Onward: How Starbucks Fought for Its Life Without Losing Its Soul

by Howard Schultz

  In 2008 I felt very strongly that many of us at Starbucks had lost our attention to the details of our business. While there exist obvious limitations to what the leaders of a multibillion-dollar global organization can be expected to attend to, we had, as a group, strayed too far in the opposite direction. We had defaulted, for example, to talking about national or global comps and rapid expansion, and when our comps went up we assumed that individual parts of the business—distribution, partner resources, entire geographic regions—were also healthy.

  Like a doctor who measures a patient's height and weight every year without checking blood pressure or heart rate, Starbucks was not diagnosing itself at a level of detail that would help ensure its long-term health. We predicated future success on how many stores we opened during a quarter instead of taking the time to determine whether each of those stores would, in fact, be profitable. We thought in terms of millions of customers and thousands of stores instead of one customer, one partner, and one cup of coffee at a time.

  With such a mind-set, many little things dangerously slipped by unnoticed, or at least went unacknowledged. How could one imperfect cup of coffee, one unqualified manager, or one poorly located store matter when millions of cups of coffee were being served in tens of thousands of stores?

  We forgot that “ones” add up.

  Grounding our leaders as well as myself in a more disciplined, detail-oriented mind-set—down from the 30,000-foot view and way of thinking about the business—was one of my earliest challenges. It was all too easy to assume that an almost $10 billion company could not operate with the perspective of a single merchant fighting for its survival. But wasn't every Starbucks store a single merchant? Yes, was my position, and I was adamant that we should think of ourselves as such.

  “When you start a business, you do not operate from a lofty place, because you cannot afford to,” I explained to a roomful of our top leaders one day. “It is so vitally important that we get back to the roots of the business, that we get back in the mud,” I declared spontaneously. “Get our hands in the mud!” I literally pleaded, holding my hands out in front of me. I held on to this analogy because it made so much sense, and from that day on I repeated it over and over and over, to people at every level.

  In fact, one day when I was walking through the offices of Starbucks’ architects and designers, I stopped in my tracks when a poster caught my eye. A pair of dirt-smudged hands, palms up, framed the words “The world belongs to the few people who are not afraid to get their hands dirty.” I asked to borrow the poster and marched it to the eighth floor, where I placed it on the wall of our boardroom so Starbucks’ executive team would see it every time we met.

  The words—Get dirty. Get in the mud. Get back to the roots of the business—cascaded down through the organization. I think that people could relate to them at a visceral level and immediately understand what they had to do differently. Not that they always did it, but an expectation had been set.

  Words, of course, in and of themselves are not enough. I also sensed that people inside the company needed to see and connect with me. Often. I had to be accessible, almost ubiquitous, more than I'd ever been throughout my Starbucks career.

  Showing up, listening to, and talking with Starbucks’ partners was one way I got my own hands dirty.

  One of the first things I did when I came back as ceo was invite people to e-mail me directly, and in my first month I received about 5,600 e-mails. I personally responded to as many as time allowed. Sometimes, instead of sending e-mails, I would call Starbucks partners throughout the country to respond to their notes or just ask how they were doing, and more than once I had to convince the person I had dialed that, yes, it really was me on the phone. I also visited our stores and our roasting plants, and almost daily I made a point of walking the floors of our home office, up and down the stairs multiple times, saying hello to people working at their desks, often stopping to chat.

  To more formally involve our partners, I reinstated regularly scheduled open forums. Similar to a town hall meeting, an open forum has always been an opportunity for partners to hear directly from me or other senior leaders, especially on the heels of major public announcements. Our open forums are brief and unscripted, and anyone can ask any question with no fear of retribution. They bring all of us together face-to-face, which helps to establish some of the emotional connection lacking in phone calls and e-mails. Over the years, our forums have yielded creative tension and critical feedback, which is good for the organization. But in the past two years, open forums had become less frequent. Now they were back, at least once a quarter.

  Whether I was in front of one person or thousands, I remained extremely conscious of how people might interpret anything I did or said. Who I talked to. My body language. Whether I was smiling or pursing my lips in frustration. There was an inevitable spotlight on me, and I wanted to use it as an advantage. I strove to be authentic and frank while threading optimism into every communication. Yes, we had hard work and challenges ahead of us, but we would get through this difficult time.

  In these early days, no one could predict the extent of our challenges, especially with regard to the economy. Any fear I had was overshadowed by my own enthusiasm and morning-to-night activity. As with all new beginnings—a marriage, a baby, a presidency—the inevitability of future hardship was buried by the momentum and possibility of it all.

  Writing helped me stay in touch with myself as well as our people, and I resurrected one of my favorite modes of communication: composing frequent memos to Starbucks’ partners. Sometimes these memos apprised people of the latest decisions being made, like changes to the leadership team. Other memos, which I composed with input from others—including Wanda, who I had asked to remain with Starbucks for a while to temporarily oversee our global communications—reiterated our strategy, restating the company's three pillars of immediate focus: fixing the US business, reigniting the emotional attachment with customers, and making long-term changes to the foundation of the business.

  Every once in a while, I penned a memo out of a spontaneous desire to share what I was thinking.

  Dear partners,

  As I sit down to write this note (6:30 a.m. Sunday morning), I am enjoying a spectacular cup of Sumatra, brewed my favorite way—in a French press. It's been three weeks since I returned to my role as ceo of the company I love, and I wanted to share with you what I know to be true:

  Since 1971 we have been ethically sourcing and roasting the highest quality arabica coffee in the world . . . we are in the people business and always have been . . . our stores have become the third place in our communities—a destination where human connections happen tens of thousands of times a day . . . we have a renewed clarity of purpose and we are laser-focused on the customer experience and returning to our core to reaffirm our coffee authority.

  There will be cynics and critics, all with an opinion and point of view, but this is not about them or competitors, although we must humbly respect the changing landscape and the many choices facing every consumer. I will lead us back to the place where we belong, but I need your help and support every step of the way. My expectations of you are high, but higher for myself.

  I am proud to be your partner. I know this to be true.

  I titled most of my memos using two words that articulated the journey we were on and the work we had to do during this make-or-break period in the company's history. Those two words were “Transformation Agenda.”

  My first memo, “Transformation Agenda Communication #1” was e-mailed January 7, 2008, the day I took over as ceo. By early March I had written more than 10 such memos. All of them concluded with the same word. A word that alluded to the power of our past as well as the potential of our future. A word that implied passion as well as planning and spoke to the confidence with which we had to forge ahead, despite daunting hurdles. And a word that implied a willingness to dig deep and get hands dirty, but always with heads held high.

&
nbsp; A word I had first written more than 20 years before: “Onward.”

  Chapter 13

  A Reason to Exist

  By early March 2008, the fact that I had returned to run Starbucks was no longer news. People outside the company—shareholders, analysts, journalists—had stepped back, moving on to other things and waiting to see if we could reverse the tide. Most doubted we could.

  I was busy every hour of every day. Ushering through the Clover deal. Planning for the launch of Pike Place Roast. Dissecting the company's cost structures. Realigning senior leaders. Conceiving a new vision and strategy. It was all a bit overwhelming, but there was no time to waste. With the disappointing first quarter behind us and a worsening second quarter already under way, a very real sense of urgency propelled me. The window for rallying thousands of partners, for rekindling their passion and belief in the company's future, would not remain open long.

  We were already planning to call together 200 of our most senior leaders from around the world for a global summit, the first time in the company's history that our vice presidents and leadership team would convene in one place. The unprecedented gathering was long overdue. Fortuitous in its timing, I saw a chance to recast and heighten the importance of the meeting. No agenda was circulated prior, and there was a high degree of secrecy surrounding the event, which began at 8 a.m. sharp on Tuesday, March 4.

  Starbucks’ department heads and regional presidents flew in from Asia Pacific, Europe, Canada, Latin America, and throughout the United States, or drove from their homes in and around Seattle. It was quite a sight. The head of Starbucks Greater China, Jinlong Wang, was within shouting distance of the head of Canada, Colin Moore. Logistics experts sat next to architects. Our top coffee experts mingled with marketing executives. Each person came to the summit with his or her own Starbucks history and questions about its future.

  Standing on a small stage no more than a few feet high, I could not discern a cynic from an optimist. Who believed in Starbucks—or, for that matter, who believed in me? All I saw seated before me were partners from every region and discipline of the company, and all I could do was speak from my heart.

  “I read a quote,” I said, “that was attributed to Paul McCartney when he was asked to identify the beginning of the end in terms of The Beatles breaking up.” I then recounted the story about the first time The Beatles played New York's Shea Stadium in the summer of 1965 to 55,000 screaming, hysterical fans, the largest crowd the band had ever performed for live. Amidst the clamor and chaos, as the story goes, The Beatles could not even hear their own music. Their art was drowned out by their popularity. It was massive shows like this that were, Paul had said in retrospect, the beginning of the band's end.

  A palpable anxiety hung in the ballroom. It was almost a year to the day that my infamous memo lamenting the erosion of Starbucks’ soul had leaked. Our stock's value continued to fall, and day by day our comps dipped further into negative territory; even though comps were no longer our obsession, they were still a measurement of our health and could not be ignored.

  My tone was somber as I wondered aloud, “When did we stop hearing our own music?”

  Was it in the march to 40,000 stores? When did we forget that our business is about the customer and our love and passion for the coffee? As we got tangled in bureaucracy and quarterly comp growth? And why did we stop holding our business operations to the same standards that we hold our coffee?

  There was no one right answer, of course, but what was more important was that we all accept that Starbucks had strayed.

  A tiny microphone clipped to my white shirt amplified my voice throughout the hushed ballroom. “We looked in the mirror and we said, ‘Ladies and gentlemen, let's be honest with one another. We are not doing this as well as we once did, and the mediocrity that we have been embracing cannot stand any longer.’” As proof of the company's newfound commitment to dramatically shift behavior, I cited the more than 7,000 US stores that had closed for espresso training just a week earlier. “I do not know in the history of retail anywhere in the world that a company would have the courage to make that kind of a step. It cost us millions of dollars, and there were people in multiple constituencies who questioned whether or not it was the right thing to do. But we are going to look back on it as not only the right thing to do, but also as a turning point.”

  Just as it is when a coach has one shot to get his team ready for the biggest game of their lives, this was not a time for a vacuous pep talk or to rehash past mistakes, but a moment that required honesty about our situation as well as sincere optimism that we would get through it. And I still believed that we would. But by the end of this three-day summit, everyone in attendance—the people who oversaw Starbucks’ business—also had to believe.

  They had to believe in our brand. In our purpose. And they had to believe in the comprehensive plan we were about to unveil, the Transformation Agenda, which would not come to fruition unless our most senior leaders stepped up, understood their personal roles in executing it, and then shared it with their teams. Yet I could not demand that they follow my lead. All I could do was state the case for change, then ask for and earn people's fellowship.

  That morning, I wrapped up my remarks with this:

  A week before I came back as ceo, both my children asked me, “Dad, why are you going back? You don't need this.” I told them that if I think about the two things I love in my life, it is our family and this company. There is not anything I would not do for my family, just like everyone in this room. And there is nothing I would not do for this company.

  I will hold myself to the highest level of accountability. I will walk through and climb over every wall to make sure that we get to the place that we deserve . . . but no one in this room, including myself, can do this alone. There has never been a time in the history of the company that we needed each other more than we need each other now.

  Looking back at me were partners like Dub Hay, a former commodities trader and wine enthusiast who had spent 25 years steeped in the coffee business, traveling to far-flung regions of the world; and Peter Gibbons, a pragmatic problem solver born in Scotland who, after 22 years at a global chemical company and turning down job offers from Starbucks three times, finally joined us in 2007 as head of manufacturing. Everyone in the room had his or her own story and point of view. Now it was time for all of us to get on the same page. “The reason I think we are here for these three days,” I said, “is to make sure that we level set the reason why we exist.”

  Later that day, after lunch, Michelle Gass stepped in front of the group to introduce and explain our more fully realized vision.

  In the past eight weeks, thanks to much discussion and debate, the Transformation Agenda had evolved from the three pillars that had marked my return into a much more comprehensive yet compact document. It was a clear, concrete plan that framed the company's bold goals and articulated exactly what we would do to achieve them. All on one page. Perhaps most important, at least from my perspective, was that the Transformation Agenda had been written in approachable language so anyone at the company—part-time baristas, store managers, regional directors, division presidents—could read it, quickly grasp our priorities, and understand how they could effect productive change. My intent with the agenda had always been to create a sound navigational tool with tangible objectives that could deliver measurable results. I felt pretty sure that we were almost there.

  Michelle had been spearheading the Transformation Agenda's evolution, working closely with me and other members of the leadership team as well as with SYPartners. Since the first brainstorming summit, the firm has helped us distill our ideas and communicate on many levels. In addition to Susan Schuman and David Glickman, Dervala Hanley, a strategic thinker, had joined the team.

  The Transformation Agenda, in its present form, began with a compelling strategic vision.

  OUR ASPIRATION

  To become an enduring, great company with one of the most rec
ognized and respected brands in the world, known for inspiring and nurturing the human spirit.

  Following the vision was the plan's backbone, seven goals that we identified as our Seven Big Moves, each with specific tactics for achieving it.

  SEVEN BIG MOVES

  1. Be the undisputed coffee authority. Starbucks could not possibly transform the company if we did not excel and lead in our core business. We needed everyone to recognize the quality and passion we exhibit in sourcing, roasting, and brewing coffee. To accomplish this we would tell our story, as well as improve the quality and delivery of our espresso drinks, reinvent brewed coffee at Starbucks, deliver innovative beverages, and increase our share of the at-home coffee market.

  2. Engage and inspire our partners. Every partner should be passionate about coffee, from soil to cup, and possess the skills, enthusiasm, and permission to share that expertise with customers. Going forward, we would significantly improve training and career development for our partners at all levels of the business, and, once again, Starbucks would develop meaningful and groundbreaking compensation, benefit, and incentive packages for partners.