Starbucks on Friday announced plans to reorganize its global support center teams, which means some people will be losing their jobs.
Such a move was likely inevitable. 2024 was a pivotal year for the Seattle-based coffee shop chain. And such pivotal years typically come with some form of corporate layoffs.
As a reminder, Starbucks sales took a surprising nosedive in November 2023 and stayed there, eventually worsening after months of people talking about how awful Starbucks had become. That ignited a massive change in corporate management, notably the hiring of Brian Niccol away from Chipotle Mexican Grill.
The last time that Starbucks had a year like that was 2008, when its sales took a steep plunge because its core customer, upper middle-class employees, were losing their jobs left and right. The company closed hundreds of stores and some 6,000 people lost their jobs.
Niccol himself was hired at Chipotle following that chain’s stubborn sales weakness coming out of its 2015 E. coli outbreak. After he was hired in 2018, the company moved its headquarters from Denver to Newport Beach, California. While that was not an outright reorganization, per se, the move was designed in part to engineer major changes in corporate staff.
The situation Starbucks faced in 2024 reminds me most of McDonald’s in 2015. Sales struggles at the chain coming out of the recession, and the highly publicized failure of Mighty Wings, cost Don Thompson his job.
His replacement, Steve Easterbrook, set about fixing things, ultimately engineering a reorganization and wholesale move of corporate headquarters to downtown Chicago. The company sold thousands of restaurants to franchisees and a lot of people either left the company or lost their jobs outright. The company has instituted a couple of other reorganizations that resulted in layoffs since then.
The biggest problem that both Niccol and Easterbrook lamented was the slow decision-making. By making these changes, at least in theory, the companies can speed processes and respond to situations more quickly.
While layoffs are painful, the demand for speed is vital in the current operating environment. The restaurant industry is highly competitive. Consumers seemingly change on a whim as social media drives new ideas and trends almost overnight. Or it can create problems.
Large companies can be ill-prepared for such speed. While size can bring serious advantages, such as marketing strength and name recognition and the ability to spend your way out of problems, they can also be slow, painfully so.
Companies develop silos and fiefdoms. Workers operating within these environments can do more to slow or even stop good ideas. It can just take a lot longer to get some things done.
Starbucks was caught flat-footed by whatever it was that created its sales challenges more than a year ago. The company had projected strong sales, both in the U.S. and China. And then that social media machine drove a backlash among occasional customers.
That sales decline led to publicity that fed in on itself as journalists wrote a series of think pieces about the same problems Starbucks itself has talked about for years—that being the conflict between its history as a “third place” coffee shop and the demands of a modern fast-food chain catering to convenience-focused coffee drinkers.
All that negative publicity ultimately made matters worse and the result was a lost year. Regardless, it’s clear following that period that the company missed something, both domestically and in China, and needed to more quickly respond to that situation before things got out of hand.
The risk for such reorganizations is that they miss the mark, creating a massive, painful disruption that only makes matters worse. Or companies take things too far and lose talented people.
Not all these moves work, but the good news for Starbucks is that its 2009 changes led to a decade-long period of uninterrupted growth. McDonald’s reorganization likewise helped usher in a strong recovery. And Chipotle has basically doubled in size since its California move.