. • Just a part time job. I own a production company. I have my own stuff to
pursuit.
• I am Student at SF state. Working on Business Marketing degree. Would like
to advance to work in the marketing department at Starbucks. Good
corporation to work for.
11) How have your perceptions of the company changed since you started as an
employee?
• Sales volume has been cut in half, less busy.
• I was hired on the spot and thought the pace was fast and overwhelming, but
now it is just normal.
• I didn't initially realize how strong the work ethic was and how customer
focused the employees were expected to be.
• At first I wasn't comfortable as a non-native English speaker, but now I am
confident.
• People think it is Power House Company but I don’t think so because they
don’t have the corporate office culture. They keep downsizing, and getting
smaller… I think the company will downsize because of the economic
downturn and lots of other new coffee shops opening.
• It has changed a lot. Used to think Starbucks was corporate. But they are easy
going and like to treat everyone with respect. Better view now than initially
held.
12) Is there anything you would like to add that we have not covered in this
interview?
• Each store that I've floated to has a different feel. It is important to have
enough work to keep all of our staff.
• If you are promoted to upper level management you have to change stores, my
benefits were not clearly communicated to me.
• No.
• Things in general are OK.
• No.

48. • Starbucks makes really good coffee and and treats employees fairly. They are
really good at business ethics.