Howard Schultz and Starbucks’ customer focus

I recently listened to Darryl Campbell’s podcast interview with Howard Schultz, CEO of Starbucks, on his new book Onward: How Starbucks Fought for Its Life without Losing Its Soul, in which Schultz discusses how he revitalized the sagging company even amid the recession. I found Schultz’ focus on rebuilding the company around its core values compelling.

I especially found it interesting how much emphasis Schultz put on integrity, though he didn’t come out and call it that. He feels that a company is much more than how much money it makes. Yes, a company’s purpose is to make money, but it does that by standing for something:

I think for any public company, and certainly one that had great success and significant growth and development like Starbucks, it’s very dangerous—and I think almost seductive—to allow the stock price to kind of put a grade on how you’re doing. That might be okay when things are going well, but when they’re not, the danger and the trepidation of all this is to ensure the fact that you don’t start making decisions that satisfy the stock price as opposed to the customer and your people.

As I say in the book, there were points in time when I thought that Starbucks, not by design but it just happened, that we became somewhat complicit with the stock price and then Wall Street’s mentality. That was a dangerous road to go down. And so the balance, and which is very fragile, is to try to achieve the balance between shareholder value and doing the right thing for the customer and, most importantly for us, having a social conscience, to make sure that we’re giving back to the communities we serve, and bringing our people along with us.

A great example of that is during the financial crisis I became under pressure from an institutional shareholder who wanted us to cut our health care benefits, which at the time was $250 million a year because we were the first company in the U.S. to provide comprehensive health insurance to every employee, including part-timers. This is before the health care bill. If I would have done that it would have fractured every level of trust that we have with 200,000 people who work for Starbucks, and wouldn’t do it. Not because I was trying to be difficult or arrogant, but the fact is that you can’t build long-term value for your shareholders unless you build long-term value for our people, and that health benefit was so vitally important in terms of the foundation of the culture, and the ongoing trust that our people have in what we stand for as a company.

At the core of Starbucks’ success, of course, is the customer, and he felt so strongly about this that he pulled 10,000 managers in for training to get them all focused in the same direction, and even shut down every store for 3.5 hours one night to help their baristas get back to basics. Schultz defends such moves with a simple explanation:

I don’t know too many companies that have lost their way because they have spent too much time focusing on the customer.

I think one of the keys of Schultz’ approach is his laser focus on the the Starbucks brand and what makes it something special. This is even reflected in how he describes himself; as a merchant rather than a businessman:

Being a merchant is kind of a lost art. It’s not something you can really be trained to do. The way I would describe being a merchant is you’re really a storyteller. You’re creating an emotional journey, either visual or non-verbal, to the consumer in a retail environment. I think that when we at our best as a company we are bringing out customers along on this journey with us.

I don’t drink coffee, and even if I did I don’t think I’d allow myself to buy coffee as expensive as starbucks’ except perhaps as a rare splurge. But as a businessman, I find myself looking forward to getting my hands on a copy of his book to see what more Schultz has to say.

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