Photo: Starbucks
Will Starbucks prosper or slide as CEO changes focus?
Starbucks chairman and chief executive officer Howard Schultz announced this week that he is taking a step back from the day-to-day running of the coffee giant to focus on the development of its Roastery and Reserve concepts along with its investment in Princi, the Italian bakery chain.
Business didn’t go so well the last time Mr. Schultz relinquished responsibility for the day-to-day operations of the company. Former grocery executive Jim Donald was named president and CEO of Starbucks in 2005, but by 2008 he was gone and Mr. Schultz was back. While acknowledging that a faltering economy was behind some of the chain’s woes at the time, Mr. Schultz also admitted that much of what was wrong at Starbucks was of the company’s “own making.”
So will Mr. Schultz’s plan to focus on Starbucks’ “long-term strategy and innovation” help the company achieve new heights or will he find himself in a situation similar to 2008?
Many experts believe Starbucks’ executive “bench” is strong and the changes announced by Mr. Schultz will prove positive for the company. In a letter to stakeholders, Mr. Schultz identified numerous executives whom he would work with directly to avoid any hiccups going forward.
Mr. Schultz made particular note of a change in responsibility for Cliff Burrows, who will go from leading Starbucks’ business in the U.S. to the top spot of Siren Retail, a new division within the company responsible for the global expansion of the Roastery and Reserve stores. Mr. Burrows will also be responsible for growing Princi, including an expansion of standalone stores.
Kevin Johnson, Starbucks’ president and chief operating officer, will be entrusted with building Starbucks’ core business. Mr. Schultz credited Mr. Johnson for his role in transforming Starbucks’ business and for his embrace of “technology that strengthens our customer connection and unlocks agility across the company.”
- Message from Howard Schultz: The Best Version of Ourselves – Building Trust, Leading with Courage – Starbucks
- Starbucks’ Schultz to step back, focus on high-end strategy – The Seattle Times (tiered sub.)
- Starbucks CEO to focus on premium coffee – USA Today
- Starbucks leadership changes herald new era for coffeehouse chain – Nation’s Restaurant News
- Howard the Merchant Helps Revive Starbucks – RetailWire
- Donald Out, Schultz Back in at Starbucks – RetailWire
Discussion Questions
DISCUSSION QUESTIONS: Do you see Howard Schultz’s decision to focus on building higher-end businesses as a positive for Starbucks’ business going forward? How much concern should there be that Mr. Schultz is turning over some of his day-to-day responsibilities to other executives at the company?
Poll
BrainTrust
Ed Rosenbaum
CEO, The Customer Service Rainmaker, Rainmaker Solutions
Lee Peterson
EVP Thought Leadership, Marketing, WD Partners
No one lives forever and no CEO is irreplaceable. Starbucks has a strong executive bench which should be able to continue moving the company profitably forward. There will be concern about turning day-to-day responsibilities over to someone else, but sooner or later it has to be done.
The hardest thing an entrepreneur can do is to know when to step away from his/her baby. The next hardest is to actually do it. Mr. Schultz said he was stepping back, not stepping away. My interpretation of that is he remembers what happened the last time and is going to be there to guide his team through the leadership transition. He also saw what happened to J.C. Penney’s during the many leadership changes. He is not going to let that happen to his baby.
Starbucks is one of the best run companies in the world, hands down, and Schultz’s ability to “see out” is the main reason why. I’m not just looking for a free grande blonde here, I mean it. Think about what physical retail needs to become in the future and you’ll see that Starbucks is already there — part fulfillment center, part social playground, with a great app to boot.
I don’t know if you’ve been in that roastery in Seattle, but that’s an amazing take on a store of the future — something every other retailer is struggling with. So, to me, if he says he’s going to lead out on a new vision, I’d get on board and ride that train to wherever the hell it’s going. Looking forward visiting that vision asap.
If time has been spent focusing on succession planning the transition should go well. This time Howard will still be around to provide a hand if needed. If succession planning has gone well, the steadying hand should not be needed.
I understand why he is pursuing other high-end niche ventures, since there are regular Starbucks on every corner of every city I have been in. The growth for more “regular” stores is slowing and this new venture is the future of growth and profitability, as there are more local brew houses in cities taking dead aim at Starbucks, and their prices are better. We have discussed the Princi bakery issue a few weeks back, so if they can make this work then it can add profits to the bottom line. Starbucks, like Amazon, is not afraid to fail, so I will be watching.
The succession plan for Starbucks is key. That simple. Look what has happened to some of the biggest brands in the world. Some do well and some struggle. Apple and Microsoft come to mind. Their CEOs started and built the companies. Change is tough — but sometimes better.
As for Mr. Schultz, he wants to focus on building out a new concept. It will either be brilliant or an oops. Changing lanes can be tricky. He’s a smart dude, so I’d bet on him succeeding. Time will tell.
Better for a CEO to have a well-groomed bench that can step up. Kudos for Mr. Schultz to know he has to retire some day and better to hand over day to day ops to another executive who can be tested on the job. Transition to new executives is always tough and there will be changes as well as friction as the new executive will never do things exactly the same, and some people will always try to end-run the new guy by going to the old CEO who is still in the company. As long as the arrangement between Schultz and the new team is strong and both sides stay out of each others’ way, it is fine. What you don’t want happen is second guessing and infighting, that will be bad for business.
We always hear about bench strength. Starbucks has it. The trick is allowing the bench to actually “play.” It is never easy to let go of the reins for a strong CEO.
I remember being told the hardest part is to let your successor fail a little. They will need to learn from their own experience. Shultz staying active in the company does provide a safety net for the company and its investors.
Starbucks is a strong organization and I would bet on their continued success. Other organizations have gone through the same transition and most of the time it works out. Better a planned transition than an unplanned one. Given the past tribulation in leadership transition here, I am sure Mr. Schultz will be watching carefully and attentively to ensure things go well.
If he has managed to create a strong culture at Starbucks, which I believe he has, and managed his succession planning in line with this, it should be a good move for him to hand over and move into other areas of the business. No CEO can stay forever so it is imperative to create a strong sustainable culture that will live on organically. Time will tell.