Howard Schultz of Starbucks: The role of culture in a crisis

This week I was lucky enough to attend the Ernst & Young Strategic Growth Forum in Palm Desert, CA. As you may recall, last year Red Hat Chairman Matthew Szulik was the national Ernst & Young Entrepreneur of the Year, and later this week, he’ll hand over his title to the next entrepreneur in waiting. One of the most exciting things about the Strategic Growth Forum is that it brings together some of the smartest entrepreneurial minds in the world in one place, and this morning, I had an opportunity to hear from one of the best.

Howard Schultz: Chairmain, CEO, and President of Starbucks

Howard Schultz, Chairman, President, and CEO of Starbucks, who won an Entrepreneur of the Year award in 1993, spoke about his experience leading Starbucks through the economic crisis. As Starbucks began going through hard times, Schultz, who had given up the CEO role in 2001 (while remaining Chariman), decided it was time to take back the CEO responsibilities himself in early 2008.

Why? He was worried that the distinct culture, mission, and values that had brought the company great success were eroding.

According to Schultz, he came back into an operational role because he felt that the way out of crisis was not a simple change in business strategy, but instead– in his words– “love and nurturing.” His key to turning things around was revitalizing the investment in his people, recommitting to the core purpose of the organization and providing employees with hope and inspiration.

He says the transformation of Starbucks since this revitalization has been key to a tremendous amount of new innovation happening inside the company. People have even commented to him that it reminds them of what the early days at Starbucks must have been like.

Schultz took 10,000 of his best people and brought them together in New Orleans in late 2008 for a leadership conference where they spent 50,000 volunteer hours helping communities re-build after Hurricane Katrina. Below is a documentary that was filmed about this event.

According to Schultz, this event was one of the most important things that galvanized the culture of Starbucks again– and he made the enormous investment despite opposition from angry shareholders who didn’t understand how the expense of the event would benefit the company.

As for lessons learned about preparing the company for the future, Schultz says that great brands provide an ongoing emotional connection and sense of discovery, and this comes from building the brand from the inside.

Which is why, while he has good things to say about his CEO predecessor Jim Donald, he admits that his weakness was not having a successor ready from within the company. According to Schultz, it is a steep challenge for someone from the outside to continue to stay true to the culture and values when things go awry. He does not plan to make this mistake again– his successor at Starbucks will come from within.

Schultz summed up his thoughts about the company culture this way:

When you love something, when you care so much, when you feel the responsibility… you find another gear.

And from hearing him today, it sure sounds Starbucks has once again found that gear. I’ll end with a quote from Schultz that appears at the end of the documentary above, describing the experience of bringing his team back together in New Orleans:

There is a word I think of when I think of Starbucks. And it’s love. We love what we have built here. We love the experience we have created for our people. Somehow, along the way, the level of that feeling got somewhat blurred by success. That is one of the things I think will be very apparent in this week about what it means to love something… and then the responsibility that goes with that.

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