Onward (10 page)

When they flew to Seattle for the first of several visits, I took them to Pike Place Market and to the original Starbucks store that had opened in 1971, 16 years before I bought the company and combined it with Il Giornale. As I walked in the door, I explained once again how it had captured my imagination more than 20 years earlier. We also visited several competitors, including some of Seattle's finest independent coffeehouses. Then I quietly brought Jim and his team to our
support center so they could get a first-hand feel for the culture. The nine-story brick building just south of downtown Seattle was a former warehouse for Sears, Roebuck and Co's catalog division, and we had designed it to feel inviting and to inspire collaboration and community, much like a coffeehouse. Our kitchens have espresso machines. The walls are lined with art inspired by countries where our coffee is grown. Costa Rica. Guatemala. Kenya. As we walked to my office, through the playful maze of slanted hallways and exposed staircases, we passed coffee trees that grow year-round under skylights, a cupping room that hosts daily coffee tastings, and partners holding impromptu meetings on couches and chairs clustered throughout the building's open spaces. Again, much like a café.

I hold most small meetings in my office around a large rectangular coffee table, and when Jim Fingeroth sat down on the couch he voiced a specific request. Could I identify an internal Starbucks partner with whom he could coordinate? Someone I trusted, who knew our leaders as well as Starbucks’ operations, but whose role would not be compromised by the knowledge of what was to come.

I sat back in my chair. There were many people whom I trusted and deeply respected. Two stood out as the most appropriate ones to confide in at the time.

One day I asked Chet Kuchinad to join me for a cup of coffee.

Chet was our number-two leader in partner resources at the time, and we had traveled together a great deal internationally. We often jogged together in the early morning hours through the streets of whatever city we were visiting. Back in Seattle, we would run at lunchtime, from our offices to Pike Place Market and back.

Chet had regular access to the board, and he was familiar with our senior leaders, our operations, and our day-to-day performance. I had always been impressed by his business acumen. He also did not shy away from speaking his mind with respect and conviction. He had a habit of telling me any number of things that I did not necessarily want to hear. At first I had been taken aback, but I came to value it.

During one of our runs, at a time when Starbucks’ stock was doing well, Chet said half-jokingly, “Howard, you are making people too rich.” Many Starbucks partners had seen their net worth grow as our stock rose and split several times over the years. “People are starting to
think it will never end.” There was truth in his statement. With time, I came to see the arrogance that the wealth of the company, and its track record for success, had created.

Whenever I spoke with Chet, I knew I was getting an honest perspective. That trait, coupled with his sensibility for Starbucks’ culture, led me to seek his help.

I put down my mug and leaned forward. “I am coming back as ceo,” I told Chet. “I could use your help, but I understand if it puts you in a delicate situation.” Chet worked with and respected Jim Donald, and he understood the tension that had come to exist between the two of us. I did not give Chet much more detail. “Take the weekend to think about it.”

On Sunday he called me on my cell phone. “Howard, I'm in.”

The next day, we met in my office where, over another cup of coffee, I brought him up to speed and put him in touch with Jim Fingeroth.

The other person I wanted to bring on board was Wanda. A lot of the work Jim Fingeroth, Chet, and I had to do in the coming weeks involved crafting press statements and internal communications that would be released the day of the announcement. I thought Wanda would be the ideal candidate to assist. She was no longer a Starbucks partner, but she understood Starbucks’ culture and my voice. After more than a decade of working together, I trusted her implicitly.

Wanda and I hadn't seen each other since February, when we had discussed the leaked memo, and in December I asked if she would meet me for breakfast at Lola, a restaurant in downtown Seattle. We hugged hello and settled into a booth inside the narrow, bustling restaurant. Over coffee and eggs, I asked Wanda how her family was doing and what projects she was working on. I updated her on the kids and Sheri. Then I casually changed the subject.

“Would you be interested in doing some work for Starbucks?” I asked, careful not to reveal the magnitude or nature of the project. “We might need some help at the end of the year with an announcement.” I was not surprised, but I was pleased when Wanda smiled widely and, without hesitating, said she was available and would be more than happy to help.

I left Lola with a heightened sense of optimism. The team was coming together.

At the end of December 2007, I joined my family for our traditional trip to Hawaii. Family has always been the most important thing in my life, and this was the only time of year when the four of us took time out from our busy lives to reconnect. But considering what I had planned for the New Year, it was hardly a vacation for me.

Every day I was on the phone with Chet in Seattle and Jim Fingeroth in New York, not only mapping out the logistics of the transition, but also planning for what would come in the following days, weeks, and months. There were no obvious answers, and together we thought through what a new management structure might look like and how a variety of people's roles had to change. One of the decisions I made was to eventually eliminate the newly created position of chief operating officer and, instead, to have Starbucks’ most senior leaders report directly to the ceo. I wanted a clear line of sight into every aspect of our operations, from supply chain to store design to everything in-between. Reshuffling, as well as eliminating, some of Starbucks’ leaders would be inevitable.

Given that I had spent the past two years observing and talking about what was wrong with Starbucks, it was invigorating to plan for how to make it right. Ideas and priorities had been percolating in my mind for so long. We needed to reignite our connection with customers. Replace the bureaucracy with a more efficient organizational structure. Slow our US growth to a more sustainable pace while ramping up internationally, focusing on countries like China. We would also have to close some stores, although I did not know how many.

My struggle, however, was with how to appropriately frame my priorities for our people in a manner that would instill confidence and elicit support while communicating that we could no longer do business as usual.

Fortuitously, I spent time in Hawaii with Michael Dell, founder of the PC company Dell, who was spending his holidays nearby. Michael and I had been friends for many years, and only 11 months earlier he'd returned to Dell as chief executive, replacing someone he'd selected to run the company two years prior. Our parallel circumstances were a bit uncanny, and although our respective businesses—coffee and computers—could not have been more different, Michael, as a returning founder, had a unique perspective and insight about what I could expect.

It was during one of our daily three-hour bike rides along the Kona coast that I first confided in him. “I think I have to come back as ceo.”

Michael did not seem surprised, and together we talked through a host of logistical and strategic issues now in front of me: managing the
Street, maintaining morale, the teetering economy and the drop in consumer confidence, as well as the trepidation that came with reassuming responsibility for day-to-day operations. We rode to Michael's house, where he walked me through the chronology of what he had done at Dell one year earlier and graciously shared the very documents that had aided his own transition.

One tool stood out as particularly applicable to Starbucks. Michael called it the Transformation Agenda. Neither of these words was part of my or Starbucks’ vernacular at the time. But they resonated with me. “Transformation” spoke to the scale of change that Starbucks had to undertake, but with a positive connotation. The word “Agenda” provided an actionable framework. This was key. I was intent on demonstrating, right out of the gate, a sense of immediacy and precision in decision making.

Yet just as the future of Starbucks was beginning to crystallize in my mind, its present circumstances were causing me great angst.

Every morning in Hawaii, I checked the company's daily sales reports.

It was extremely difficult for me to fathom what I was seeing. Starbucks was reporting negative daily comps—meaning our sales were down compared to the same day a year earlier—in the
double digits
. Our comparable store sales had been negative before, but never had I seen performance this poor, and so consistently. Sales were in free fall! Every day, around the country, fewer and fewer people were coming into our stores. And those who did were spending less money than in the past. Starbucks was hardly alone. That holiday season in the United States, consumer spending reached its weakest level in four years. Still, I felt helpless. I was on the phone with our people in Seattle asking for comps from every region of the country. The numbers were so bad I felt paralyzed. I simply did not know what to do with myself. I couldn't eat breakfast. I couldn't enjoy my family. I could barely move. It was as if everything I feared was coming true.

As December 2007—and our first fiscal quarter of 2008—came to a close, I knew that Starbucks would not make its projected earnings. I was not only coming back as ceo, but also coming back to hold the mantle after the company's worst three-month performance in its history as a public company.

Immediately after the New Year, I returned to Seattle and reconvened with Jim Fingeroth and the few other people who knew of my return as ceo.

There was a disciplined, almost chesslike approach to the work we did in the days leading up to the public announcement on Monday, January 7, 2008. As the cold winter rains and gray skies engulfed Seattle, we hunkered down around my dining room table, comfortably dressed in jeans and sweatshirts, and engaged in very serious discussions about what and when to communicate to a variety of audiences. These included Jim Donald; Starbucks’ most senior leaders; thousands of corporate and store partners; shareholders; the financial community; the business and consumer media; and customers who would likely come across the news online, in newspapers, or on television.

Everything had to be done with an eye toward disclosure regulations and legal formalities, as well as authenticity and sensitivity to our partners. I also wanted to personally touch as many people as possible, in person or by phone. It would be a logistical whirlwind that required precise execution. First, following my private meeting with Jim Donald, the board would have to meet and officially ratify the change in Starbucks’ leadership. Before the announcement, Nasdaq, the exchange where Starbucks’ stock trades, had to be alerted. After the announcement went out, a conference call with financial analysts had to be scheduled. For the Securities and Exchange Commission, we needed to prepare and immediately file an 8-K form documenting financial details of Jim's departure.