CEO of Starbucks Explains Why Not All Business Decisions Are Economic

He’s the creator of Starbucks and not only did he 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. In my discussion with Howard Schultz, he explained much of his success was because of “heart” decisions like great employee benefits that investors find terrifying.

Everyone knows Starbucks is legendary in its efforts to make the world a better place. Most are also familiar with it’s great employee benefits like health insurance for part-time employees, free college tuition, stock options or retirement benefits, Starbucks employees were treated extremely well. But it goes beyond benefits.

Starbucks has also donated millions on top of millions of dollars in donations to charities across the globe, leading the industry in treating coffee farmers fairly, and the company provided clean water to kids across the globe with their Ethos water project. But how does this make his shareholders money and how do you convince them on “heart” ideas, especially when they seem to conflict with the bottom line?

How To “Sell” Great Employee Benefits

It starts with training your staff to be great at listening, empathy and trust. It’s something I’ve truly struggled with and I’ve been doubtful it can be even be trained at all. Schultz believes it’s possible, but says heart decisions don’t come easy, you need to model listening, empathy and trust, proving it time and time again. That 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, and providing great employee benefits is one way to show appreciation.

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. Loving the company and employees are core but also there must be recognized that not every business decision is an economic one and that success must be shared. In order to succeed, leaders must understand business is a team sport.

One person can’t create a business of scale. Legendary leaders don’t just pass down orders for others to execute. He explains how important it is for leaders not to isolate themselves but surround themselves with people that are truly more intelligent than themselves. This alone 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.

A number of senior people at Starbucks have got off to create their one thing. 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. What they are doing is emulating in their own way, servant leadership. What they are also doing is proving great leadership can be taught.

Intangible Vision

People 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 fear of shareholders 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.

 

Listen to the full interview with Howard Schultz >

 

Justin Brady increases workplace engagement, lowers attrition, uncovers hidden profit ideas in your company, and solves today's toughest workplace challenges. Learn how to win work culture.

 

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