Hard Choices

Howard Schultz on What's Brewing at Starbucks


Around 2000, it felt natural to hand over the chief executive role to Orin Smith, who had helped me build Starbucks (SBUX). I was a little bored, and I felt like I was repeating myself. I became chairman and had no intention of coming back as CEO.

We didn't do a lot of succession planning, and the truth was that Orin only wanted that job for maybe three to five years. When he left, we brought in Jim Donald. The company had been hitting a home run in terms of growth every single year, but I could smell that things were wrong. We weren't creating a soulful, romantic experience anymore: We'd lost sight of the experience around the coffee, and we were too focused on ringing the register.

In December 2007, I went on vacation with my family to Hawaii. I was taking a bike ride one morning with Michael Dell, who had come back to his company as CEO a year earlier. I told him I was planning to go back, too, and he encouraged me. He shared how he had tried to galvanize his company around a piece of paper that laid out his priorities and role. I stole the idea: When I came back a month later, it became Starbucks' transformational agenda.

The first thing I did was apologize to our staff for the decisions we'd made that had put us in this position. I closed every store for retraining. It cost us $6 million. We brought every store manager to New Orleans, which cost us $30 million, to meet and volunteer in the Ninth Ward. As I was trying to refine our strategy, the financial crisis hit. I spoke to Jim Sinegal of Costco (COST), who advised that we maintain the loyalty of our core customers at all costs. Trying to win them back later would be too hard. If he hadn't said that, we might have veered off into looking for new customers.

Now I'm much more focused on succession, on nurturing talent within the company. Being the CEO of a public company these days is a 24/7, all-in proposition. You can't take success for granted: I remember what it was like when we had one store and couldn't make payroll.


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