Onward: How Starbucks Fought for Its Life Without Losing Its Soul

by Howard Schultz

  The NGOs were astonished at our productivity. Most had never hosted a group of our size and were used to volunteers coming in and swinging a hammer for an hour or so. But when our teams of partners showed up—aggressive, athletic, passionate—they could finish a project in two and a half hours even when they were scheduled for four. “Give us more!” we cried, and more we got.

  I spent my volunteer hours helping more than a dozen store managers whom I'd never met paint a house, one of the 86 homes our volunteers repaired that week so families could move back in after three years of displacement. While there was laughter and a sense of camaraderie as we climbed ladders, painted front stoops, and caulked and raked and planted and dug and drilled and sawed and hammered and fixed doors and laid down floors, there was also a heartwrenching pang. Many of us spent time talking with the men and women who had lived through Katrina, and we heard stories of not only individual sacrifice and loss, but also of neighbors taking care of neighbors. The power of community was so evident in New Orleans, and when people's appreciation of our efforts was tough for them to put into words or a smile was not enough, they expressed themselves with quiet tears or a hug. Incredibly emotional.

  “When you give up,” said a slim older man whose home we rebuilt, “you might as well lay down and die.” It was obvious that we weren't just giving people back their homes, but also restoring a sense of dignity. No doubt, our community contribution reinforced what it meant to work for Starbucks, and I knew that the experience would be difficult to adequately describe to people who were unable to attend.

  Throughout the week, our volunteers’ presence could be seen en masse. We arrived at work sites by the busload, almost everyone clad in jeans and the same white T-shirt or navy sweatshirt. The name “Starbucks” did not appear on our clothing. Instead, “Onward” was printed across the chest. I'd been surprised to see the shirt design when I'd pulled it from my own welcome bag in my hotel room. Incorporating “Onward” had not been my idea, and as far as I could recall this was the first time my signature sign-off had been lifted from my memos. It was somewhat surreal, but I could not have imagined a more appropriate time or place to give that word more life.

  All told, Starbucks’ partners volunteered approximately 50,000 hours of time in New Orleans. It was unprecedented, and I was beyond proud. Our partners were as well. Proud of the impact we were able to make during our visit to New Orleans, as well as even a little bit prouder of the company that we had come here to rebuild.

  “In times of adversity and change, we really discover who we are and what we're made of,” I would later hear one partner say as he reflected on the week. “To be a part of this organization as it moves through transformation, that is really exciting.”

  New Orleans was serving its purpose in helping us rediscover ours. And the week had only just begun.

  Whenever I see someone carrying a cup of coffee from a Starbucks competitor, whether it's an independent coffee shop or a fast-food chain, I take their decision not to come to Starbucks personally. I wonder what I, as Starbucks’ chairman and ceo, might have done to keep them away and what I might do to encourage them to come back or to try us for the first time. I ask myself what I can do today to win someone's business and earn his or her loyalty. If we were going to really transform the company, Starbucks’ store managers needed to take their jobs just as personally as I take mine—to act in their stores just as they were acting here in New Orleans, where every tree planted or house painted mattered. We'd come here not as bystanders, but as participants, and on Wednesday, as the conference neared its close, it was time to turn our attention inward and accept that, as a company, we were in the midst of our own crisis and could not afford to stand back and hope for the best. We each had a responsibility to help ourselves and recognize that every little act matters: A store manager's job is not to oversee millions of customer transactions a week, but one transaction millions of times a week.

  The general session would give me one shot to help our partners fall back in love with Starbucks and ensure that they understood their roles.

  Inside the New Orleans Arena, the home of the NBA's Hornets basketball team, my intent was to share with the audience of almost 10,000 my thoughts on what had gone wrong at Starbucks and how we needed to self-correct, an endeavor that was as much about attitude as it was about business tools, tactics, and resources. I had no script, but knew I wanted to strike a balance between harsh realism and belief in our future. The massive arena was dark except for the lit stage. Every seat was filled. When I walked in front of a huge lime green screen that read “Onward,” the arena settled down into serious quiet.

  We are here for a reason. We are here to celebrate our heritage and traditions and also to have an honest and direct conversation about what we are responsible to do as leaders. . . . We are not a perfect company. We make mistakes every single day. We put our heart and our conscience first, but we have lots of issues that we are trying to balance. Expectations are high from every constituent and we are trying our best, especially during this downturn and in this economy, to do the right thing. . . .

  Now, we can point to many things that perhaps are causing the issues that we have faced this year. Like many other companies, we are facing perhaps the most difficult economic situation since the Great Depression. It's real. It is serious. People do not have as much money as they once did, and Starbucks more often than not is a discretionary purchase. So we have the economy. And we also have something else. Something new. We have competitors small and large who think we are vulnerable and not as good as we used to be. Not as passionate. And they are trying to take our customers away. Which is why one of the themes of this conference has been to make it personal.

  But what does that mean?

  What does it mean when approximately 50 customers a day are not coming into our stores versus last year? What does it mean when at eight o'clock in the morning the line is out the door and a customer peels off and leaves? What does it mean when you see a customer you recognize with a cup of coffee that is not ours? What does it mean when you know for a fact that the beverage you just handed over to the customer was not made to the standard of Espresso Excellence? These are serious questions, and what they mean, I have always believed strongly, is that we have to take accountability and responsibility for the things that we observe. The things that we experience. And the things that we learn.

  I spoke for more than half an hour, and it was actually difficult for me to wrap up; I had the attention of the people with the power to turn Starbucks around. I did not want to let them go, and I took every last second of my time to reach them. “I will do everything humanly possible to represent you the way that I ask you to represent the company. Passionately. Honestly. With great sincerity and humility and doing everything I can to exceed your expectations to make sure our future is as great as our past.”

  The next few hours of the general session took a page from our annual meeting, using that platform as an opportunity to blend substance with inspiration, to inform as well as rally. Gospel choirs sang. Other leaders spoke. And backstage we had two surprises that I knew would electrify our partners. I just wasn't sure which would get the bigger response.

  “I was going to jump out of a cranberry scone, but maybe not.”

  Bono, lead singer for U2, global activist, and someone I consider a friend, had joined me onstage to everyone's shock, and now he leaned into a speaker's podium and, in a black shirt and his signature red-tinted sunglasses, spoke candidly. I had come to know Bono through our mutual interest in and support of African countries, and I was grateful that he had been able to make it to New Orleans, not to wow us with celebrity, but to educate and motivate store managers about a new multiyear partnership between Starbucks and his organization.

  My conversations about partnering with (RED) had begun a year before with Tom Freston, the cofounder and former CEO of MTV Networks, back when we both were sitting on the DreamWorks board. Thanks to Michelle's dil
igence, my initial dialogue with Tom had finally come to fruition, and during the 2008 holiday season Starbucks would designate its three holiday drinks (RED) and give a nickel for each one sold in the United States and Canada to the Global Fund, which finances programs to fight AIDS, tuberculosis, and malaria. Like all monies collected through purchases of (RED) products at Gap, Apple, Converse, and Dell, our contributions would go directly to the Global Fund for AIDS programs in Africa. The announcement thrilled many of our partners who had been disappointed that Starbucks had not “gone (RED)” sooner, given the natural synergy of our organizations’ values.

  “These are interesting times,” Bono began.

  Howard has brought me to talk to you in interesting, strange, unsettling times. For Starbucks. For America generally. Times of crisis. Times of chaos. Times of opportunity. . . . The sight of your stores closing—well, a sign of the times. Historically, though, it is times like these, times of disruption, where America seems to discover its greatness.

  Bono spoke not just about Starbucks and the United States but also, more importantly, about his travels to Africa, a continent where 4,000 lives were being lost every day to preventable, treatable diseases, and where 12 million children had been orphaned because of HIV. It had sparked in Bono a rage that ultimately drove him to create (PRODUCT) RED. He moved us by speaking in our own language about the absolute necessity of companies to do well by doing good.

  Some people say, “Come on, markets are not about morals, they are about profits.” I say that is old thinking. That's a false choice. The great companies will be the ones that find a way to have and hold on to their values while chasing their profits, and brand value will converge to create a new business model that unites commerce and compassion. The heart and the wallet. . . . The great companies of this century will be sharp to success and at the same time sensitive to the idea that you can't measure the true success of a company on a spreadsheet—

  He paused for a second and smiled wryly. “I can't believe I just said the word ‘spreadsheet.’ Please do not tell the band I said the word ‘spreadsheet.’”

  We laughed, but most everyone in the arena also believed, especially after the week we'd just had, that Bono was right: People want to do business with companies they respect and trust, especially in the current climate, when they are being more discerning and are scrutinizing their purchases.

  Ever since we'd expanded our relationship with Conservation International back in March, Starbucks had taken more steps to do the right thing as well as to earn consumers’ respect, including putting a stake in the ground and setting some significant goals for how we would approach business in the future. We called this effort Starbucks Shared Planet, and it represents our commitment to doing business in a manner that is good for people as well as the earth. Starbucks Shared Planet is not just a philosophy, but also a set of tangible, ambitious, forward-looking goals that, for the first time, Starbucks committed to publicly.

  The goals address how we design and build stores, the environmental footprint of our cups, how we give back to neighborhoods, and, of course, how we source Starbucks’ coffee. We reaffirmed our commitment to ethical sourcing by, first, announcing there would be more farmer support centers, this time in East Africa, and vowing to ethically source 100 percent of Starbucks’ coffee by 2015, 45 percent more than we were currently procuring.

  We also committed to double our annual purchase of Fairtrade certified coffee to 40 million pounds in 2009, making us the largest purchaser, roaster, and retailer of Fairtrade coffee in the world that year. The move would affect thousands of farmers, including many who only harvested two or three acres of land.

  Putting ourselves out there in this way at such a tenuous time in our business affirmed for many of our partners—who held the company to high standards in this regard—that, despite financial challenges, Starbucks was not abandoning its values. In fact, we doubled-down.

  At the end of Bono's talk, Michelle walked onstage and put a red barista apron on him. Our partners exploded into applause. I thought nothing else could match their joy at Starbucks’ long overdue participation in (RED), our Shared Planet commitments, or the image of Bono as a barista. But I was wrong.

  Bono was upstaged. By Cliff.

  The head of Starbucks’ US business walked onstage holding a mysterious metal briefcase, the contents of which he had just gotten the go-ahead to publicly announce. In fact, Cliff had been in his hotel room the night before when he received an e-mail from our chief information officer, Stephen Gillett. Since Stephen had stepped into that role, he'd initiated sweeping IT reforms, among them negotiating to acquire 10,000 Hewlett-Packard laptops to supplement our stores’ outdated computer systems. Stephen couldn't make it to New Orleans because his wife was due to have their fourth child, and his back-and-forth discussions with HP were still going on when he arrived at the hospital. Finally, from just outside the delivery room, Stephen e-mailed an anxious Cliff: “Go ahead and tell the partners. I just closed the deal.” And with that, a relieved Stephen clicked off his cell and returned to his wife's side.

  Before opening the silver case onstage, Cliff first reviewed the various new support tools coming to stores: a new, easier-to-use point-of-sale system (essentially, the automated cash registers) would be ready to pilot in 2009. Labor scheduling software would empower managers to better control staffing and expenses. A “retail dashboard” would provide data and a common language to improve business acumen. Each announcement was followed by cheers from a stadium filled with store managers fed up with Starbucks’ antiquated technologies.

  “Okay, you've been wondering what's in this briefcase.” Cliff picked it up and placed the case on the podium. He flipped open the top and removed a black laptop computer. A roar of applause. There were whistles. High fives. Hoots. Cliff received a standing ovation that rivaled Bono's. “The tools you need to do your job are on the way,” said Cliff above the din, announcing that every store would soon be getting its own laptop. The volume and duration of our partners’ jubilation exceeded anything we had heard or seen that day, providing proof of just how desperately our managers needed better resources and how hungry they were to do a better job.

  I spoke for the last time.

  The power of this company is you. We need to recognize as leaders that, unlike any other time in our history, this is a seminal moment. This is a test. A crucible. A challenge for how we are going to respond. And my primary message is to share with you the pride that I have in being your partner. The faith that I have in you. People talk about the power of the Starbucks brand, but the power of the Starbucks brand is not some external force. It is you and the people you represent. You are going to restore it. People are going to be writing history books about the business of Starbucks, and the business of Starbucks is going to once again demonstrate that you can build a company with a conscience.

  Please remember what you have experienced here. Remember how you felt. And when you get back, please do not be a bystander. Change and refine behavior when you see it is inconsistent with the standards that we all have observed here this week. We made this investment in you because we believe in you. And all we ask is that you take all this back. 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 have each experienced in the last few days.

  The conference ended. Our partners packed their bags. They headed home. The city seemed empty.

  Craig Russell, his assignment over, was exhausted from a week of 16-hour days spent orchestrating events with his team, and before heading back to Seattle he stayed in the city on Friday to relax. Later, he told me this story: As he walked through New Orleans’ famed French Quarter, he stopped at the booth of a young street vendor to admire the art.

  “Where you from?” the artist asked.

  “Seattle,” responded Craig.

  “Did you have anything to do with Starbucks being here?” When Craig answered yes, the young man got choked
up. “You paid my mortgage this month.”

  That's when it hit Craig. The New Orleans conference had been an unequivocal success.

  Opportunities to authentically galvanize people are few and far between. These moments cannot be invented. They must be real and above reproach and exist on their own merits. Like Craig, I had a gut feeling that New Orleans had met this test, and as with so many other touchstone moments in Starbucks’ history, the only proof I needed was the direct feedback from our partners. Hundreds e-mailed me in the days and weeks following the leadership conference, including eight-year partner Gina Hurstak, a regional director of operations:

  Howard,

  I can't begin to tell you how proud I am to be a partner . . . working with amazing people who want to and will transform this company one cup at a time! These four days have been life changing for many. . . . The highlight was definitely rebuilding New Orleans. I appreciate your passion and belief in all of us. . . . We won't let you, the coffee, our partners, customers, farmers or shareholders down. The troubled economy and competition are challenging our business. Our partners are looking for leadership. And our customers expect more. . . .We will deliver! Thank you for having a vision, sharing it, and allowing us to carry it on.