This interview was recorded during Howard Schultz’s potential 2020 Presidential run. Please excuse the scratchy audio, as we was doing this interview on the road.
Howard Schultz, Starbucks founder — It’s undeniable the Starbucks mastermind has made one of the most iconic and loved brands in the world. More than that though, he brought the idea of the 3rd space, by inventing the concept of the American coffee shop. I asked him about success, heart, and about capitalism vs socialism.
We also dig into many of his “heart” decisions that investors find terrifying. In this Howard Schultz interview, I asked him about maintaining heart, amidst shareholder pressure.
Everyone knows Starbucks is legendary in its efforts to make the world a better place. Starbucks’ benefits and perks include health insurance for part-time employees, college tuition reimbursement, stock options, and retirement benefits.
Schultz has told stories in multiple books about his fight to maintain Starbucks benefits, despite financial pressures. There is no denying Starbucks employees are treated extremely well. (Before my interview with Howard Schultz, I was contacted by a former Starbucks employee to make sure I passed on gratitude for the benefits he received when he worked there.)
Under Howard Schultz’s leadership, Starbucks is also a great global citizen, donating millions upon millions of dollars to charities, leading the food and beverage industry in their treatment of global coffee farmers. Starbucks’ treatment of coffee farmers by paying them well, and providing clean water to kids across the globe with their Ethos water project are well known. It’s a great story, but how did he convince his shareholders to maintain their world-class employee benefits and other big “heart” ideas of his?
In my interview with Schultz, he explained it wasn’t easy. He broke down his process and explained why business plans are necessary even for big heart ideas, when “gut feelings” won’t cut it. He also answers the most critical question we all have. Is Chemex better than a French Press?
Why Not All Business Decisions Are Economic
Not only did Schultz make one of the most iconic and loved brands in the world, but he literally defined the culture we live in and invented the very concept of the American coffee shop. He explained much of his success was because of “heart” decisions like great employee benefits that investors often find terrifying.
Within the retail and fast-casual space, Starbucks is legendary in its efforts to make the world a better place. Not only do employees report being treated very well, but most are also familiar with Starbucks amazing employee benefits package:
Starbucks Employee Benefits Include:
- Health insurance (even for part-time employees)
- College tuition reimbursement
- Stock options
- Retirement benefits
But Starbucks’ loveable community approach goes far beyond benefits employees see on a page. The company has also donated millions on top of millions of dollars in donations to charities across the globe, leads the industry in treating coffee farmers fairly, and the company provided clean water to kids across the globe with their Ethos water project.
You do have to wonder, how did this make his shareholders money and how do you convince shareholders on “heart” ideas, especially when they seem to conflict with the bottom line? I asked.
How To “Sell” Great Employee Benefits
It starts with training your staff to be great at listening, empathy, and trust. Because these traits are difficult to grasp, I was doubtful they can be taught, but Schultz disagrees. It’s possible but because “heart” decisions don’t come easy, you need to model listening, empathy and trust, proving it time and time again.
Practically, this comes in the form of sharing your success, sharing the stage, and creating opportunities at all levels of the company. He genuinely believes people want to trust the company they work for and want to love their job. Providing great employee benefits is one way to show appreciation. The traits Schultz leans upon boil down to love.
Love is a key theme in Schultz leadership style. Whether it’s a love of coffee, love of brand, love of his employees, or love for his community, country, and the planet — it’s the core of how he leads and I’d argue what defines a great leader. Not every business decision is an economic one, at least not directly. In order to succeed, leaders must understand business is a team sport and share success. Listening, empathy, trust and love do just that.
One person can’t create a business of scale, so Schultz explained why it’s so important for leaders surround themselves with people that are truly more intelligent than themselves instead of isolating themselves. This is hard. Leaders want to be the smartest in the room and feel threatened by employees or executives that are truly intelligent. Sometimes they fear they will fly higher than themselves. But if you truly train people to be legendary leaders, that’s part of the territory—knowing, and embracing the notion they may outperform you.
This is the case for Schultz at Starbucks. Some of his power leaders have gone on to big things. Christine Day, CEO of Lululemon; Annie Young-Scrivner, CEO of Godiva Chocolate and Christine Barone, CEO of True Food Kitchen are all leaders that left the Starbucks nest.
But Schultz isn’t upset, or at least he doesn’t seem to be. He seems proud as they emulate servant leadership—they are also proving great leadership can be taught.
Materializing An Intangible Vision
Founders like Howard Schultz seem to be experts at the intangible ideas that lead to success down the road. But many, including shareholders or board members, would consider his decisions to be illogical ones, especially when considering the costs for their great employee benefits packages.
I asked him if shareholder fear is one reason companies stop innovating and Schultz believes within companies today there is a tremendous amount of short term pressure to satisfy wall street and true leadership is being the one strong enough to hold the line.
True leaders shift perspective from financial pressure, focusing on what is in the companies best long-term interest. At times, it means sacrificing short term profit, for long term gain. It shouldn’t be a hard sell, but it is. Many of Schultz’ ideas have been unorthodox, especially the great employee benefits Starbucks offers, which were unheard of at the time and still are industry-leading. Despite the pressure, the ideas worked. They reduced attrition and made superior employees that beat the snot out of the competition. Valued employees work hard.
The price of admission is financial performance. But it has worked for Schultz. Over 26 years Starbucks has performed significantly better than the S&P.
How Do You Push Vision On Your Boss?
Especially in an age of data, data, data how do you get vision and heart decisions pushed through? It’s about heart, Schultz said. He grew up poor and he wanted to create a company that would truly change lives, but not everyone shared this vision. How does he recommend negotiating with employees who have no vision to push great ideas through?
It will be a tough sell, but anyone pitching ideas needs to have some kind of business plan that will demonstrate an economic model. Any innovative idea requires risk, but there must be a reason for that risk and you must be able to demonstrate that with as much research as possible. Those ideas also need to reflect the core vision of the company as well.
It’s also helpful to know, in this era, consumers really do want to support companies whose business values are compatible with their own. The things Starbucks has done were magnetic to their customers and this is part of the reason of their success. Brands reflect their customers. Obviously, he’s right, but not everyone sees it.’
Constant Improvement
The other thing leaders like Schultz do, is committing themselves to continuous improvement in caring for their people. If you’d like more resources from other world-class leaders, and future Q&A opportunities. Sign up for my newsletter.
Socialism VS Communism
Schultz is the epitome of the American dream. He grew up poor, in government-subsidized housing, but worked hard and made one of the most iconic brands in the world, while paying employees a fair wage, giving even part-time employees healthcare, and paying for college. Sadly many of his fellow Democrats have vilified his success.
He explains where capitalism has failed, why challenging social problems is the true recipe for success, and why we should never turn to socialism.
