Onward How Starbucks Fought for Its Life Without Losing Its Soul

Business

A Review of "Onward, How Starbucks Fought for Its Life without Losing Its Soul" from a Leadership and Marketing Perspective

In 2008 Starbucks saw the return of Howards Schultz to the helm of Starbucks as CEO. Schultz had taken a step back eight years previously, taking the position of Chairman, but with Starbucks showing signs trouble Schultz returned to lead a turnaround. The rise of Starbucks is well-known, Schulz's story of growth and success is recounted in his book; "Pour Your Heart into it: How Starbucks Built a Company One Cup at a Time," published in 1997. At the time the firm was in a period of strong growth, and in line with both reader, and market, expectations the firm continued to expand. Indeed, it was seen as negative that the first half quarter of 2008 the like for like store sales showed only a 1% increase (Schulz 87). The problems were not unique to Starbuck's; the recession was hurting many firms that had appeared indefinable were failing, and shorts had already noticed some problems within Starbucks brand. The book "Onward, How Starbucks Fought for Its Life without Losing Its Soul," initially published in 2011, is a follow-up to the 1997 book, and gives an account of the way in which Starbucks recovered from the problems. In this second book Schultz shows that organizations can turn around their operations without losing their core values and ethics. Schultz picks up the story in 2008 when he has returned as new CEO, and gives a comprehensive, and sometimes strikingly honest, narrative of the way in which Starbucks managed to turn itself around.

The book may be argued as not only informative, but also engaging, due to the styling which it is written. Schultz gives an honest and emotional account of the events, which acknowledged except some of his own failings, as well as identifying problems that were present in the company. Schultz's narrative gives interesting insights into successful companies, successful leaders and successful marketing. However, when reading the text it is also important to remember that the book is told entirely from Schultz's own perspective, and while there is something genuine about his perspective and writing, it may also be argued that the book is somewhat biased in terms of self praise, and even displays a degree of conceit. No leader is perfect, and likewise no company turnaround could be perfect, the Starbucks does appear to have successfully traversed a difficult period in its history, refocusing and recovering, while retaining "it's soul."

Like any story of commercial turnaround, it is necessary to consider how and why the company was failing; otherwise it is difficult to fully comprehend the importance of the subsequent actions taken and strategies adopted. Schultz recounts the story of a memo that he wrote in 2007 while still only the chairman. The memo, which was written on February 14, 2007 was entitled "The Commoditization of the Starbuck Experience" was sent as an e-mail to Starbucks CEO Jim Donald, along with his team (Schulz 25). Schultz recounts some of the content, describing the memo as an impassioned plea to return to the core activities and address some of the problems, such as dealing with the way that the streamlining of souls had meant that the stores "no longer have the soul of the past" (Schulz 24). There is little doubt this memo was relatively scathing, and by 23 February the memo had been leaked onto the Internet, which Schultz felt was a personal betrayal (Schulz 26). However, when reading this section of the book one must always consider the perspective from which it is written. The deluge of publicity that was created, even contain through carefully worded statements reiterating commitment that the company as a whole had to quality and authenticity, Schultz was the cause of this publicity. When looking at his role as a leader, one may wonder how and why this particular course of action was chosen. There were certainly some naivete in believing this memo this type would remain confidential; as a former head of Starbucks communications, and public relations expert told him, nothing remains confidential today (Schulz 28). More importantly, the story of what, if anything, was done before this to try and resolve the situation and maintain Starbucks authenticity appears to be missing. Many takes a leadership indicate that a significant quality of leaders is the ability to scan the environment and identify changes which will impact on firm, but that information then has to be used for the benefit of the company. In terms of leadership, the reader may consider whether or not Schultz may have tackled is in a better way, so that concerns were raised and dealt with in a meaningful manner. Schulz himself appears to believe that this memo was the start of the change, and sees it in a positive light forcing Starbucks to look at itself in a mirror (Schulz 24).

No leader will be perfect, especially where there is an emotional commitment, and reading Schultz's book there can be little doubt that whatever his position in the company CEO or chairman, Schultz had and still has a passion for Starbucks. The passion is not just for the company, but for everything which is associated with that company, from the authenticity of the experience from the customers expected, to the commitment shown to employees who are referred to as partners and the ethical stance taken by the company developing long-term relationships with suppliers and pursuing fair trade policies.

The turnaround of the companies dotted almost a year after that memo, when in January 2008 Schultz returned as ceo; interestingly he always refers to this in the lowercase, which may be seen as a potential indication of humility. History of share market prices and reactions demonstrate that there was a generally positive reaction to Schultz's return to CEO, and right from the start there was a determination to turn the company around, return it to its core values and recapture the authenticity of the brand.

As an entrepreneurial leader Schultz had not expected to take a leading role in a turnaround, and his strategy, calling on others to help, such as Myron Ullman, demonstrates the way in which leaders cannot operate in a vacuum. While leaders themselves need to be able to demonstrate leadership qualities, such as clarity of vision, confidence and good judgment, there is also a significant benefit in consulting with others and specialist knowledge on how strategy should be implemented (Schultz 39). This use of additional input knowledge was seen not only in the way that the return of Schultz was announced to CEO, with caregiver not only to stock market, but also to the employees. Advice was also use later regarding the way in which subsequent changes were implemented.

The general approach taken right from the beginning, despite some of the scathing attacks made on Starbucks management in the leaked memo, Schultz claims that he adopted a no blame approach, as he felt it would be unproductive. Instead, the focus was to the future, and the way in which changes were made, and it appears to be present in the strategies adopted.

One of the first strategies undertaken was the retraining of 135,000 baristas (Schulz 3). Making coughing may appear simple, there are many things that can go wrong, if water pours to quickly the espresso which produces for the two-week, and if the water flows to slowly there is likely to be a bitter coffee caused by a coffee that is too fine (Schulz 5). The strategy adopted to undertake the retraining was brave, at 5:30 PM on one Tuesday afternoon all 7,100 stores across the United States shut their doors for three hours, while the staff were retrained on how to make coffee. Starbucks head office had created a DVD to be used as a training tool, not only to improve standards need to stores, but to ensure that there was consistency. All 7,100 stores had received the DVDs, and DVD players (Schulz 5). The strategy may be seen as almost genius, the employees were trained, and with Schulz speaking to all of the "partners" on the DVD, without the use of a script, there was also the ability to try and connect with the people working the shop and win them over to the changes which were occurring. The strategy may have had a high cost, losing approximately $6 million in sales, but it also achieved a high level of publicity. Therefore, as well as serving to improve the skills of the partners, the strategy may also be considered in the context of PR exercise that effectively gained a significant amount of media coverage. Not all of the media coverage was positive, with some critics voicing opinions of Starbucks was "broken," but other reports or more informative or neutral (Schulz 5). In the long run, it appears highly likely that the strategy was very successful. It is noted that the increased following the closures, and while it is not specified in the book, it is also highly likely that despite the lost business in a few hours of closure, the reputation of the company was somewhat restored by the display that they were willing to admit they need to improve, and undertake actions to make that improvement.

Schultz has demonstrated that as a leader he was able to assess what was going on in the company, and identify what needed to be done to change. However, the change can be brought about simply with a few hours of retraining. There was a need to identify exactly what had gone wrong, and undertake strategies to prevent the same thing is happening again. A significant issue for Starbucks had been the rate of growth, Schultz states "if not checked, success has a way of covering up small failures, and when many of this Starbucks became swept up in the company's success, it had unintended effects. We ignored, or maybe just failed to notice, shortcomings." (Schultz 39). This is a lesson that can be acknowledged as relevant to not only Starbucks, but are many other organizations. Initial success, and ongoing growth, can result in problems as the small failings were either unnoticed, or ignored with the hope that they will go away. Schultz also notes that the success itself increased pressure, and that the desire to increase sales also created some bad decisions in terms of strategic choices, such as the opening of stores in both locations, and transferring goods coffee shop managers to oversee stores, replacing them with an undertrained barista (Schultz 39). It is these types of issues that resulted in the gradual decline.

When retraining the blisters shops argued that closing the stores for three hours required courage (Schultz 7). Subsequent actions indicate that Schultz had the courage of his convictions, was prepared to make difficult decisions. Several examples may be used, these include the decision to change the way in which quarterly reports were made so that like-for-like stores would not be reported a quarterly basis, a move that was not liked by investors. There was also the removal of the warm breakfast sandwiches, which talks did not believe fitted in with the Starbucks experience. However, a few small changes such as this are unlikely to turn a company around, instead, it is necessary for there to be a clear vision that is well articulated, that would involve embracing change and innovation, in order to return the authenticity, which was embodied in what became the "transformation agenda" (Schultz 104). The aspiration was very ambitious, "to become an enduring, great company with one of the most recognized and respected brands in the world, known for inspiring and nurturing the human spirit." (Schultz 104). This was backed up by the seven big moves including becoming the undisputed coffee authority, engaging in inspiring partners, igniting an emotional attachment with customers, expanding the global presence, becoming a leader in ethical sourcing an environmental impact, creating innovative growth platforms and delivering a sustainable economic model (Schultz 105).

The transformation agenda may be seen as the articulation is a vision, backed up by resources that were needed to win over the employees to support the long-term change. Much of the focus was placed on the U.S., as this was where 70% of the business originated, but the changes needed to take place across the entire company (Schultz 106).

Schultz undertook a great deal of change within the organization, aided by the association and charisma that he had been able to develop or he was first in the position of CEO. His vision and confidence helped gain support, a great deal of the book focuses on positive actions were taken. The values were not only rhetoric, but were practically demonstrated to actions taken by senior management, principally Schultz himself. For example, the increased commitment to ethical coffee sourcing was seen in a trip by Schultz to Rwanda in June 2008 (Schultz 281). However, there is also some acknowledgement of the pain that had to be caused, as any organization with inefficiencies is unlikely to recover nearly by adopting new strategies to improve performance. There is also the necessary move of reducing costs and cutting out deadwood. The ability to make these decisions can be one of the most difficult aspects of leadership, in United States alone 600 stores had to be shut, at a cost of 12,000 jobs (Schultz 151). The issue of timing can also be seen as a part of the way this decision was announced, within hours of being made 5 min after the stock market closed on the East Coast (Schultz 153). The company sent e-mails to the partners (employees) 12 min after the announcement was made, with an attempt of honesty, to help retain the company reputation as well as retain company support for the employees that would be remaining with the company.