The Memo

Schultz began to organize his thoughts on a yellow legal pad in a handwritten memo titled “The Commoditization of the Starbucks Experience.” In it, he noted recent technical advances that were undercutting key cultural values and ways. Automatic espresso machines increased speed, consistency, and service, but eroded the mystique of the barista as a key element in the Starbucks aura of theater and romance. Sealed bags kept coffee fresher, but customers could no longer enjoy the experience and aroma of seeing or smelling it as it was ground. Streamlining and standardizing store design gained efficiencies of scale but sacrificed some of the “cozy coffee bar” ambience of the past.

Schultz ended the memo with a heartfelt statement: “We desperately need to get back to the core and make the changes necessary to evoke the heritage, the tradition, and the passion that we all have for the true Starbucks Experience.”⁶

The Uproar

Schultz intended the memo as confidential food for thought for key executives, but, to his chagrin, someone leaked it. As it went viral across the Internet and the media, it set off a raucous debate inside the company. Some at Starbucks strongly disagreed with Schultz: Wasn’t the coffee merchant the most visited retailer in the world? Others were confused or insulted. They were working hard to make the company better: Was Schultz saying they weren’t doing their jobs? Still others felt that Schultz was speaking truths that needed to be told and debated.

Schultz was stunned by the leak and felt pressure to do damage control. But the memo expressed his passion for Starbucks, and he hoped it would generate a productive dialogue. Over the next several months, his concerns about the company’s direction continued to grow. His heart sank when he walked into Starbucks stores and felt that they were no longer celebrating coffee. This violated his conviction that a true merchant creates magic and tells a story that envelops customers as they enter a shop. Months went by, and Schultz felt that nothing substantial was changing in the company or the stores. “Day by day my disappointment edged toward anger, and at times fear, that Starbucks was losing its chance to get back the magic.”⁷ By the end of the year, same-store sales started to show double-digit declines. Schultz and the Starbucks board agreed that he needed to return as CEO. When he did, in January 2008, he hit the ground running.

Barista Boot Camp

One of Schultz’s first initiatives was to close all seventy-one hundred U.S. stores for an afternoon of barista reeducation. Notes on locked doors explained the purpose: “We’re taking time to perfect our espresso. Great espresso requires practice. That’s why we’re dedicating ourselves to honing our craft.”⁸

Some 135,000 baristas received a reintroduction to the magic of a Starbucks espresso. They brushed up on steaming milk to frothy foam. Beyond honing their beverage skills, baristas were reinfused with the spirit and heritage of Starbucks. The event cost an estimated $6 million, but Schultz felt that it was worth the investment for its symbolic value in reversing years of sacrificing spirit and heart to growth and profit.

Reinventing an Icon

Back at headquarters, Shultz worked on renewing roots with a playful brainstorming session for key executives. Outside consultants used the Beatles as a metaphor to generate creativity around the central questions: What does it mean to reinvent an icon? What could Starbucks learn from John, Paul, George, and Ringo about innovation? Reframing existing ideas with the Beatles metaphor helped people imagine new possibilities and find a better balance between heritage and innovation.

Leadership Summit

A week after the stores closed for barista training, Schultz convened the top two hundred Starbucks execs from around the world for a hands-on, interactive three-day leadership summit. He opened with a story from Paul McCartney, who had said that the beginning of the end for the Beatles might have been their concert at Shea Stadium in New York, where the crowd was so big and enthusiastic that the Beatles couldn’t hear their own music. The story raised a question that Schultz used to set the stage for the summit: “When did we stop hearing our own music?” In the next few days, the executives visited Seattle’s most exciting retail shops and studied them from a customer’s perspective. They spent hours in breakout groups chewing over a transformation agenda.

The climax was a ceremony of recommitment to the mission. Schultz talked about updating the mission in a way that would “capture the passion we have for the future and the respect we have for the past.”⁹ He read the preamble: “The Starbucks Mission: To inspire and nurture the human spirit—one person, one cup and one neighborhood at a time.”¹⁰

Next up were representatives from headquarters and regions around the world, who read sections of the mission focusing on coffee, partners, customers, stores, neighborhoods, and shareholders. The reading sparked an emotional reaction that the group carried into the next room, where the statement was displayed on oversized pillars along with artifacts from the company’s history. Veteran executives enthusiastically affixed their signatures on the large-scale replica of the document.

2008 Annual Meeting: Building Confidence

Thousands of investors and partners flocked into a large auditorium for the annual Starbucks shareholders’ meeting in March 2008. The mood was tense and gloomy—the stock price had plummeted, and there was no positive news in sight. Schultz saw it as an opportunity to get people to renew their faith in the company. He opened with a frank acknowledgment: Starbucks’s recent performance had been unacceptable. He made it clear, however, that the company would come back stronger than ever. “It’s time to convince you and many other people who are not represented here, to give you all reasons to believe in Starbucks again. And that is exactly what we will do today.”¹¹ He wasted no time in directing attention to a large black draped object beside him on stage. With dramatic flair, he unveiled a glittering copper and stainless steel appliance: a new espresso machine that no longer blocked the sight line between customer and barista. For Schultz, the new machine solved problems of both quality and theater. A delighted crowd roared as a barista, with panache, prepared an espresso for Schultz.

He then introduced more crowd pleasers, including a Rewards Card and an interactive website. The final initiatives focused on coffee. The crowd got a chance to taste a new, milder brew, Pike’s Peak Roast. They saw a demonstration of the showy, high-tech Clover coffee maker, a machine that Schultz extolled as replicating the virtues of French-press coffee. Schultz closed the meeting to enthusiastic shareholder applause.

The Galvanizing Extravaganza

After the 2008 Wall Street meltdown, Starbucks lost $7 million for the third quarter and had to close six hundred stores. Articles in the business press opined that Starbucks’s best days were behind it. Schultz was getting advice to sell the company or to save a few million dollars by roasting slightly cheaper coffee because “no one would know.” He was also under pressure to cancel the expensive biennial leadership conference. Did Starbucks really need a $30 million managers’ meeting? The answer was clear to Schultz. In his mind, there was no better time for a company rally.

In October 2008, ten thousand regional, district, and store managers streamed into New Orleans, a city struggling to come back after Hurricane Katrina. One of the city’s legendary marching bands greeted them at the airport. On the way to their hotels, they saw blue and green banners hanging from streetlamps and boldly declaring, BELIEVE.

The convention center itself was huge, large enough to accommodate four huge walkthrough displays, each organized around a different theme: coffee, customers, partners, and stores. Starbucks partners could experience dramatic scenes of coffee’s journey from soil to cup. “Each gallery was interactive. It was emotional. It was multisensory. It was storytelling.”¹²

The ten thousand Starbucks people were there for more than business or learning; they also were there to roll up their sleeves and help New Orleans rebuild. Work teams flooded the city—planting trees, refurbishing and painting old homes, and erecting new ones. T-shirts bore one word, onward, a signal to themselves and to the people of New Orleans that troubled times require moving ahead with hope and faith. “In times of adversity and change, we really discover who we are and what we are made of.”¹³

At the closing session in the New Orleans Arena, Schultz acknowledged the daunting challenges facing the company, but also offered a message of hope. Schultz, like his fellow business legend Steve Jobs, liked to give an audience more than they expect. The dazzling surprise was U2’s lead singer, Bono, a rock star and humanitarian who had helped raise more than $2 million for post-Katrina relief. The crowd cheered wildly as Bono joined Schultz onstage and began to talk about partnering with Starbucks to combat poverty and AIDS in Africa. “Great companies,” he said, “will be the ones that find a way to have and hold onto their values while chasing their profits, and brand values will converge to create a new business model that unites commerce and compassion. The heart and the wallet.”¹⁴

The crowd’s reaction to Bono’s speech reaffirmed the conference’s theme of “Believe: in the heritage and future of our company.” Then Schultz ended the gathering: “Please remember what you have experienced here. Remember how you felt. And when you get back, please do not be a bystander . . . Do not allow the pressures of the day to in any way erode the emotion, the feeling, and the power of 10,000 that you each experienced in the last few days.”¹⁵

Schultz’s package of symbolic initiatives helped to refocus Starbucks’s strategy and reenergize its people. The New Orleans meeting came just as Starbucks was hitting the bottom of a two-year slide. From losses in late 2008, Starbucks rebounded to record revenues ($10.7 billion) and profits ($1.4 billion) two years later, while retaining its place on Fortune’s list of the one hundred best companies to work for and expanding its efforts to become greener and provide more support to coffee growers. One analyst called it the most remarkable turnaround he had ever witnessed. Since then, Starbucks has continued its upward spiral in growth and profits. In the second quarter of 2012, the company’s earnings were up 15 percent, and Schultz received Fortune magazine’s award as Businessperson of the Year.

Reviewing the Cultural Threads of the Starbucks Story

Culture is not easy to see when you are enmeshed in it. Pared to the bone, culture is “the way we do things around here” or “what keeps the herd moving roughly in the same direction.” Schultz was able to step back and view the Starbucks culture by focusing on the symbolic threads that intertwine to form a meaningful enterprise. These include history, values, heroes, rituals, ceremonies, stories, and a cultural network of informal players.

In reweaving the cultural tapestry of Starbucks, Schultz relied on the mystical power of all these symbolic threads.

Symbolic Leaders Respect and Use History

If leaders assume that history starts with their arrival, they typically misread their circumstances and alienate their constituents. Wise leaders attend to history and link their initiatives to the values, stories, and heroes of the past. When the Starbucks founders nixed Schultz’s vision of recreating the Italian espresso experience in America, he started his own business, Il Giornale. It was successful, but his instincts told him that he wanted the power of Starbucks’s history and the “mystical quality” of its name. Starbuck was the first mate of the whaling ship Pequod in Herman Melville’s classic sea story Moby Dick. Schultz eventually persuaded the founders to sell him what was then a tiny, highly successful chain of stores in Seattle.

Symbolic Leaders Interpret Experience

In a world of uncertainty and ambiguity, a key function of symbolic leadership is to offer plausible and hopeful interpretations of experience. President John F. Kennedy channeled youthful exuberance into the Peace Corps and other initiatives with his stirring inaugural challenge: “Ask not what your country can do for you; ask what you can do for your country.” When Howard Schultz began to build his fledgling company, many people told him he was crazy to think that Americans would ever spend $1.50 for a cup of espresso. But to Schultz, Starbucks was more than coffee. It was a “third place” between home and work, “a social yet personal environment where people can connect with others and reconnect with themselves.”¹⁶ In reframing the meaning and possibilities of something as mundane as a coffee shop, Schultz exemplified his view of what great merchants do: “We take something ordinary and infuse it with emotion and meaning, and then we tell its story over and over again, often without saying a word.”¹⁷ Having a cup of coffee at Starbucks is “enjoying the Starbucks Experience.”

Symbolic Leaders Develop and Communicate a Hopeful Vision

One powerful way in which a leader can interpret experience is by distilling and disseminating a persuasive and hopeful image of the future. A vision needs to address both the challenges of the present and the hopes and values of followers.

Where does such vision come from? One view is that leaders create a vision and then persuade others to accept it. If we look at Howard Schultz, we see that the reality is more subtle. Schultz didn’t know he wanted to be in the coffee business until he tasted his first cup of Starbucks coffee, and his image of coffee shops as places for connection and community only began to crystallize as he toured espresso bars in Italy. Schultz’s magic lay in his intuitive ability to assemble a vision from bits and pieces that were already there in a scattered and inchoate form.

Leadership is a two-way street. No amount of charisma or rhetorical skill can sell a vision that speaks only to the person selling it. Leaders play a critical role in articulating a shared dream by distilling a unique, personal blend of history, poetry, passion, and courage.

Symbolic Leaders Lead by Example

These leaders demonstrate their commitment and courage by plunging into the fray. In taking risks and holding nothing back, they reassure and inspire others. In Chapter Six, we saw Anne Mulcahy take the top job at Xerox in 2001, when the building was burning and few thought she had much chance of putting out the fire. Her financial advisers told her that bankruptcy was the only choice. But she was determined to save the company she loved, and became a tireless, visible icon working to get the support she needed to make Xerox a success. When Howard Schultz returned as Starbucks’s CEO after an eight-year hiatus, he threw himself back into the business he loved—not because he had to, but because he believed that his instincts and example would provide the spark the company needed. His passion and resolve communicated to others that Starbucks could and would reclaim its soul.

Symbolic Leaders Tell Stories

Howard Schultz has described Starbucks as a “living legacy” to his father. The stories he tells about growing up poor in a subsidized housing project in Brooklyn, New York, shape his values and the culture he has built at Starbucks. He has never forgotten the time in 1961 when he was seven years old and his dad broke his ankle at work. Fred Schultz hadn’t liked his job as a truck driver for a diaper service, but now he couldn’t work and had no income or health benefits. Howard Schultz felt that his father deserved better. Even when Starbucks was losing money in its early days, Schultz insisted on providing health care coverage and stock options for employees. At times when Starbucks’s business slumped, investors or analysts sometimes pressured him to goose the bottom line by cutting the health care benefits. That suggestion was always a nonstarter for Schultz. In his mind, a company can be great only if it provides the benefits and pride that his father never experienced.

Stories abound in successful companies. Ritz-Carlton is renowned for its platinum standard of guest service: “Ladies and Gentlemen serving Ladies and Gentlemen.” Employees carry a list of “service values” with them while at work, and focus every day on a value selected for special attention. During frequent “lineups,” cross-sections of employees meet in a ritual to reinforce the importance of guest service and to hear and tell stories of employees who have gone out of their way to satisfy guests. For example, a family that had stayed at a Ritz-Carlton arrived home to a crisis: their toddler’s treasured stuffed animal, JoJo, had been left behind. They sent an emergency message to the hotel, which put out an all-points bulletin. Housekeeping searched the room and the laundry. Bellmen, concierges, and other staff member scoured the premises. Once JoJo was finally tracked down, a creative Ritz-Carlton staffer took him around the hotel and photographed him in assorted locales—the kitchen, the lobby, a guest room, and so on. She then packaged JoJo with the photos and a note indicating that he had had a wonderful time and made many new friends during his stay. The little girl was thrilled. Her delighted parents may never stay at any other hotel.

Stories succeed because they are truer than true. We want to believe them rather than to scrutinize their historical validity or empirical support.

Symbolic Leaders Convene Rituals and Ceremonies

Rituals and ceremonies are special times in the life of a group or organization. During such occasions, people swap stories, renew ties to one another, and recommit to cultural values. Schultz relied heavily on ritual and ceremony to restore the company’s ties to its cultural roots and vitality.

Recall that his first step was to close Starbucks stores for a “reeducation of baristas.” Baristas are Starbucks’s front line, with direct contact with customers, what Jan Carlzon of SAS called “The Moment of Truth.”¹⁸ Schultz did not conceive of the event as a skill session, but rather as an opportunity to get baristas to fall in love with coffee again, to regain passion for every cup they served.

Once the front line was energized, Schultz convened a series of special events, beginning at the top and building to the New Orleans extravaganza involving ten thousand store managers. All these occasions focused on renewing the soul and spirit of the company.