Starbucks chief Howard Schultz called on restaurateurs who packed his keynote address at the National Restaurant Association to take greater responsibility. In the view he tried to sell to the industry, leaders should assume responsibility for their failures, employees should be responsible for their brand and Americans should take responsibility for fixing the problems that leaders in Washington D.C. have been unable to address.
“I’m not here to give a political speech or depress you,” the chairman, president and CEO of the coffee chain said. But it was already too late. Before stepping onstage a sobering video played summarizing the financial collapse of 2008, its human toll and the loss of faith in any leadership coming from our nation’s capitol.
“I am here to talk about truth with a capital ‘T,’” Shultz continued.
He provided a summary of the heady days of Starbucks, when same store sales grew for 20 years straight. “Everything we touched we turned to gold. Every store, every new market, every product, every country. Thought [it was] never going to end.”
But it did, in 2003, a year after Schultz stepped down as CEO.
“A disease entered the halls of Starbucks and in the essence of the way the company was being managed,” he said.
Everything was managed with the objective of growing same-store sales, throwing the balance of profit with social responsibility out of whack.
“The world doesn’t need Starbucks coffee,” Shultz pointed out. “There are hundreds of places down the street that can offer coffee cheaper.” Every customer has to be convinced to go to Starbucks, he said, and the company had stopped convincing them.
Shultz was brought back into the company in 2008 and took responsibility for the problems. Comp sales were at -8 percent. At -14.8 percent, the company would be insolvent.
“I stood up in front of company and offered a deep and humble apology and broke down and cried,” he said. “We had let our partners down and their families, 200,000 people who wore the green apron, we let them down because we were not deserving of them. And we promised them we would turn things around.”
Shultz made some high-profile moves, bringing nearly 10,000 store managers to a meeting in New Orleans at a cost of $32 million and closing every store at the same time on the same day to retrain employees how to make coffee.
“The admission of guilt, the embarrassment,” he said. “It was truthful with a capital ‘T.’”
While he and his leadership team took responsibility for the company’s failures, Shultz said used the gathering in new Orleans to convince managers that they would be responsible for a turn around.
“I asked them to understand what it means to not be a bystanders,” he recalled. “There are a hundred things that happened in a Starbucks store everyday. How many things do you see just on the edge of mediocre, that we overlook. How many new people come in and see that level of behavior that then gets imprinted as the standard of our company because somebody has been a bystander. We are all wearing the green apron and we are all personally responsible and accountable.”
Comp store sales never declined again after New Orleans and today the stock has reached a record high, raising the company’s market capitalization to $48 billion.
Shultz says he learned valuable lessons from the experience,. For one thing, he said, the company must always embrace the disruptive nature of innovation. It must always be curious and willing to make big bets. It can never be satisfied with the status quo. And it must always seek relevancy in the market, particularly with the seismic changes brought about by social media. “There is nothing more important to our business or any business than building a reservoir of trust with multiple constituencies,” he told the ballroom of restaurateurs.
Shultz said he took responsibility for the company’s failures. He called on his store managers to take responsibility for renewing the brand. And he closed his comments by calling on the audience to take responsibility for the direction of the nation.
Building on high-profile remarks he’s made about the dysfunction in the nation’s capitol, he said we have never been witness to the kind of fracturing partisanship that characterizes modern-day politics.
“We can’t wait for Washington to solve our problems,” he said. “it’s not going to happen. We have to stand up and be accountable. We have to do more for our people and our communities. [Starbucks] is living proof that we can reach the balance between profits and a social conscience.”