Growthitude

Starbucks’ Turnaround

12th July 2017

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“The equity of the brand is defined by the quality of the coffee, but most importantly, the relationship that the barista has with the customer, and whether or not the customer feels valued, appreciated, and respected”
Howard Schultz

When Howard Schultz returned as a CEO at Starbucks in 2008, the company was in big trouble. They started the turnaround of the company with admitting, in front of 180.000 people that they had failed the employees and their families.

Then, against the advices he got and at the height of the financial crisis when most companies were cutting costs, Schultz took 10.000 store managers to New Orleans for a conference, the conference didn’t start before they had done 50.000 hours of community service at a cost of $30 million. The conference was about galvanizing the leadership of the company, making every leader responsible for the outcome and for each customer interaction.

Howard Schultz is convinced that they wouldn’t have managed to have a successful turnaround of the company if they didn’t have the event in New Orleans.

They did also cut costs, $ 581 million to be exact, however 99% of that was not consumer facing and most was permanent. Then they reinvested in their people and in innovation.

And most importantly, they didn’t cut health care even if it would “save” the company $300 million. To Howard Schultz cutting health care after 39 years of trust in the company would be the same as killing the company.

Over many years, Starbucks has had an employee’s-first approach and encourage staff to form close bonds with each other. Employees are called “partners” rather than employees and even the part-time staff (in the US) receive stock options and health insurance.

At the height of the global financial crisis, when other companies were cutting HR costs wherever they could, Starbucks invested in staff training, including coffee tastings and courses that qualify for credit at higher educational institutions.

Starbucks employees help create a warm, friendly atmosphere in each store as a natural result of an inclusive culture and not because managers tell them to.

“ The only way we can succeed and sustain growth, and new development, and innovation, and new dreams we have, is the foundation of all of the future of the company is linked to the basic elements of one cup of coffee, one customer, and one barista at a time”
Howard Schultz

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About the writer:

Tonje Elisabeth is the founder of Growthitude AS and co-founder of HeartsInGrowth AS and has worked as an Executive and Industry Manager in companies like Microsoft and Google with clients from all types of industries.

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