In another class we have discussed several times the decline of Starbucks and what they are doing now to try to turn it around. It has lead my mind to the question of the company’s leadership – because what I didn’t know before studying the company is that former CEO Howard Schultz, who saw the company through its massive and in the short term successful growth during the 1990’s and early 2000’s, returned to the helm in 2007 after a seven year absence during which he served as chairman and focused on global operations.
Upon Schultz’ return, he sent a memo to top management criticizing and taking personal blame for some of the profit-boosting decisions that lead to the dilution and commoditization of the branded “coffeehouse experience” that carried Starbucks to its heights. A few examples of these decisions include stream-lining store designs, sales of non-coffee products, hasty openings of neighboring stores, installing automated brewing machines to shave seconds from drink-making time, and other cost-cutting measures. Schultz has pledged to get back to the “experience” in order to turn the company around.
In order to do that, hundreds of stores are being closed and thousands of jobs being cut. Without getting into whether his methods will be able to make the company profitable again, what characteristics of leadership will Schultz most need to demonstrate in order to be an effective leader, to improve the reputation of the brand, and to gain/keep effective followership while closing stores and cutting jobs – a solution to a problem that developed on his watch?
Immediately Geneen comes to mind. He states that “One of the essential attributes of a good leader is enough self-confidence to be able to admit his own mistakes and know that they won’t ruin him.” (Geneen 1998) It appears that Schultz has this one covered by taking blame for much of the demise of the company. Geneen also says that firing is one of the true tests of leadership abilities: “the alert leader will recognize the clues and will move forcefully as soon as he learns the facts. And when he does, he will earn the respect of all the others who are hardworking imaginative and productive.” (Geneen 1998) How does a leader recover when he was, himself, the individual an effective leader should have fired?
Another thing to note: The memo to top management was leaked to the public. Was the “leak” a strategic move by Schultz to ingratiate him to the public? If it was purposeful, was it a good idea?