Howard Schultz, Chairman and CEO of Starbucks Coffee, spoke on April 10th as part of the Albers Executive Speaker Series. Howard has been in the news a lot lately because of both Starbucks' recent success as well as for his political commentary.
Pigott Auditorium was packed. Every seat was filled. I wish we had more seats, because there were at least another 100 people who wanted to participate. If people left early, we ushered someone in to fill that seat. I've heard from many of you who we were unable to accommodate, so I am going to put a little more detail into this than I otherwise might!
Howard started off with a video about the Great Recession and Starbucks' response to raise funding for loans to small businesses. The company decided that job creation was the most important thing needed, and small business was the best opportunity for that. With access to credit for small businesses in short supply, the company started a campaign to raise funding for small business loans. Howard is really proud of that video, by the way. I was hoping the video was on the company website so that those who could not attend could see it, but it is not. They suggested that people watch the video of their recent annual meeting, which has many of the same themes.
In his opening remarks, Howard talked about his efforts to fight back against political gridlock in Washington, DC. If things were working well, Starbucks would not need to be launching the campaign to boost small business. He noted that 154 CEOs had joined him in protest by holding back political campaign contributions.
Another concern he has is the fraying of the social safety net. With rising stress on state budgets, he thinks there is little doubt we will see further deterioration as states are forced to cut back their programs (Washington state is shaping up to be a prime example of this).
He switched gears and started talking about developments at Starbucks. He noted that a business is not going to be successful for the long term if it just focuses on maximizing profits for shareholders. It must give highest priority to its employees, second comes customers, and shareholders are third.
He also noted that Starbucks had an important set of values that were part of the culture and retaining those was critical to success. For example, he told a story of a large institutional shareholder coming to him in the midst of the Great Recession and suggesting it would be a good time to dump the employee health coverage plan to boost profitability. Howard said, "He didn't get it." Taking away health care would destroy the trust the company had built up with employees.
He recounted his returning to the CEO role. It was right at the beginning of the Great Recession. The company had strayed from its roots, and its problems included it was a coffee company that actually was not making good coffee anymore! Could something be more fundamental?? He talked about dramatic steps he took, such as shutting down for a day to retrain on coffee making, or holding a $33 million company meeting in New Orleans to get key leaders from across the company back on the same page. While spoofed at the time, subsequent results speak for themselves.
He spoke of some of the key to success. These included loving what you do. You need to enjoy what you are doing to be successful at it. Second, surround yourself with talented people who complement your skill set and share your values. A third key is to share success. Give plenty of credit to others for their contribution to the success of the enterprise.
He closed with an uplifting message. He was not born into privileged circumstances. He has come a long way from humble beginnings. He grew up in the projects. He did not attend Harvard, Yale, or Stanford. One of the keys was to dream big dreams and not let others discourage you from achieving them. His life story is the American Dream. "Dream big dreams and then dream even bigger dreams," he said!
It was then time for the Q&A, starting with questions from our panelists, which included alum Jody Hall (owner of Cupcake Royale), undergraduate student Arielle Newcomb, and MBA student Michael Wang.
There were interesting ties in their background that might have made one think we knew that when we put them on the panel. Jody started working at a Starbucks in 1988 when she was still a student at SU in order to get money for Christmas presents. At that time, there were only about 30 stores (compared to over 17,000 today). She ended up working at Starbucks for eleven years (her last role was head of marketing for music and entertainment), and you can see the influence of Starbucks on her business (health benefits for employees, giving back to the community, etc…). For Arielle, her first job was as a Starbucks barista in Redmond, WA in 2007! Truth be told, we did not learn all that until after they agreed to be panelists! Nothing on Michael and Starbucks that we could uncover, though.
In the Q&A, he made a few interesting points:
- Regarding China, they have found that it is important that the leadership team needs to be Chinese, not ex-pats. They know the culture and the politics.
- Regarding India, they greatly admire Tata and what the company stands for. They decided that they wanted to be partners with Tata and pursued that goal.
- One question asked about all the new beverage products (juices, sports drink, etc…) that the company is planning, and whether Starbucks would remain a coffee company. Howard responded that the core competency of the company for over four decades was coffee. That was not going to change, BUT, it is important to retain the entrepreneurial spirit of the company, and from time to time they need to experiment with new products.
- One question asked him to reflect on what would have happened to the company if he had not returned as CEO in 2008. He responded that he was well positioned to return. He understood the company and its heritage. If someone was hired from the outside, they would not have had that understanding and by the time they did, it may have been too late.
- He noted that there had been two important shifts in employees and customers in the last few years that all businesses have had to address. Customers are much better informed about companies, including the company's values and culture. Customers want to support companies with values similar to their own. Regarding employees, many employees had a previous employer with a dysfunctional culture. They arrive with a certain amount of cynicism and distrust. It is critical to demonstrate to them in the first 45-60 days that they are valued and that the firm has a mission they can embrace. A company that can do these things has a significant competitive advantage.
- The final question brought him back to the political scene. He illustrated the problem by recalling how President Truman sold the Marshall Plan to the nation and both political parties. He asked if such a thing would be possible today. The answer is no. Our political debates are dominated by the extremes on the Right and the Left. The much larger middle is going unheard. We need to get back to the middle and not be held hostage by ideology and partisanship.
Regarding the turnout, I have had a number of people imply their disappointment about not getting into Pigott Auditorium. We were hoping for a strong turnout, but it was definitely larger than we had anticipated. Maybe we would have done a few things differently, but someone was sure to be left out.
What I was struck by was the number of undergraduate students in the audience. Past experience is they don't turn out for the speaker series, but they were here for Howard Schultz. I was glad to see them, and hope they can take advantage of future speakers. This does suggest that Howard has captured the imagination of this group of students and the generation they represent. He has "rock star" status. He could use this to assert a positive influence over them! It is an opportunity that very few people have, and it will not last forever. That is something for him to think about!
Next up is Dan Nordstrom, CEO of Outdoor Research, on April 26th. Come learn about how Dan revived this iconic outdoor equipment brand!