Onward (12 page)

Forty-five minutes later, at 1:30 p.m., I stood in front of more than 1,000 Starbucks partners who had crowded into the large communal space that spans our eighth and ninth floors, an area connected by an open staircase and brightened by skylights. The space is typically filled with pods of partners discussing business; now it was wall-to-wall with people gathered for an all-hands meeting—at Starbucks we call them open forums—that had been announced that morning, sparking curiosity throughout the building. The forum would be broadcast to our offices and roasting plants around the world.

I had no prepared speech, just an intuitive sense of what to say.

“Good afternoon,” I began. “I'm sorry to have you all abruptly gather here in the middle of the day and interrupt your schedules, but I have an important announcement to make.” The room was quiet except for shifting feet and the shuffling of latecomers arriving. “Yesterday, Starbucks’ board of directors had a meeting in executive session, and in that meeting it was concluded that I would be coming back as chief executive officer.” I paused and the abrupt sound of clapping filled the space, filling me with relief. “Thank you,” I said, and broke into a wide grin. “You always wonder when you make an announcement like that what the reaction could have been.” There were trickles of laughter as both the crowd and I relaxed.

My goal during the next 30 minutes was, in large part, to ensure that people understood that Starbucks’ very survival was at stake, while at the same time helping them feel safe. I had to demonstrate my own confidence in the resiliency of our brand as well as my belief in our collective ability to rise above our own missteps. But beyond rhetorical cheerleading, I also discussed the plan I'd formulated.

First, of course, I acknowledged Jim.

The previous day at my home, Jim Donald found out that I would be coming back as ceo. Weekend meetings at my house were quite common, but asking colleagues to come there at the last minute was not something I did regularly. Still, despite the short notice, Jim readily agreed to come by without knowing why. When the bell rang, I opened the front door and we exchanged hellos and, while walking through the front hall, inquired about each other's family vacations. He followed me down the two steps into the living room, where we sat across from each other.

This scenario had repeatedly played out in my mind.

I knew what needed to be said:
The board has been closely monitoring
what has been happening at the company and feels that under the circumstances, we must act to restore shareholder value. The board feels it is my obligation, as chairman and founder, to take direct responsibility for doing so, and returning as ceo is the most direct way for me to have the authority to make the needed changes and see them through.
More difficult to articulate given my inevitable discomfort with the situation would be my feelings. I wanted Jim to know how much I regretted that this conversation had to happen, that I think he is an exceptional professional and a wonderful man, and that I hoped he knew how deeply appreciated and liked he was throughout Starbucks. In the end, our conversation happened so quickly that I cannot recall the exact words I spoke to Jim before he looked at me with what I perceived as disappointment and surprise, accepted several legal documents that had been prepared for him, and left my house.

Saying good-bye to people when they leave Starbucks never gets easier, even when I think it is the right choice for the company, and especially when I truly respect the individual. If I share a friendship with the person beyond work, this kind of career-altering event pretty much severs our personal bond, a cost I have reluctantly come to accept but never fully reconciled. Of course, as difficult as this process is for me, it is undoubtedly worse for those who leave.

I went to the kitchen and made a fresh cup of coffee. Soon the Starbucks leadership team would arrive to hear the news.

“Let me first acknowledge and pay special tribute to Jim Donald, who will be leaving the company,” I spoke into the microphone at the open forum. “It is very difficult and emotional when you have a business partner and a close friend who you work next to for five years, especially someone so well liked and admired, and for whom you have so much respect. Unfortunately, the business and responsibility we have is bigger than any one person—whether it's Jim or myself or anyone in this room. We have a greater responsibility to the 200,000 partners and their families and shareholders. And the board felt, and I agreed, that a change was really needed.”

I'd conducted open forums throughout the world for two decades, and whether I spoke to hundreds of partners in Seattle or the staff of a single store in London, I usually had no script, just a general idea of what I wanted to say on that given day. Before I spoke, Wanda had
asked me if I had talking points. I told her I didn't. I just wanted to speak honestly and share my own emotions and show that I truly understood what people were feeling. Everyone had to leave the forum believing that Starbucks would be okay, that I could lead us out of the quagmire. As I spoke, I strove to subordinate the company's problems to our collective ability to overcome them. Much more than just an announcement of new leadership, this open forum was my rallying cry:

If you're really honest with yourself, as I have tried to be with myself, along the way in building the company, there has been something we have lost. And it's no one's fault and there's no punishment or blame. We are what we are—but the question is, What are we going to do about it and how are we going to fix it?

I want to express to you that this is not an interim situation for me. And I will tell you as I told the board that I'm in this 100 percent. My passion. My commitment. This is the most important thing in my life other than my family. This is 25 years of my life, and I don't like what has happened.

It is not going to be good enough to go “back to the future,” but there is a piece of that past we need; we have to find and bring the soul of our company back, find our voice.

Soon I'm going to share with the leadership team a restructuring of the organization, and I promise you I will do everything in my power to restore the company to the greatness we have known in the past. But understand that this is not a one-person job. We have to lock arms with one another and recommit ourselves to the things that are important.

The worst thing that could happen is that you spread out with fear and trepidation. That's not the purpose of this meeting—the purpose is to be honest and open that we have serious challenges, and we need serious people to help solve them. And I commit myself to being in the front of the line leading the way.

As I spoke, a flurry of internal and external communications was being unleashed. Just as the stock markets stopped trading for the day on the East Coast, our press release hit the newswires (“Starbucks Announces Strategic Initiatives to Increase Shareholder Value; Chairman Howard Schultz Returns as CEO”) and a memo from me (“The Transformation of Starbucks”) was e-mailed companywide. Simultaneously, the voice message that I'd prerecorded landed in every partner's voice mail
and a letter to customers was posted on our website.

Meanwhile, Nancy and Tim Donlan—my other assistant, who first worked for Starbucks as a barista in 1991 and, like Nancy, is an invaluable asset to the company—sent dozens of international vice presidents and the regional organizations that operated our stores in other countries an invitation to join me for a conference call. Nancy sent another letter to a collection of individuals who were not formally connected to the company, but were considered friends and family. Also, on the eighth floor, Valerie O'Neil and her team were busy scheduling one-on-one interviews with journalists, responding to media requests, and answering the questions that were flooding in from news outlets.

Overall, the news we issued that day strove to balance humility about our missteps with self-assurance about our ability to self-correct.

The open forum ended as open forums always do, with an opportunity for partners to ask questions. Nothing was vetted beforehand, partners were free to broach any issue. I surveyed the crowd, and one person raised a hand. His question was not about Jim, me, or the impending restructuring or new strategies I'd touched on. His question was about another elephant in the room. Competitors.

That very day,
The Wall Street Journal
had run a front-page article about McDonald's move into the specialty coffee market and the effect it might have on Starbucks. At the time, only 800 McDonald's franchises in the United States served espresso-based beverages, and they were made by machines that automatically mixed espresso and milk. The offering would soon spread to all of its 14,000 US stores, accompanied by a sprawling, $100 million advertising campaign. McDonald's also had $1 billion in capital to reconfigure many of its stores into what it was calling McCafés.

Starbucks’ ills were not the result of competitors of the likes of McDonald's or Dunkin’ Donuts. Yet, as the economy continued to put pressure on consumer spending, McDonald's would no doubt capitalize on convenience and price. And despite what we perceived as the stark differences in the quality of our brewed coffee and espresso drinks—Starbucks sources and roasts its own beans in its own roasting plants, while McDonald's and Dunkin’ Donuts outsource those processes—we could not ignore the fast-food chains.

I answered the question. “We have never had a major threat from
a national company that has the resources, muscle, and commitment that McDonald's appears to have to coffee—and we have to get ready.”

The one thing we could not and should not do was dismiss the ability of any competitor to capture our customers. It was going to be hand-to-hand combat as we tried our best to differentiate ourselves in the marketplace. “I strongly believe that if we protect, preserve, and enhance the experience to the point where we really demonstrate that the relationship we have with our customers is not based on a transaction, that we're not in the fast-food business, and then let the coffee speak for itself, we're going to win.”

We also could not allow competition to define us. We had to play offense, proactively defining ourselves by sharing the full story of Starbucks’ value proposition: Behind every cup of Starbucks is the world's highest-quality, ethically sourced coffee beans; baristas with health-care coverage and stock in the company; farmers who are treated fairly and humanely; a mission to treat all people with respect and dignity; and passionate coffee experts whose knowledge about coffee cannot be matched by any other coffee company.

“If we can't do all that,” I concluded, “then shame on us and they deserve to take our business.” I hoped that fear of a company like McDonald's could actually motivate the organization, giving us something to fight against, someone else to point to, instead of just ourselves.

A bit to my surprise, there were no other questions and so I wrapped up the forum with a heartfelt thanks and a final emotional boost. “We earned our respect and recognition because of one reason: the quality of our people. Thank you for all you've done in contributing to the success we have enjoyed. I ask that you do everything you can to support the new initiatives and help get this company back, find our voice, find our soul, and make our customers and partners proud to be associated with Starbucks.”