I've just finished Howard Schutz's Onward: How Starbucks Fought For Its Life Without Losing Its Soul, and it's very hard for me to resolve my mixed feelings about it.
I went into a Starbuck's last weekend for a cup of coffee and was surprised when the barista asked me what I thought of the book .. I'd forgotten that I was carrying it with me. I hesitated. Finally, I said that I thought Howard Schultz was silly. I was having trouble taking him seriously at 100 pages into the book; he seemed to be saying that he had fired Jim Donald, the previous CEO, because he would not remove breakfast sandwiches from the store -- because Schultz didn't like the way they smelled. And, some of the other things he said in the beginning of the book just seemed silly to me.
He characterized Jim Donald by saying you couldn't find a kinder guy. That strategy, they taught us in high school English, is "damning with faint praise." I found myself wondering: did Schultz, or the board, ever articulate any goals for CEO besides growth? Did they ever identify new product innovation, preserving and enhancing the store experience, or solving supply chain logistics issues as goals?
I was immensely uncomfortable with the idea that, breakfast sandwiches notwithstanding, what was killing the company was overexpansion and Schultz was both the main architect and the main implementer of that overexpansion. How, then, did he earn the privilege of attempting to turn the company around?
Of course, you can't argue with success and Starbucks has been hugely successful and so has Howard Schultz. The overexpansion that Schultz helped to foster is a common result of the successful entrepreneur's hubris, and it's killed many other retailers, as has the recession. Schultz led Starbucks through an organizational crisis caused by overexpansion, neglect of employee training, runaway costs and operational inefficiencies, the effect of which was exacerbated by the recession. By 2010, his leadership staff had closed hundreds of stores and in the process, raised net revenue by billions of dollars. Just saving his company was a huge achievement; greatly increasing operating revenue was spectacular.
Further, I would argue that Starbucks is a lifestyle company, that is, that much of their appeal was the "lifestyle" element. For me, it was a chance to have coffee like that I had in Italy; for others, the chance to be among young people or get away from the office. But as a "lifestyle" store, especially one that did seem "hip" or "cool" to some and pretentious to others, there was a danger that once the "overexpansion" factor had been corrected, Starbucks would no longer be seen as of the moment and would continue to decline simply because of the impression that its moment had passed.
That that didn't happen to Starbucks is certainly part of Starbucks' and Schultz's achievements.
What fascinates me most about this book, however, is the question of how you manage a retail business. One of Schultz's answers is that you provide health benefits to your "partners" (i.e., employees). Another is that you call your employees something other than employees - in this case, partners. (Zappos does the same thing.) Another is that you shoulder enough corporate responsibility to help your employees feel good about the fact that they work for you.
I actually think that all three of these elements are important. Schultz talks at length about a partner conference in New Orleans and the "experiences" that were created for partners there, including volunteer work opportunities rebuilding New Orleans. I infer that Schultz also believes that creating marketing aimed at employees is important.
Not to confuse you, either, but Schultz believes in tradition -- he talks many times about maintaining the "core" of Starbucks business, its coffee authority -- as well as innovation.
He talks about his experience visiting Italy on business and seeing how integral a part of urban life the espresso bars on every corner are. He talks many times about Starbucks should and does function as a "third place," someplace other than home or work that adults can visit to get a sense of connection. I agree that this is important.
However, I am uncomfortable hearing a businessman talk about these things. Schultz talks at length about the "store experience" and the "theatre" and "connection" that baristas foster. Starbucks is a retail business but has qualities of the restaurant business. It surprises me, however, to hear a businessman talks at length about something that's so hard to quantify.
Schultz does talk a lot about things that can be quantified, like the year-to-year store profit comparisons called "comps". At one point, he stops reporting them on the grounds that the increasingly disappointing news is hard on morale.
Because morale is another of his abiding, although hard to quantify, concerns. And he's not afraid to spend money on it. He reports that his decision to hold the biennial conference of district, regional and store managers cost the company millions and would, he was sure when he made the decision to hold it New Orleans, be a lightning rod for criticism.
In fact, a large part of this story is his decision to grow the quality of the company's products and services at the same time that the company undertook dramatic steps to cut costs.
I cannot feel entirely comfortable with the contradiction between maximizing profit and talk about a third space, creating connection, and helping others. Toward the end of the book, Schultz reported that the company had lived up to its pledge to donate $5 million dollars to New Orleans over the course of five years. I was shocked by the smallness of that figure. It's nothing compared to Starbucks' overall profit in 2010 (Schultz writes here, on p. 315, that operating income rose to $1.4 billinoin in 2010 from $562 million in 2009).
Schultz's talk about connections between baristas and their customers seems to me an acknowledgment that this is the heart of the Starbucks' business, and is why it's essential to treat their employees well. This business is really all about service (like many others).
Something especially appealing about this book is that Schultz often does talk in great detail about how he turned the business around. It was a combination of many factors, among them: customer research, new products, closing underperforming stores and laying off staff; reducing staff hours in slow times; placing new people in leadership positions and going outside the company for operational expertise; fixing longstanding operational issues including chronic supply chain breakdowns (it's crippled armies and so it's no surprise that it was crippling Starbucks), implementing customer loyalty programs, turning to others for expert advice (including those on the Starbucks board), and one of my all-time favorites -- advocating for LEAN principles which allowed staff to organize their own procedures and work space.
In Chapter 30, "Balance," Schultz explains that he visited a store in Vancouver, Washington and talked to Amy Bernash, the store's manager. Amy had implemented Lean principles at her store. Lean originated in the manufacturing world, and is intended to reduce waste and inefficiency while making procedures easier for employees and improving quality for customers. It was introduced to Starbucks by Scott Heydon who was interested by Lean's emphasis on incorporating employee suggestions for streamlining work.
Amy explained that she began her implementation of Lean by watching her employees work; getting out from behind the counter allowed her to observe small mistakes of which she'd been unaware. At her store, employees rearranged the store room to make it easier to reach items that were frequently needed; they posted step-by-step beverage instructions at the "cold" station to help ensure accuracy and consistency; and they made the crucial decision to grind coffee as needed throughout the day instead of grinding as many beans as they thought they'd need first thing in the morning.
That ensured that the ground coffee would be very fresh and ensured that the aroma of ground coffee would frequently be present in the store.
Schultz found that delightful. The aroma of freshly ground coffee is a large part of the "store experience" he wants to offer customers. It was the smell of burnt cheese from the breakfast sandwiches that he had found so objectionable he had them pulled from all the Starbucks stores when he became CEO for the second time.
Earlier in the same chapter, he spoke at length about how much he admired an Italian shopkeeper in Milan, Aldo Lorenzi, the second generation proprietor of a knife store. Lorenzi wrote a book about his store and his philosophy of retailing called, That Shop in Via Montenapoleone. Schultz quotes at length from Lorenzi's book in this chapter and I was very impressed by these excerpts. My favorite is this:
By the end of the book, my respect for Schultz had grown: he quoted many Starbucks employees talking about their passion for the company, and many customers talking about their passion for the "connection" that they find at Starbucks.
Schultz's reason for writing the book, I imagine, is that he's keenly aware of the value of good PR (he talks about the fact that Starbucks has traditionally avoided national advertising but has warmly embraced the world of social media and other publicity efforts) and a 300-page book allows him to tell the story the way he wants to tell it and to ensure that Starbucks gets the credit he believes it has not always received for its efforts to procure coffee in an ethical way, for its relationships with Conservation International, Heifer International, Bono's RED campaign, and adopting and meeting fair trade standards.
Tweet
I went into a Starbuck's last weekend for a cup of coffee and was surprised when the barista asked me what I thought of the book .. I'd forgotten that I was carrying it with me. I hesitated. Finally, I said that I thought Howard Schultz was silly. I was having trouble taking him seriously at 100 pages into the book; he seemed to be saying that he had fired Jim Donald, the previous CEO, because he would not remove breakfast sandwiches from the store -- because Schultz didn't like the way they smelled. And, some of the other things he said in the beginning of the book just seemed silly to me.
He characterized Jim Donald by saying you couldn't find a kinder guy. That strategy, they taught us in high school English, is "damning with faint praise." I found myself wondering: did Schultz, or the board, ever articulate any goals for CEO besides growth? Did they ever identify new product innovation, preserving and enhancing the store experience, or solving supply chain logistics issues as goals?
I was immensely uncomfortable with the idea that, breakfast sandwiches notwithstanding, what was killing the company was overexpansion and Schultz was both the main architect and the main implementer of that overexpansion. How, then, did he earn the privilege of attempting to turn the company around?
Of course, you can't argue with success and Starbucks has been hugely successful and so has Howard Schultz. The overexpansion that Schultz helped to foster is a common result of the successful entrepreneur's hubris, and it's killed many other retailers, as has the recession. Schultz led Starbucks through an organizational crisis caused by overexpansion, neglect of employee training, runaway costs and operational inefficiencies, the effect of which was exacerbated by the recession. By 2010, his leadership staff had closed hundreds of stores and in the process, raised net revenue by billions of dollars. Just saving his company was a huge achievement; greatly increasing operating revenue was spectacular.
Further, I would argue that Starbucks is a lifestyle company, that is, that much of their appeal was the "lifestyle" element. For me, it was a chance to have coffee like that I had in Italy; for others, the chance to be among young people or get away from the office. But as a "lifestyle" store, especially one that did seem "hip" or "cool" to some and pretentious to others, there was a danger that once the "overexpansion" factor had been corrected, Starbucks would no longer be seen as of the moment and would continue to decline simply because of the impression that its moment had passed.
That that didn't happen to Starbucks is certainly part of Starbucks' and Schultz's achievements.
What fascinates me most about this book, however, is the question of how you manage a retail business. One of Schultz's answers is that you provide health benefits to your "partners" (i.e., employees). Another is that you call your employees something other than employees - in this case, partners. (Zappos does the same thing.) Another is that you shoulder enough corporate responsibility to help your employees feel good about the fact that they work for you.
I actually think that all three of these elements are important. Schultz talks at length about a partner conference in New Orleans and the "experiences" that were created for partners there, including volunteer work opportunities rebuilding New Orleans. I infer that Schultz also believes that creating marketing aimed at employees is important.
Not to confuse you, either, but Schultz believes in tradition -- he talks many times about maintaining the "core" of Starbucks business, its coffee authority -- as well as innovation.
He talks about his experience visiting Italy on business and seeing how integral a part of urban life the espresso bars on every corner are. He talks many times about Starbucks should and does function as a "third place," someplace other than home or work that adults can visit to get a sense of connection. I agree that this is important.
However, I am uncomfortable hearing a businessman talk about these things. Schultz talks at length about the "store experience" and the "theatre" and "connection" that baristas foster. Starbucks is a retail business but has qualities of the restaurant business. It surprises me, however, to hear a businessman talks at length about something that's so hard to quantify.
Schultz does talk a lot about things that can be quantified, like the year-to-year store profit comparisons called "comps". At one point, he stops reporting them on the grounds that the increasingly disappointing news is hard on morale.
Because morale is another of his abiding, although hard to quantify, concerns. And he's not afraid to spend money on it. He reports that his decision to hold the biennial conference of district, regional and store managers cost the company millions and would, he was sure when he made the decision to hold it New Orleans, be a lightning rod for criticism.
In fact, a large part of this story is his decision to grow the quality of the company's products and services at the same time that the company undertook dramatic steps to cut costs.
I cannot feel entirely comfortable with the contradiction between maximizing profit and talk about a third space, creating connection, and helping others. Toward the end of the book, Schultz reported that the company had lived up to its pledge to donate $5 million dollars to New Orleans over the course of five years. I was shocked by the smallness of that figure. It's nothing compared to Starbucks' overall profit in 2010 (Schultz writes here, on p. 315, that operating income rose to $1.4 billinoin in 2010 from $562 million in 2009).
Schultz's talk about connections between baristas and their customers seems to me an acknowledgment that this is the heart of the Starbucks' business, and is why it's essential to treat their employees well. This business is really all about service (like many others).
Something especially appealing about this book is that Schultz often does talk in great detail about how he turned the business around. It was a combination of many factors, among them: customer research, new products, closing underperforming stores and laying off staff; reducing staff hours in slow times; placing new people in leadership positions and going outside the company for operational expertise; fixing longstanding operational issues including chronic supply chain breakdowns (it's crippled armies and so it's no surprise that it was crippling Starbucks), implementing customer loyalty programs, turning to others for expert advice (including those on the Starbucks board), and one of my all-time favorites -- advocating for LEAN principles which allowed staff to organize their own procedures and work space.
In Chapter 30, "Balance," Schultz explains that he visited a store in Vancouver, Washington and talked to Amy Bernash, the store's manager. Amy had implemented Lean principles at her store. Lean originated in the manufacturing world, and is intended to reduce waste and inefficiency while making procedures easier for employees and improving quality for customers. It was introduced to Starbucks by Scott Heydon who was interested by Lean's emphasis on incorporating employee suggestions for streamlining work.
Amy explained that she began her implementation of Lean by watching her employees work; getting out from behind the counter allowed her to observe small mistakes of which she'd been unaware. At her store, employees rearranged the store room to make it easier to reach items that were frequently needed; they posted step-by-step beverage instructions at the "cold" station to help ensure accuracy and consistency; and they made the crucial decision to grind coffee as needed throughout the day instead of grinding as many beans as they thought they'd need first thing in the morning.
That ensured that the ground coffee would be very fresh and ensured that the aroma of ground coffee would frequently be present in the store.
Schultz found that delightful. The aroma of freshly ground coffee is a large part of the "store experience" he wants to offer customers. It was the smell of burnt cheese from the breakfast sandwiches that he had found so objectionable he had them pulled from all the Starbucks stores when he became CEO for the second time.
Earlier in the same chapter, he spoke at length about how much he admired an Italian shopkeeper in Milan, Aldo Lorenzi, the second generation proprietor of a knife store. Lorenzi wrote a book about his store and his philosophy of retailing called, That Shop in Via Montenapoleone. Schultz quotes at length from Lorenzi's book in this chapter and I was very impressed by these excerpts. My favorite is this:
I believe the shop can still justify its existence if the staff put their experience and [professionalism] at the disposal of the customer. That is not just a commonplace catchphrase. It is the communication of one's passion for one's work .. A presumptuous person lets slip every opportunity to pass on to his workmates the knowledge he derives from his sales activity and interrupts that precious exchange of information that always takes place through contact with the customer. Each one of us is necessary; isolating oneself in the shop is negative.
By the end of the book, my respect for Schultz had grown: he quoted many Starbucks employees talking about their passion for the company, and many customers talking about their passion for the "connection" that they find at Starbucks.
Schultz's reason for writing the book, I imagine, is that he's keenly aware of the value of good PR (he talks about the fact that Starbucks has traditionally avoided national advertising but has warmly embraced the world of social media and other publicity efforts) and a 300-page book allows him to tell the story the way he wants to tell it and to ensure that Starbucks gets the credit he believes it has not always received for its efforts to procure coffee in an ethical way, for its relationships with Conservation International, Heifer International, Bono's RED campaign, and adopting and meeting fair trade standards.
No comments:
Post a Comment