Starbucks last week said that it has hired Laxman Narasimhan to be its next chief executive. He will take a formal role with the coffee giant in October and will fully take over the CEO job next April.
In the process, Starbucks signaled what will end up to be a near-complete overhaul of much of the way it does business. Consider what the chain has done since March:
Announced the replacement of former CEO Kevin Johnson with the guy who recruited him to the top job, Howard Schultz;
Announced plans for massive changes in how the company operates following an extensive planning session by much of the company’s executive team;
Brought in a new chief strategy officer in Frank Britt, giving him growing responsibility for operations at a time when Starbucks faces unprecedented unionization efforts;
Either pushed out or let go of numerous c-level executives, including people such as former COO John Culver who might have become the CEO in a more normal time;
Hired a complete outsider in Narasimhan, who led the London-based Reckitt, maker of Durex condoms and Lyson cleaning products, among other brands.
It is clear that Schultz saw something he didn’t like and started pushing changes that the board ultimately agreed with once the unionization campaign that started in Buffalo spread to more stores—now numbering well over 200.
The changes represent a massive overhaul at the company that belies its performance. Changes this extensive are typically reserved for businesses facing financial ruin, not companies whose sales are so strong the company can barely keep pace with all the business coming its way.
It’s not necessarily a bad thing that a company sees a problem before it makes its way into the profit and loss statement. Problems serious enough to drive away workers—which is Starbucks’ primary problem at the moment—usually become problems serious enough to drive away customers.
That doesn’t make what Starbucks is doing any less unusual.
Narasimhan will be the sixth CEO in Starbucks’ history, not counting Schultz’s latest go-round as interim chief executive. He is also the first true outsider to take the position.
Johnson had been on the company’s board for several years before Schultz convinced him to take a bigger role at Starbucks, first as chief operating officer, then as CEO in 2017.
Previous non-Schultz CEOs, including Jim Donald (2005) and Orrin Smith (2000), had worked for the company for a period before being hired on at the top job.
“He’s not bringing the usual Starbucks’ internal biases, which Howard is definitely trying to avoid,” said John Gordon, a restaurant consultant out of San Diego.
This isn’t to say Narasimhan doesn’t come with considerable experience. His tenure at Reckitt, a global operator of numerous retail brands, has generally been viewed as a success. He arrived at that job in 2019, two years after Reckitt acquired Mead Johnson for $18 billion, a deal that loaded Reckitt up with debt. Reckitt largely raised prices on its various cleaning and other products, which helped increase profits and eased its debt burden.
Before that, he spent several years with Pepsico and before that he worked with the consulting firm McKinsey & Co., both of which likely gave him an introduction into the U.S. restaurant industry, at least from the outside.
For Starbucks, the hire was fortunate. Narasimhan wanted to return to the U.S., Reckitt said in its release announcing his departure. Starbucks gave him that opportunity.
“It appears to be a good hire,” Gordon said. “He seems to have the right kind of experience throughout the world. That coincides with Starbucks’ business model” as a global retail company.
Narasimhan will get six months to learn Starbucks and its culture before he becomes chief executive. And the company’s fix-it plan will already be developed and in the process of implementation when he takes the position. Schultz will also be on the board and will provide guidance.
Then again, that could be a double-edged sword. Schultz didn’t even have a role before he helped force the massive changes that will sweep Narasimhan into the CEO job. And Schultz picked the previous chief executive, too.