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Name: Hoang Dat Luong ID: 45845581 Essay topic: Starbucks CEO Howard Schultz Word Count: 1863 Class: Tuesday (6-9 p.m) Lecturer: Stephen Carpenter

Introduction Leadership is such a significant component of business management that it has a huge influence on the success of an organisation (George, 2015, p.43). Being one the most well-known business for coffee drink, Starbucks’s growth and success are nearly unobtainable if it weren’t for its humanitarian CEO - Howard Schultz (Chris, 2015). The brand’s reputation in the industry is connected with his leadership style. By the time he was in charge since 1980s, Starbucks expanded themselves with 28,000 stores in 77 countries coming from only 11 stores at the beginning, also proved to have both abilities to be the best financial performance as well as to bring up and share their success with ones belongs to the customer communities they targeted to (Starbucks, 2018). Moreover, comparing to its initial public offerings in 1992, Starbucks improved themselves to gain 21,000% more in its stock price value thanks to the great leadership of Schultz. In June, he became chairman emeritus when his executive chairman term ended. One of the important reasons contributed to the development of the company is his decision to promote the unfamiliar but attractive benefits for their employees and workers. Those included comprehensive healthcare, stock ownership and providing college tuition fee, for both part-time and full-time employees (Starbucks, 2018). For what help Schultz to achieve and succeed these milestones, it is his determination and ethical mindset towards the work coming along with independent thinking.

Leadership can be defined as the ability of an individual to drive and enable people to make contribution towards the success and effectiveness of the organisation (House et al., 1999). Gary Yuki (2013) added more detail in the definition as the process of enabling individual and cooperative efforts to achieve mutual goals, and the process of driving people to accept and understand on what and how things should be done. Burns (1978) categorized two types of leadership characteristics, which are transactional leaders and transformational leaders. Among those two, transformational type is followed by the man behind the success of Starbucks, one of the most ethical companies worldwide. Transformational leader is meant to bring up the encouragement of individual development and contribute to the team as a whole package so that common objectives could be achieved by promoting the trust, respect among employees and maintain high commitment toward his company. This essay would analyse and discuss Howard

Schultz’s ethical behaviors as a leader using theories and frameworks aligned with the transformational leadership perspective.

Body According to Burns (1978), Transformational leadership is basically built upon moral and motivation level, which emphasizes visionary, symbolic behavior and inspirational appeal to values and self-sacrifice. Four components in Transformational leadership are: idealized influence or charisma (behavioral or attributed), individualized consideration, inspirational motivation, and intellectual stimulation (Bass, 1998; Bass & Avolio, 1993). Idealized influence or charisma requires a leader the ability to build up confidence and gain trust and respect form other members within the organisation, a charismatic leader would motivate people to be more adaptive when needs arise. The second component, individualized consideration, displays the acceptance of differences among employees in the leader, who understands the importance of respecting the followers’ unique dignity and respect, and addressing issues of employees accordingly. The third component, inspirational motivation, is shown in the leader’s enthusiasm and positivity which enables the leader to provide their employees with empowerment and self-actualization. Lastly, intellectual stimulation involves creating environment in which nurtures creativeness and innovation, and providing opportunities for the members to raise their own voices without the fear of punishment (Bass & Avolio, 1993). Northouse (2016) stated that a Transformational leader would walk along with his employees and develop connections that improve the level of morality and motivation in both employees and the leader. Howard had been following this leadership style in various ways. His employees at Starbucks had always been treated as his partners, indicating an effective relationship between followers and the leader. He possesses a high motivation and strong vision of supporting his people, by instituting various programs to support employees which includes tuition assistance, employee stock purchase program, veteran hiring and health benefits for parttime employees (Strutner, 2018). Also, he developed an efficient workplace where his employees would receive constantly support and respect, so that they were motivated to bring out their best in working performance. Schultz believed that hiring the right and efficient people would result in best effort and positive outcome as he aimed to identify and provide training for his employees to achieve success for the organisation (Stead and Stead, 2016). He emphasized his dual focus on both

people and profit in a Marketplace podcast in 2014: "I feel strongly that we have demonstrated that we are a performance-driven company… At the same time, we have done all this through the lens of humanity, and that's what I'm most proud of.” It was his strong leadership qualities that drove him forward and allowed Starbucks to differentiate itself to become a successful business until now.

Ethics has become a vital topic in organizational behavior, and along with it is the increasing concern from researchers for ethical and moral in leadership. Ethics is defined as a set of moral principles and values that governs the behaviour and decision of individuals or group concerning what is right or wrong (Bratton, 2015). Within an organisation, a leader is the source of ethical guidance as well as takes responsibility for the ethical development. Ethical leadership is important and crucial in leading the organisation to accomplish its vision, mission and desired objectives (Kanungo & Mendonca, 1996). It is seen as an important factor in managing the company’s image in the public and maintaining competitive advantages with other companies (Blanchard & Peale, 2011). The process of ethical leading involves inquiry in which indicates what is right or wrong, and a set of conduct in which followers are provided with examples on particularly right or wrong actions (Guy, 1990). In 2005, from a social learning perspective, Brown and his colleagues conducted research on ethical leadership and eventually considered ethical leader as a role model of proper behaviours. The term was defined as “the demonstration of normatively appropriate conduct through personal actions and interpersonal relationships and the promotion of such conduct to followers through two-way communication, reinforcement and decision-making” by the authors. Howard Schultz is undoubtedly a good model of an ethical leader, under whose leadership Starbucks has become the most ethical brand for 8 years (Starbuck, 2017). He has implemented his ethical leadership in Starbucks’ core values: environment, diversity, community, and customer satisfaction (Hidalgo, 2018). Schultz’s vision of building an organisation that treats people with dignity and respect also lies in Starbucks’ mission statement: “to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time” (Starbucks, n.d).

Evidences on the relationship between ethics and transformational leadership had been provided in study conducted by Turner, Barling, Epitropaki, Butcher, and Milner in 2002. In this study, the

authors indicated that transformational leaders would possess a higher sense of ethical reasoning, which implies that leaders conducting relatively high level of ethical behavior are more likely to be transformational. Simola et al. (2010) also shared similar findings and concluded that there was an existing connection between ethics and transformational leadership. Past research had incorporated transformational leadership with ethical orientation for a long time. As Burns’s (1978) findings showed that transformational leaders motivate people to prioritize board collective purposes over their individual wants, it is necessary for the leaders to fulfill their followers’ lower level existence needs which then enables them focusing on higher level objectives. In addition, he hypothesised that by directing employees’ attention toward moral values such as equality or justice, they are driven to a higher level of ethical development under transformational leadership. Also, Burns viewed transformational leaders as the moral ones and that people were aware and capable of following leaders who share the same values with them, therefore, it is important for the leaders to develop and introduce a set of shared values across the organisation. As for Schultz, he had been always improving on how Starbucks treat their workers. Having realised that healthcare and education are essential; he provided his employees with all of these rights regardless of which nation they were in (Hidalgo, 2018). As a result, not only did he motivate their commitment to the organisation, he also made contribution to a better society.

Further researchers had taken into account different dimensions of ethical leadership in their studies where 3 different elements of ethical leader behaviours had been identified and exmanined by Brown et al. (2005) and Trevino et al. (2003). The authors indicated the first element as fairness in which behaviors are displayed as making fair decisions, showing honesty and trustworthiness, being responsible for taken actions and not committed bias or discrimination. Howard Schultz has showcased his fairness by demonstrating his integrity over his leadership, recognising his personal responsibility towards, and treating his employees fairly (Hidalgo, 2018). The second elementw was power sharing, which involves the leaders to empower their people with decision-making, allowing them to raise voice and contribute opinions concerning their organisation (Brown et al., 2005). Howard displayed the same trait by giving more power to his employees in making decision and providing them with flexibility to choose their working hours. The last element was identified as role clarification suggesting that

leaders should communicate respectfully and clearly, at the same time, clarify performance objectives, reponsibilities, and expectations with their employees (Brown et al., 2005). Schultz’s subordinates can clearly understand on what should be done and how they can make contribution to meet the desired goals thanks to his transparency and open communication.

Despite transformational leaders were assumed as moral in Burns’ study in 1978, another finding from Bass (1985) suggested that they might conduct either unethical or ethical behaviors. Future study of Avolio and Howell (1992) also showed evidence on transformational leader displaying both ethical and unethical behaviors. Those involving ethical outcomes are considered as authentic while others with unethical outcomes are seen as pseudo (Bass and Steidlmeier, 1999). Authentic transformational leaders are those dedicated to ethical values such as honesty, equality, and humanity why pseudo transformational leaders display the contrary with favoritism, selfesteem and unreliability. Since Howard Schutlz has been able to build up his charisma, and gain trust and respect from his employees; he has clearly proved his commitment to ethics as an authentic transformational leader. He had been leading his business with ‘profitability and social consciousness balance’ mindset as he believed that organisations with authenticity and ethics would perform better in the long run than those with only profit oriented purpose (McClelland, 2007).

Conclusion Overall, Howard Schultz has proved to be one of the most inspirational and professional leaders driving Starbucks to success. As a transformational leader, he ensures there is trust, commitment, honesty and respect within the organisation he is leading. Moreover, in pursuit of Starbuck’s business goals, his openness for social and ethical practices is well-appreciated by publicity and places a positive image about Starbucks and its leader in people’s minds. Although, he had stepped down from the CEO position since 2017, his experiences remain as valuable lessons and examples for current and future leaders.

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