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Howard Schultz Leadership Style: Discussing The Reason Behind Its Success

Question

Task: Provide a detailed narrative on the Howard Schultz leadership style.

Answer

Introduction
In the field of business management, the concept of leadership is considered to be very significant and crucial. As per the opinion of the prominent scholar Rubin in 2013, it is the quality of leadership implied by the entrepreneurs which determine the magnitude of success in a business institute. The ideology of leadership is a very sensitive one that portrays the direct impact of the efforts made by the leaders on workers in the company. Justifying this context of Howard Schultz leadership style, the well-known scholars Boulgarides and Cohen in 2001 had argued that the implied leadership in a company has a crucial role in its success and achievements. If taken the context of Apple company, it is one of the dominating smartphone manufacturing companies in the global market of which major involvement should be accounted for the leadership efforts invested by Steve Wozniak, Ronald Wayne, and Steve Jobs (Rowe, 2014).
We have taken the context of Howard Schultz leadership style implied in Starbucks for analyzing this report. Howard Schultz was appointed as the CEO of the Starbucks company. In the initial section of this report, we have tried to introduce the background of Howard Schultz to the readers. In the succeeding sections, a detailed analysis of Howard Schultz leadership style implied by him while he was CEO of Starbucks is performed (Koehn, 2001). A particular focus is being given to critically evaluate the leadership strategies implied by him. Considering the later performance of the Starbucks company, the efficiency and the impact of the strategies implemented under Howard Schultz leadership style are evaluated in the final section of the report.

Howard Schultz Leadership Style

Howard Schultz
The company of Starbucks has employed Howard Schultz as its CEO in the year 1982. At that time, the business of the company was restricted only to small scale (George & McLean, 2006). Howard Schultz is a citizen of the USA and belonged to a Jewish family. Talking about his professional career, he started working in the Xerox company soon after his graduation (Youssef, 2013).  He later joined the Swedish houseware manufacturing company Peterson AB after working few years for Xerox. When the higher officials of Starbucks have observed the exceptional management skills of Howard Schultz, they offered him a designation at the retail and marketing department of the company. It was when the company of Starbucks came under the guidance of Howard Schultz that various path changing and innovative strategies were implemented for the expansion of the company's business at the global level (Wallace et al., 2013).

Howard Schultz leadership styles
If referred to the biography of Howard Schutz, it could be observed that he has conceived the target of making Starbucks, the best brand in the world as the purpose of his life after joining the company. At earlier times, the coffee shops followed a conventional style of business and focused on those places only where the people preferred coffee above other beverages. However, this perception was changed by Howard Schultz when he visited Italy in 1983. He observed the coffee outlets were placed at every location which represented the presence of a community. The idea of converting coffee as a culture and way of life got into the mind of Howard Schultz during this visit. Rather than the spot for drinking coffee, the site was used by customers for various purposes. The quality and approach of service in such outlets have impressed him to the furthest since customer satisfaction was being taken care of by providing customized and polite services. It made customers extremely relaxed at such coffee outlets. Howard has noticed that the employees were entitled to the freedom to express their views since leadership had taken a very friendly approach towards them (Marques, 2010).
The significance of implementing proper leadership strategies in the success of Starbucks at the global level has been understood by Howard Schultz after studying the business styles used by Italian coffee bars. It was the transformational and democratic leadership style that he had decided to implement in the Starbucks company. It was based on the realization that only an amicable relationship between employees and management could develop a comfortable and friendly environment within the organization (Schwepker, 2015). It has been observed in many other instances that quality relationships were established between workers and management by the implementation of transformational and democratic leadership styles.

The approach of leadership in which the management allows the employees to put forward their points of view, concerns, etc. regarding any particular issue in the company is termed as democratic leadership. It has been strongly advocated by Howard Schultz that the implementation of the democratic and transformational style is the most operative and productive approach to convince the whole employees towards a particular goal of the organization. As per the opinion of Pangarkar (2015, p. 295-297), Howard Schultz has chosen specifically the democratic style of leadership since he wanted to get different and innovative suggestions from his juniors and sub-ordinates hoping that they would bring the company towards new heights. Though the observations made by Schriffin (2015, p. 639) were different from the opinion of Pangarkar. As per his observation, there were some challenges that he had to face while implementing this approach in the company which are listed in the below section of this report.

 A significant time is required for the leader to make a decision if the democratic leadership style is followed in the company. Howard has faced a lot of challenges while implementing the decisions which were against the interests of the employees, which were very significant for the existence of the company. When the great depression of 2008 struck the whole global economy, every corporate company was affected financially. Howard was left with no other way than to look for staff reduction to sustain the existence of the Starbucks Company (Le et al., 2016). In this circumstance, the decision and stance taken on behalf of Howard were absolutely against the interest of employees. The approach of Howard had created a negative influence over the later business of the company.

There were also some other challenges when Howard entered into a conflict with the employees though he has adopted a democratic style of leadership. The aggressive stance towards the expansion of business by him was highly criticized by the employees. Their sense of disapproval was quite high among the workers towards the strategies implied by Howard.

It was in the year 2010 that Howard had assimilated the principles of transformational leadership style, which would cover up the weak points and loopholes in the democratic leadership style. It was by using the tool of high moral values and motivation that higher productivity was brought by using a transformational leadership style among employees. As per the arguments made by Weinzimmer and Esken (2016, p. 333), there was a significant improvement in moral thinking and output of employees after Howard had implied a transformational style of leadership in the company environment. The lost trust at the time of the great depression had been redeveloped by him later by implementing the concepts of transformational leadership. The aftermath of economic regression had created havoc among the employees regarding the approach and strategies of Starbucks. The new strategies drafted after the implementation of the transformational leadership style signified the increased innovative thinking of the employees (Mat, 2008).

The new approach had helped Howard in expanding the business of Starbucks to the markets of the Eastern countries on the globe. The high returns of implementing the transformational leadership were noticeable in the financial year of 2011 as per the observations made by Bookman and Martens (2013, p.290). The same trend in the improvement of financial performance by the company was observed in the following years. As per the financial data, the revenue of the company had increased to 56 % of the value of 10707 million dollars (2009) to 16702 million dollars in 2012. The new figures of Starbucks had revealed before the world that the transitional style of leadership is the most effective one in the new corporate world. 

Life Journey
It is the ability to handle the whole team of employees for the betterment of the organization by encouraging and motivating them that is meant by the term executive leadership. The efficiency of the employee team in delivering the performance could be ensured by implementing the executive leadership style in the organization. Howard Schultz was born in a typical poor family on 19th July 1953. At that time, even the parents of Howard Schultz wouldn’t have thought that he would turn out into the richest person in the whole US. In his childhood, Howard Schultz had faced many financial difficulties since the family had very low income. At even an early age, he was well aware of the difficulties faced by a middle-class family and developed the skills to overcome the financial challenges (Schultz & Gordon 2012). The visual of his father tackling the financial hurdles and going through different jobs to meet both ends had seasoned him in his childhood to deal with them. Even in some of the interviews, he had mentioned that he witnessed his father in some humiliating instances because of the lack of money. He revealed that society treats an ordinary working man with utmost dishonour.

Career
It was at his age of 12 years that Schultz started his first profession as a newspaper seller. Later he took a job in a local café at the age of 16. He had to go through a lot of financial difficulties while working in this stage. He had done very hard jobs like in a fur store where he was given the job of stretching the leather. However, he kept on further investing in the hard work since he wanted success at any cost. The whole exhaustive scenario had helped him in evolving into a person with a strong personality. By following the profession within tangibly demanding areas, he developed a good physique and later even acquired an athletic scholarship. It was in the year 1975 he acquired his communications bachelor's degree from the University of Northern Michigan. Soon after his graduation program was completed, he joined the designation of the sales manager in the Xerox company. Later he joined the Hamamaplast company situated in Sweden. He also tried supplying appliances like grinders to major companies like Starbucks. He had observed that it was the Starbucks company that bought the coffee machines on a large scale (Burbach, 2004). It was at this point that he decided to settle in Seattle so that he could make regular contact with the higher authorities in Starbucks.

A professional career in Starbucks
Starbucks is one of the leading coffee companies in the global market, which is based in America. The headquarter of this coffee chain company is in Seattle. Zev Seigl, Jerry Baldwin, and Gordon Bowker found the company when they were just college students. Three of them all were highly passionate and interested in the coffee business and started several outlets. However, the entry of the company in the American market was quite an inappropriate instance since the locals started losing their interest in instant coffee products by the 1960s. Most of the consumers had changed their preferences to other sorts of coffee products in America. However, Howard was instantly impressed when he tasted the coffee products of Starbucks. He understood that the unique methodology of preparing coffee would attract the whole customers in the country (Lamdin, 2012). The incident happened when Howard was just at the age of 29.

Howard Schultz Leadership Style

Realizing the potential of the company, he invested all his effort to get employed in the Starbucks Company. When he was employed in the company, strong recommendations were made by him to open more outlets so that a higher turnover could be achieved (Beehner, 2020). Though the major suspicion was expressed by the managing body that the extensive expansion would negatively impact the existing business of the company. Though the same cause was advocated by Howard and he persisted in making a gradual progression. Although he was offered half the salary of his previous job, he accepted the designation of the marketing director in Starbucks (Jensen, 2020). It was in the year 1982 that he moved to Seattle permanently to associate totally with the company.

Later Progress
The Howard had later contributed heavily to the progress of the company and as a part of it visited Milan in 1983 to derive out the recipe for Cappuccino coffee. The step had made a very constructive impact on the sales ratio of the Starbucks Company. In the successive year, the turnover of the company was increased triple that of the previous year. It was the inclusion of an Italian Café that is considered to be the milestone in the business of Starbucks. The new culture of spending quality time at the cafes has increased the business of Starbucks. The higher official was regularly provided with innovative ideas by Howard though they were abruptly disregarded and refused (Wanjala, 2014). The major argument for refusing these ideas was considering that the company would lose its identity after implying them. The higher authority of Starbucks was very conventional in thinking. They were not ready to take any sort of risk in the business. Howard Schultz Leadership style was very innovative in nature and turned out to be a very efficient leader in the later phase of the company (Morgan, 2012).
Starbucks evolving as a modern company.
To establish Starbucks as a new modern company, Howard required the amount of around $ 1.7 million of which major part he took from a bank. The extended outlet of the company was first opened in Seattle by him in 1986. Il Giornale was the new name given by him for the new coffee outlet. The step turned out to be an immense success for the company, which scored around 300 customers on its inauguration day itself. In the later years, the owners of Starbucks decided to sell the company because of the existing managerial inefficiencies. The selling price of the company units was decided to be around 4 million dollars, which seemed to be an interesting offer for Howard. Howard was able to find investment and loans at an appropriate time, and you may find it interesting that Bill Gates could be counted as one of the initial investors of Starbucks. After the sale, Howard Schultz established himself as the sole owner of the Starbucks Company.

Now every business process in the company was revived by him, and he included a bar counter in every coffee outlet. For attending the customers, he took an additional effort to employ professional baristas at the bar counters. They carried out the tasks of serving, grounding, brewing, etc. of the coffee. These ideas were copied from the coffee cafes in Italy. The American population had accepted the new way of serving the coffee wholeheartedly. The company had made a new policy of employing the outlets with such workers who could bring attractiveness to coffee serving. The company even started training programs for its employees which turned out a great success for Starbucks.

Apart from other forms of beverages, coffee is a little addictive for the customers, and the same factor has been considered by the company to imply certain new selling strategies. The innovativeness in the Howard Schultz leadership style had labelled him the tag of an adventurer. The shareholders of the company have heavily profited since the company started 125 further coffee outlets in the successive five years. The company had reached an unplanned and undecided height by the year 1992. As an initiative, further outlets of the company were started in the cities of Boston and Chicago. The drastic growth of the company even compelled the company to start an outlet in Chicago (Azman, 2020). By copying the franchising system of McDonald's, the company of Starbucks had attracted furthermore clients and investors. However, the focus on crucial aspects like goodwill, quality, and quantity was lost by the company management. The Howard Schultz leadership was quite challenging and full of risk though it helped him in transforming into an efficient leader.

Howard Schultz Leadership Style
The best characteristics of Howard Schultz Leadership Style was that all the employees were considered and treated as the partner of the company. By adopting this approach, the company had been able to develop a constructive relationship with the employees. The employees of the company had displayed a very large level of performance because of the implementation of Howard Schultz leadership Style in its organization system. From this case, it could be ascertained that in the presence of a healthy official environment, employees could provide their maximum level of performance. Starbucks had always supported the policy of respecting each associate employee. It is the liability of the management team to provide the employees with appropriate inspiration so that a constant level of performance could be assured from them. The Howard Schultz Leadership Style assured by implying various strategies that the employees delivered a constant performance. The most effective measure was the decision to give appropriate comprehensive benefits as per the performance of the employees. The parameter to avail of these benefits was marked as to work at least 20 hours a week. The inclusion of facilities like flexible working hours had increased the performance of the employees. The consecutive effect of competitive salary has been visible in the performance of the Starbucks Company. The Howard Schultz Leadership Style ensured that only the candidates with enthusiasm and determination to dedicate themselves to derive better output for the company are employed (Thompson & Arsel, 2004). As per the Howard Schultz Leadership Style, the employees were provided with proper training so that there should be no compromise in customer satisfaction. Innovative strategies like employee stock purchase plan have contributed heavily to generating customer satisfaction (Pennacchiotti & Popescu, 2011). The company has also staged the facility for its employees to buy the stock products by just submitting their 10% of aggregate salary. The employees are entailed with a total of 85 % discount while purchasing the company items. Such innovative measures taken in the Howard Schultz Leadership Style make it the best approach to sustain the higher performance of the company via employee satisfaction. The major principle behind implying the Howard Schultz Leadership Style was that the entrepreneurs consider the requirement of his employees.

If done a deep analysis of the Howard Schultz Leadership Style, it could be observed that the democratic style was adopted in the working environment, and hence it required some exceptional outlook and approach. Different from other organizations, the working environment of Starbucks was made very friendly one by implying this leadership style. All the challenges in the global market were easily targeted by implying the Howard Schultz Leadership Style. The democratic concept is the base of Howard Schultz Leadership Style. The approach made by Howard Schultz while leading the company of Starbucks is still a debatable aspect in the discipline of business studies. The negative impact on the business has been visible soon after Howard Schultz had resigned from the post of CEO. In the later stage, the company had faced a lot of financial failures of which the absence of Howard was the prominent reason. Even a lot of outlets of the company have been closed down because of the financial loss.

Role of Howard Schultz Leadership Style in employee motivation
Howard Schultz understood that by implementing a very effective leadership style, the maximum output from the employees could be derived out. The performance of the employees plays a very crucial part of increasing the financial turnover of the company. In this scenario also, Howard Schultz had implemented a particular leadership style that had helped in sustaining the motivation of employees. If considered the Howard Schultz Leadership Style, various aspects to be focused on sustaining the motivation of employees could be ascertained. The major aspects are listed in the below section.

  1. Integrity towards company policy
  2. Unique self-concept
  3. Critical reasoning ability and cognitive intelligence
  4. Motivation from behalf of the leadership.
  5. The higher level of emotional intelligence.
  6. Specific business identity.
  7. Higher hold over the business dynamics and its rules.
  8. Higher motivation and drive towards a common goal.

For leadership to become an effective one, the above-listed qualities should be mastered and retained by it. These characteristics would help the leader in leading the whole team very efficiently towards a single goal. It is the people-oriented leadership style which depicts higher similarity with that of the Howard Schultz Leadership Style. The contributions made by him on the concept of employee welfare in the global corporate market is very large. The approaches of Howard Schultz Leadership Style have been studied by a lot of scholars, and almost every one of them had found it to be very effective in increasing the performance of the employees (Argenti, 2004). The strong relation of the morale retained by the employees with that of the associated perks could be traced in this leadership style. The higher involvement of the employees in providing a better customer experience at the outlets of Starbucks is considered to be one of the major factors in the success of the company.

On conducting a detailed analysis, it could be observed that the concepts of participative leadership and democratic leadership are highly assimilated in the Howard Schultz Leadership Style. The specific leadership approach mandated the active participation of employees in the decision-making process. The different relevant recommendations from the experienced workers would reveal the hidden aspect of the issue; hence they could be addressed more efficiently (Dickinson, 2002). Since the leadership style adopted by him encouraged the collaboration of employees in the crucial processes of the company, it highly resembled itself with that of the approach followed in people-oriented leadership. The changes in the business processes were only done after consulting with the employees. The approach of the leader towards the employees takes them at a position, from where they have to invest higher commitment for the upliftment of the company. The staff in Starbucks were provided with a very friendly and hygienic environment along with high flexibility in their work shifts.

Retiring from the designation of CEO
It was in the year 2000 that the designation of CEO in Starbucks was resigned by Howard Schultz. The move turned out very disastrous for the company since a lot of its expansions activities failed tremendously. In the span of Howard Schultz Leadership, the company had witnessed very rapid business developments. An increasing complaint against the decreasing quality has been reported against Starbucks after the departure of Howard Schultz. In the near future, the company had witnessed a sudden downfall in its reputation and goodwill. The same factors have created a negative impact on customer satisfaction which conclusively had created a destructive impact on the turnover of the company. Deviating from the initial Howard Schultz Leadership Style, the company had gradually shifted to the less aggressive bureaucratic style. After implying a series of ineffective management styles, the companies had identified the gap created by the departure of Howard from the company (Simon, 2011). When the financial crisis struck the local markets of America, he decided to return back as CEO of the company.

The impact created by Howard Schultz leadership style during the financial crisis
Howard had returned to the designation of the CEO in Starbucks on the date of January 8, 2008. He had returned to the company after a long gap of 8 years. It was the previous CEO, Jim Donald, who was replaced with his return. Soon after the return, it was identified that the company is going through an immense financial crisis, and some aspects should be immediately addressed to prevent the downfall of the company. It was the aggressive and rapid development of McDonald's, which was creating an imminent danger to the business of Starbucks. The strong message by him was conveyed to every unit of the company so that its focus should be primarily towards customer satisfaction. The policy was shifted towards building up an emotional and sustainable relationship with potential and loyal customers. The previous management bodies and leadership had blamed their whole failures on the low-performing economy and increased the price of dairy products. But Howard had made it clear to the company that it was the inconsiderate spending on behalf of the management that pushed it into the pit of large debt (Schultz, 2012). It was the reimplementation of Howard Schultz Leadership Style which brought back the company to the track of development.

The new approaches, like giving higher priority to the feedback provided by the customers, were introduced at the reentry of Howard. The new and innovative approach is still labelled as My Starbucks Idea. By this approach, the customers were allowed to provide recommendations and innovative ideas to the higher authorities. The feedback provided by the customers were highly considered when drafting the strategies regarding marketing campaigns, product presentation, delivery services, creating guidelines on corporate social responsibilities, etc. The campaign had helped the company in acquiring valid recommendations for its further development programs.

Evaluating the influence of Howard Schultz as a leader
There is no requirement for the further description of Howard Schultz Leadership Style and its success. Every trait of a successive leader could be traced in Howard Schultz, and he is still considered an iconic entrepreneur in the modern corporate world. His ability to move the whole staff towards a single goal is exceptional, and the same approach is appreciated all over the world. The motto of I am responsible was familiarized among the employees by the implementation of Howard Schultz Leadership Style.

The effectiveness of the Howard Schultz Leadership Style was further revealed before the world when Starbucks displayed strong recovery from the financial downgrade, by reimplementing the strategy. If the strategies implemented by the person are not beneficial for the organization, then it would he or she could not be labelled as an effective and reliable leader. It is based on the approach of the leader on which the integrity of the staff depends upon. Bringing up Starbucks as a universal brand was the life mission of Howard Schultz.

Conclusion
The report on the Howard Schultz Leadership Style has mentioned the ups and downs of the company towards establishing itself as a reliable brand in the global market. Though Howard was born in a very poor family, he managed to achieve career success in his life. The experience in poverty had helped him develop some skills in countering various hardships and challenges. The initial aspect of the career of Howard was full of difficulties, and he undertook several frivolous designations. It was because of his hard work and strong determination that he later ended up as an employee of Starbucks. It is because of the innovative Howard Schultz Leadership Style that the company had displayed very significant and rapid growth in the coffee industry. In the modern world, the Howard Schultz Leadership Style is considered to be the most appropriate one which could derive out the best performances from the employees. It has been revealed by Howard Schultz Leadership Style that the level of profitability could be increased considerably by increasing employee and customer satisfaction. The influence of him in the company was so big that his retirement had even risked the sustenance of the enterprise. It was by the reimplementation of Howard Schultz Leadership Style after eight years that the company was revived to its initial strength.

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