Starbucks Control Mechanisms

Control systems are developed and implemented as a means to control resources and to ensure that employees act in a manner that is beneficial to their organizational goals. Starbucks was started in 1971 in Seattle, Washington with a goal to imports the world’s finest coffees to the cold, thirsty people of Seattle. Starbucks has since become a worldwide phenomenon with more than 16,000 stores in 48 countries. Starbucks, like most major corporations have many control methods.

This paper will discuss hierarchy control, regulative control, financial control, and clan ontrol and how they are used within the Starbucks Organization.

Regulative controls are described as coming from standing policies and standard operating procedures (Encyclopedia of Management, nd.

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). In today’s corporate society, many companies have started using a more decentralized and flat organizational structure. Because of this, their boundaries blur, and include “suppliers in inventory management and customers in new product development, forging cooperative alliance with competitors, and developing virtual organizations in which employees are geographically dispersed and may meet only a few times each year” Encyclopedia of Management, nd. ).

In some instances, it is possible that regulative controls could actually prevent companies from obtaining goals. Financial controls can include budgets, balance sheets, and profit and loss statements (Bateman & Snell, 2009). According to B Corporation, they “are the means by which an organization’s resources are directed, monitored, and measured. ” These controls hold managers responsible in an effort to secure profits for companies (Encyclopedia of Management, nd. ) and place limits on spending.

Financial controls are important ways of protecting resources and making sure that a company’s account records and reporting are accurate.

Hierarchy control basically says that all decisions need to be made by those in higher positions. In a traditional hierarchy control, power, and authority flows down from the top. This form of bureaucratic control has been around for centuries, and usually has formal rules and standards in place. Control systems of this type are typically designed “to measure progress toward set performance goals” (Bateman & Snell, 2009).

While this approach is still found in companies today, many are choosing to modify their structures to allow for a more employee friendly approach, such as the clan control. Clan controls are “based on the norms, values, shared goals, and trust among group members” (Bateman & Snell, 2009). Today, more than ever, many companies hold their employees to high standards and expect integrity of them. Because of this, employees strive for effective controls on their own. Companies have turned to clan controls, encouraging employees to take responsibility of their own actions.

Employees are given guidelines under which they are to work, and are expected to make good judgments. Employees have common goals and trust one another, and formal controls may be less necessary (Bateman & Snell, 2009). When using these control mechanisms as a resource to implement the standards of the goals of the business, it is vital to know the positive and negative aspects. Utilizing these controls could be beneficial to the business but they can also cause detrimental damage to it if they are not managed or implicated properly.

Because Starbucks is one of, if not, the only largest coffee brewer in the world today, they should ensure all necessary control mechanisms into their daily routine in order to maintain their effective customer service. Because a hierarchy describes the structure of the management from the top of the company, which is the managing director, in this case would be Howard Schultz, the positive aspects of it would be that according to the Starbucks case study, he indicated that he wanted to include people in the decision making process and that he would be open and honest with them (Schultz, 2010).

This shows the confidence he has in his team and in the people he chose to build the organization with. The negative impact hierchy control may have on this organization is that although everyone’s opinion matters to the upper division, it is most likely that the final decision will impact not the benefits of the employees but the benefits of the organization. Most employees will have to sacrifice in order to try to accomplish the goals of the business and help gain its revenue.

The key in terms of management control is matching regulative controls such as policies and procedures with organizational goals such as customer satisfaction. (Droege, 2011) Starbucks standing policies and operating procedures are affected by the quality of their teas, coffees and merchandises sold to their customers to maintain the upscale customer satisfaction. By implementing the usage of this control, it will provide some positive reactions towards the organization by relying on their regulatory agencies to determine what products are safe for human consumption.

In regards to this, the negative reaction may stem from the financial impact related to the costly supplies that have to be purchased in order to obey their regulatory decisions. For example, providing rBST-free milk available to U. S customers upon request. (June, 2001)This control mechanism coincides with the next control that Starbucks tends to bump into very often. This control is financial control. Financial control is the foundation of any procedure of a business.

Because Starbucks profit is the key essential to their future and success, without financial control the company can enter major negativity by going into bankruptcy or losing their dedicated employees. However, maintaining financial control can help the organization sustain their revenue or increase it by motivating their employees to sale more coffees. Lastly, clan control relies on values, beliefs, corporate culture, shared norms, and informal relationships to regulate employee behaviors and facilitate the reaching of organizational goals of Starbucks.

Starbucks utilizes this control by creating a “customization” beverage from employees to create their own individual drinks that can be sold. Starbucks implemented this exciting and adventurous idea so that they can promote dedication, and discover individual recognition from their staff and also discover different personality types within the business. Starbucks has also successfully structured their clan control to maximize their employees by providing them with major benefits such as medial coverage and discounts towards beverage purchases.

As much as clan controls can be beneficial to both the production of the business and its employees, it can be detrimental to the business as well in some ways. Implementing too much clan control within the business can cause lack of standard management which can lead to problems in the business such as, employees may slack, take advantage, or shrug responsibility without guidelines. (Ganly, 2010) All of these control mechanisms are related to the four functions of management. In order to create and implement the effectiveness of a controlled environment, a manager of any organization would have to plan out the necessary objectives.

Planning the hierchy of a business by hiring those who are ahead in the decision making process is vital. Organizing the products within an organization to ensure a better future does regulating and maintaining policy procedures to implement great service. To manage financial control, it is vital to implement a controlling function that involves monitoring of all financial resources, such as sales increase and the hourly salaries of every employee. When it comes to clan control, using the management function of leading is ideal.

In order to control a clan, there has to be a leader to motivate their people’s desires to help achieve the goals of the organization and also increase the knowledge that they retain towards the business. Starbucks is a truly authentic, interesting, and one-of-a-kind cafe and these controls, for the most part, have enabled Starbucks to fulfill its organizational goals. These controls have created a culture within the organization the enables top management to plan, lead, organize, and control in positive way.