Layoffs at Starbucks!

When one thinks of high growth, innovation and the new corporate model – one of the first names that comes to mind is Starbucks. In recent days, Starbucks has been in the news because their CEO has announced layoffs, store closings and a slower pace of growth. What – a corner without a Starbucks coffee shop? The shake-up at Starbucks can serve as a lesson for any business or organization.

Growth

The bigger a company or organization grows, the harder it is to stay true to it’s “roots”. Even if quality and image are strictly controlled – as they are with Starbucks (like McDonalds), there mentality, vision and passion of the corner start-up is difficult to maintain. Having a clear mission and staying true to that mission is essential for every location and every employee.

Core Business

When I think about Starbucks I think about coffee, maybe something to nibble with the coffee and a place to work, meet clients or read the WALL STREET JOURNAL or NEW YORK TIMES. While some people may think of it as a place to buy CDs, coffee mugs, calendars or other items, I do not. And it seems that Starbucks began to stray further from their basics. The point – stick to your knitting (your core business).

People

Starbucks is not about coffee – it is about people. People take the orders, people prepare the coffee, people keep the locations clean, and people manage what could be chaos during busy times. There people are the face of Starbucks – not the CEO and not the headquarters staff. While Starbucks has been very public about how people-oriented they are (benefits, training, respect for employees), there is a slippery slope that will be created by lay-offs. A people oriented business that lays people off and shutters locations can soon become just like any other fast food outlet or massive retail chain – cold, impersonal and full of clock watchers.

Overhead

Organizations that grow love to create new positions, new rules, and new bureaucracies and new titles (each requiring their own staffs for “support”). This is not unique to Starbucks. But every dollar that goes to overhead steals a dollar from the customer-facing resources and also from the profitability of the enterprise. Headquarters, regions, areas – each with their own functions, executives and support staffs drain the life out of any business rather than invigorate them. As a business grows, unless every function can demonstrate in some way there are generating revenue or creating value, I recommend the function either be outsourced to support business with that core competency or incremental to “line” (profit-focused) responsibilities.

Down-sizing people and locations will not be the death of Starbucks. But any business or organization can learn from downside of rapid growth as demonstrated by Starbucks. The tendency to grow quickly, lose focus, to treat employees as overhead, to build non-customer facing staffs are not unique to Starbucks. But any entrepreneur or executive with a growing business would be well served to avoid the same pitfalls.


George F. Franks, III is the President of Franks Consulting Group, a Bethesda, Maryland management consulting and leadership coaching practice. Franks Consulting Group is on the web at:
http://franksconsultinggroup.com
George can be contacted by e-mail at:
gfranks@franksconsultinggroup.com