Howard Schultz stepped down as the CEO of Starbucks in 2000 when business was booming. While he stayed on as the Chairman of the Board, he did not fully realise the depth of the crisis at Starbucks until 2008 as its shares plunged by more than 50%. Due to the financial crisis and competitive market conditions, many “experts” forecasted that it was just a matter of time before Starbucks and its overpriced coffee went bankrupt. When Howard Schultz returned as the CEO of Starbucks in 2008, the first thing he did was to admit that the company had lost its way and that he would accept full responsibility for the company's situation. Instead of trying to blame others for the situation at Starbucks, he recognized his own failure as its chairman.
The plummeting share price of Starbucks brought huge pressure to dramatically change the strategy and business model of the company. One argument was for getting rid of company owned stores and moving to a total franchise system. Schultz rejected this on the grounds it would totally disrupt the culture of the company. Additional pressure was put on reducing the quality of the coffee by 5%, which could save the company a few hundred million dollars. Again, Schultz would not bow to short-term shareholder interests, as he was accountable to the customers of Starbucks who expected nothing less than a premium coffee and experience.
Schultz believed that the only way to save Starbucks was to rebuild trust between its customers and employees. In a bold move, he shut down every store for 3 ½ hours for retraining. He also took 10,000 store managers to New Orleans for a leadership conference where they spent over 50,000 hours helping to rebuild a city that was devastated by Hurricane Katrina. While the analysts were screaming that this was a waste of time and money, Schultz knew that public perception linked Starbucks and its expensive coffee to the financial crisis. The only way to change this perception was to restore the original company culture and to reconnect with customers in a more personal way.
Before Starbucks delivered its recent quarterly results, the “experts” were saying that Starbucks is slowing down and the company is overvalued. Howard Schultz and his team once again proved them wrong by delivering better than expected results. From the depths of the crisis in 2008 to the success of today, Starbucks has regained its position as one of the world’s strongest brands and as a company whose culture instills trust with both its customers and employees. The Accountability Award goes to Howard Schultz for stepping up in a crisis and taking responsibility for all of Starbucks’ problems. By doing this, he was able to rebuild what was broken and save the company that he started back in 1986 when the coffee revolution began.
For more information on Leadership, please refer to the following articles:
- The HBR Interview: “We Had to Own the Mistakes”, Harvard Business Review, Adi Ignatius, July-August 2010 issue : https://hbr.org/2010/07/the-hbr-interview-we-had-to-own-the-mistakes
- Leadership and Accountability: Howard Schultz, CEO of Starbucks, The Booth Company, Jeremy Unruh, October 5th, 2010 http://www.boothco.com/360-feedback-resources/leadership-and-accountability-howard-schultz-ceo-of-starbucks/
- Why I'm Stalking Starbucks CEO Howard Schultz, Forbes, Kristi Hedges, April 10th, 2012 http://www.forbes.com/sites/work-in-progress/2012/04/10/why-im-stalking-starbucks-ceo-howard-schultz/
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