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Book review: Onward — How Starbucks fought for its life without losing its soul

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

By Howard Schultz

Rodale

$29.99

Now here’s a cool way to brainstorm.

You walk into a ballroom. You’re given a black sharpie, a white iPod and a pack of index cards.

You hit play on the iPod and start listening to Come Together. You walk over to a large table covered with enlargements of album covers and photos from The Beatles.

You flip over one of the index cards and you’re asked to answer the question what does it take to reinvent an icon?

That’s the exercise Howard Schultz did a week into his second tour of duty as CEO of Starbucks in 2008.  Schultz had stepped aside almost eight years earlier from the company he had built from 11 stores into a ubiquitous global brand. He was back to reinvent an icon.

“It had never been my intention to return as CEO,” says Shultz. “But I have always said that people are responsible for what they see and hear. I could not be a bystander as Starbucks slipped toward mediocrity, especially since I had played a role in and bore some responsibility for our troubles.

Schultz started to worry that something was wrong with Starbucks back in 2006. “The merchant’s success depends on his or her ability to tell a story. What people see and hear or smell or do when they enter a space guides their feelings, enticing them to celebrate whatever the seller has to offer. So when I walked into more and more Starbucks stores and sensed that we were no longer celebrating coffee, my heart sank. Our customers deserve better.”

Many little things were dangerously slipping by unnoticed or 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.”

Schultz returned to the helm just as Starbucks posted its worst three-month performance since the company had gone public in 1992. For 16 years, same-store sales had grown five per cent or better. Sales were now at an anaemic one per cent. “Sales were in free fall. Every day, around the country, fewer and fewer people were coming into our stores. And those who did were spending less money than in the past.”

Schultz wasted no time getting back to basics or, as he called it, getting in the mud. He hung a poster in the boardroom that showed a pair of dirt-smugged hands palm up framed with the words “the world belongs to the few people who are not afraid to get their hands dirty.”

His first order of business? Discontinuing warm breakfast sandwiches.  The stink of burnt cheese overpowered the aroma of coffee and that drove Schultz to distraction. “Despite the sandwiches’ loyal following, and disagreement among Starbucks’ top managers, I was convinced this was right for business.”

In February of 2008, Starbucks closed all of its 7,100 for three hours to retrain every barista on how to make espresso.

Shultz drafted and rolled out a transformation agenda with seven big moves for Starbucks. Be the undisputed coffee authority. Engage and inspire our partners. Ignite the emotional attachment with our customers. Expand our global presence while making each store the heart of the local neighbourhood. Be a leader in ethical sourcing and environmental impact. Create innovative growth platforms worthy of our coffee. And deliver a sustainable economic model.

Starbucks launched a loyalty card, a new brew, instant coffee and MyStarbucksIdea.com, a website where customers and employees could submit big and small innovative ideas. More than 100,000 ideas have been submitted so far by 250,000 registered members. “Starbucks is at its best when we lead, not follow, when we reinvent categories, create new rituals and transform an industry.”

Some hard decisions also got made.  Six hundred stores closed and there were deep job cuts at head office. “One particular statistic raised my ire,” says Shultz. “Seventy per cent of all stores slated for closure had been opened in the past three years during the aggressive growth period when we opened 2,300 locations. We were closing almost 20 per cent of our newest stores. A lesson resonated. Success is not sustainable if it’s defined by how big you become. The number that matters is one. One cup. One customer. One partner. One experience at a time.”

By the third quarter of 2009, Starbucks had its first earnings growth since the first quarter of 2009. The company earned $152 million, compared to $7 million a year earlier. The company had cut $580 million from its cost structure and improvements to supply management management saved another $400 million.

The transformation was gaining traction and an icon was reborn.

“Starbucks has regained a healthy balance with a culture that celebrates creativity and discipline, entrepreneurship and process, as well as rigorous innovation,” says Shultz. “But perhaps the most vital thing that came out of the past two years has been the confidence we gained knowing that we could preserve our values despite the hardships we faced. Holding fast to those values steadied us throughout the tumultuous journey.”

This is a must-read for every entrepreneur, aspiring entrepreneur and anyone who’s trying to rescue, reinvent and renew an organization.  If you’ve got the passion and the vision, the rewards will be far greater than all of the tough calls, heavy lifting and muddy hands.

Review:

This review first ran in the May 8th edition of The Hamilton Spectator.

You Can't Fire Everyone

By Hank Gilman

Portfolio ($32.50)

Congratulations on your promotion and welcome to middle management.

For your orientation, here’s a quick introduction to your new team.

Kent has a great sense of humour that will be entirely at your expense.

Jane mostly keeps to herself, although her recurring bouts of silent sobbing will, if ignored or acknowledged, become full-on meltdowns that weird out the rest of the staff.

George had an incredibly productive year once back in the early 1980s and is overdue for a comeback.

Brenda is a fiercely loyal and devoted follower whose allegiance is to the manager we fired so we could hire you.

Rick is a real go-getter who’s well on his way to reaching 100,000 followers and 10,000 tweets on his “Things I’d rather be doing than working” Twitter feed.

Kate is a freshly minted grad and academic all-star who considers our organization and whatever work you try to assign to be beneath her and unworthy of her attention.

And Phil has moved past denial at not getting your job and has moved straight to anger.

So, welcome aboard. And while it’s last minute and your first day on the job, could you please submit your annual departmental budget with a 15 per cent clawback by 4 p.m. today?

Like parenting, there’s no instruction manual that comes with managing. And while there’s no shortage of advice, theory rarely translates into practice.

Hank Gilman can relate. He was a rock-solid, major league journalist who was promoted to editor with no training provided. Twenty years later and now the deputy managing editor at Fortune magazine, Gilman is sharing what he learned through trial and error in his book, You Can’t Fire Everyone.

“If any human resources type could be honest with you for a second, they’d tell you their company was filled with folks who have no clue how to be good bosses and make their people better at what they do,” says Gilman. “They scream, discourage, hire the wrong people, take all the credit for great work and blame their employees for their own mistakes. Most of them don’t even know how to fire someone the right way. Some of this misbehaviour can be blamed on really warped personalities. But the biggest problem is that no one ever trained them how to be good bosses — or any sort of bosses, for that matter.”

So here are some highlights from Gilman’s guide to effective managing in the real world.

You can’t be both boss and friend. Loneliness, says Gilman, is the penalty of leadership. “You can never have good, close friends on your staff once you start being their boss. If you’re doing your job the way you’re supposed to, you’ll invariably do something to fracture the relationship.”

Drop the myth that all employees are created equal. Treat your stars differently. “The hardest part of the job is making sure your most important employees stay happy and you get the most out of them.” Let your stars work from home on occasion, give them a nicer office and some extra time off. Above all, says Gilman, give them interesting work. “Your stars do the best work, typically are the hardest workers and tackle the projects with the highest degree of difficulty. They’re also a rare commodity.”

Avoid the cardinal sin of casting the right people for the wrong job. “It’s the ‘asking the short guy to dunk the basketball’ thing,” says Gilman. “The very worst thing you can do for anyone is put them in a position where they’re sure to fail.” Trust your gut. You’ll know what your staff can and can’t handle. Doling out assignments on the hope that your staff will rise to the challenge is a bad idea that will lead to predictable results.

Firing employees is unpleasant, unavoidable and one of the most important parts of your job, says Gilman. Terminate quickly. Don’t leave staff languishing in jobs they have no hope of excelling at.

And don’t delegate the dirty work. “The best bosses always do the firing themselves. They want to show the rest of the staff that they’re not afraid to take on unpleasant tasks. You do not want to be perceived as a wimp.”

Always pay attention to how things look. Optics matter. “In boss land, how you behave and how things look is more important than almost everything else.”

Stand up for your staff. “Management is a lot about conflicts,” says Gilman. “Probably the toughest thing a manager has to do is stick up for his or her employees — largely because there’s not a lot of upside in terms of your own career advancement.” Don’t shy away from the unpleasant confrontations behind the scenes with your boss and peers.

One final piece of advice from Gilman. Don’t force your employees to abandon their families. “When workers feel like they have to ignore their husbands and wives and miss their kids’ after-school events because their boss has those expectations — or sets those expectations through example — that’s a big problem.”

Clock punching is silly, says Gilman. He doesn’t care when his staff come in. He doesn’t care when they leave or how many hours they put in. He only cares about getting the job done right and on time.

If you’re new to the management ranks, or looking for a new approach to leading the troops, give Gilman’s book a read. He’ll make your life easier with some battle-tested, practical advice.