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

by Howard Schultz

  Cliff, who recognized Lean's potential, had asked Scott to focus on it full-time in the summer of 2008.

  Lean was not an easy sell, and many of us in Seattle were on a learning curve as we figured out how to relinquish some of our control by inviting store partners to problem solve as well as adopt new routines. The proposed changes in workflow and thinking could frustrate and intimidate people in the field, but experiencing Lean's effects firsthand could turn skeptics like me into believers. The more our managers and baristas were asked to pay closer attention to the details of their daily activities, the more shortcomings they noticed, voiced, and solved, and the more customer service improved. Their stories found their way to me.

  In Chicago, regional director Kristen Driscoll integrated Lean thinking into her coaching and watched, somewhat amazed, as her managers begin tackling various problems. At one store, America-nos were taking longer than necessary to make. At others, carafes of milk at the self-serve condiment bar were going unused and being thrown out. Floors looked dirty no matter how many times partners cleaned them. When pouring brewed coffee, partners turned their backs on customers. People manning the register repeatedly walked away from the machine for any number of reasons, prolonging checkout time. And, in almost every store, pounds of unused ground coffee were being thrown out. Each of these issues was eventually addressed thanks to the persistence and ingenuity of individual store partners.

  Kristen summed up Lean's benefit well: “We were spending so much of our time fixing moments, but not actually solving problems. But fixing moments, like mopping a dirty floor, only provides short-term satisfaction. But take the time to understand the cause of the problem—like how to keep a floor from getting so dirty in the first place—solves, and maybe eliminates, a problem for the long run.”

  In store after store, Lean thinking was producing better ways of doing business, and customer satisfaction began to rise. Not all the so-called repeatable routines, like the Eight-Minute Cadence, were right for every store, but by asking our partners to proactively rethink how they work and to have a hand in improving their own environment, instead of simply coming in and doing their work, we were essentially asking them to act like owners and entrepreneurs. Like independent merchants.

  The challenge our leadership faced in formally rolling out Lean was finding a balance between encouraging it and pushing it, between ceding partners more independence while ensuring that they maintained the high standards our customers expect and the performance our shareholders deserve.

  For my part, I began posing my own question to partners at open forums around the world: “If this was your store, what would you do differently?” If an answer is within the guardrails of Starbucks’ values, mission, and quality standards, I encourage them to do it. Inside Starbucks, Lean has become a very big idea.

  What a difference six months can make.

  By June 2009, tangible signs that the transformation was taking hold began to emerge:

  Our new store designs were being rolled out and lauded.

  More of our store partners were embracing Lean principles—though we all still had much to learn—and customer surveys were measuring statistically significant improvements in service and satisfaction. Partner friendliness was up six percentage points, speed of service was up by 10 points, and overall customer satisfaction was up eight points since their recent lows.

  In our test markets, VIA was exceeding expectations, and its small team was laser-focused on its nationwide fall launch.

  Online, Starbucks had been ranked the number-one most engaging social media brand thanks to our presence on Facebook, Twitter, and nine other outlets.

  Our Plan B cost savings were exceeding our quarterly targets and expanding our operating margins.

  Monthly comps continued their uptick, from negative 7 percent in April to negative 4 percent in June. At the end of the month, our share price closed at $13.89, up 41 percent from the beginning of the year.

  And, much to our pleasure, when the Zagat ratings for best-tasting coffee in our category came out, Starbucks was rated number one.

  Despite the fact that many analysts and pundits were still counting Starbucks out, my mood began to shift, and for the first time in a year and a half, I looked forward to hosting our upcoming earnings call. In many ways, July 2009 was looking to be a momentous month for Starbucks, likely full of many pleasant surprises.

  Chapter 31

  Conscience

  It was a late June morning in Rwanda, the beginning of the dry season, but the coffee farms nestled in the hills outside the capital city of Kigali still looked lush. On the ground, thousands of farmers and their families were waiting to greet us.

  This was my third trip to Rwanda since Starbucks had begun sourcing coffee beans from the African country in 2004, and as I walked into the sea of people, returning smile after smile that welcomed us to the coffee-farming cooperative, it was hard to imagine, although impossible to forget, that only 15 years earlier Rwandans had suffered horrific acts of ethnic violence and murder in a genocide that turned neighbor against neighbor, ravaged communities, destroyed families, and stole the lives of an estimated 800,000 men, women, and children in barely 100 days. I'd read books about Rwanda's tragic history and had come to know its current leader, president Paul Kagame, whose fight to end the genocide and commitment to healing the country are among the most inspiring acts of rebirth in human history.

  I've been to other African nations, and inevitably each has touched me in its own way. But there was something about Rwanda. Something I saw in people's faces, especially in the eyes of the children and their mothers, that grabbed my heart. Their will to move on and rebuild, even to try to forgive instead of dwelling in hate, were incomprehensible yet a testament to the inner strength human beings are capable of. I felt that being in their presence and conducting business together was an honor, especially because coffee was playing an important role in the country's economic and emotional recovery.

  Starbucks sources coffee from tens of thousands of farmers in almost 30 countries, mostly from families who work on small farms of only a few dozen acres. Coffee farming requires hard, hard labor. What's more, sustaining a profitable business had been a challenge for them long before Starbucks even existed.

  First, harvesting high-quality green coffee beans requires a unique skill set that is acquired over time and often passed down from generation to generation. Growing coffee is indeed a craft.

  Second, coffee farmers have a history of not being paid adequately or being charged unconscionably high interest rates to borrow money so they can run their businesses. And too often the money the consumer spends to buy coffee never even makes it to the farmer, but rather gets unfairly distributed among a thicket of middlemen. In my almost 30 years with Starbucks, our coffee buyers had made tremendous progress in ensuring that our farmers are treated and paid equitably. It is a delicate loop that begins and ends with quality. For Starbucks to pay a premium price to a coffee farmer, we have to have a premium product that our customers are also willing to pay a premium for. As such, Starbucks sets high quality standards that not every coffee farmer is capable enough or caring enough to meet.

  Starbucks can, however, assist farmers on a number of fronts.

  Collaboration between our coffee department and our global responsibility team, as well as our growing partnerships with Fairtrade and Conservation International, was improving the depth of Starbucks’ farmer support. We had also committed to increasing the amount of money we make available for loans to coffee farmers from $12.5 million to $20 million per year by 2015. Recently, we had built our second farmer support center in Rwanda—the first has been operating in Costa Rica since 2004—where our own partners help farmers improve the size of their harvests and the quality of their crops.

  I was traveling with a group that included Vivek; Darcy Willson-Rymer, who runs Starbucks in the United Kingdom; Peter Torrebiarte, Starbucks director of coffee sustainability; and Christina
McPherson, a director of public affairs who had coordinated the trip's back-to-back agenda. Also with us was Harriet Lamb, the executive director of the UK Fairtrade Foundation, and Sheri, who along with Starbucks partner Laura Moix Varma is involved with Foundation Rwanda, an organization founded by photojournalist Jonathan Torgovnik and Jules Shell to provide educational opportunities for Rwandan children born of rape during the 1994 genocide. Jonathan was also with us and would film our group as we toured the co-op, met farmers, and saw a new AIDS clinic.

  Our hosts led us into a brick, wood, and tin facility built into a sloped hill. A young man named Gilbert in a button-down striped yellow shirt and khakis described what we were seeing. As he spoke, we walked past rows of wood tables where bushels of raw white coffee beans were drying in the sun. I was impressed by what seemed to be a smoothly run co-op with about 1,800 different farmers.

  After the tour, we attended what I could only describe as a jubilant presentation of singing and dancing, and when I was asked to speak I actually found myself at a loss for words. It almost seemed impossible to adequately convey my respect for the thousands of Rwandans sitting in front of me, shoulder to shoulder on the slope of a small hill. I could only begin to understand the trials they had suffered and I was filled with respect for their hard work and commitment. Never before had the human side of the equation that guided Starbucks—a commitment to balancing people and profits—been so palpable. Less than 50 feet from me were thousands of lives that Starbucks had the power to help—or to hinder. Standing in front of a microphone and next to the blue, green, and yellow striped Rwandan flag, I spoke from the heart.

  As I look out and see all of you, the most honest thing I can say is that it is humbling and very difficult to find the words to express to you the importance of your role with Starbucks. . . . I suspect that most of you have never even heard of Starbucks, so I just want to spend a few moments talking about who we are as a company.

  My intent was to put a story with our faces and to articulate the origins of the company so the farmers and their families might see how their daily work is part of a larger organization with values and purpose. I spoke about the company's history for several minutes, stopping occasionally as my words were translated into Kinyarwanda and broadcast over a loudspeaker.

  As we look at the future, I think I realize personally more than ever, especially looking at all of you, the deep responsibility that Starbucks Coffee Company has in ensuring that you get the fair price that you deserve. . . . What I can say in closing is that we will be the kind of partner you can depend on, and we will do as much as we possibly can to help you and your families.

  Earlier that day, I'd had a more private conversation with a small group of farmers whom I'd wanted to hear from directly about how things were going. Some 20 people had gathered in a long, narrow open-air room, and I took a seat on a bench against a brick wall with Gilbert to my left, who translated the farmers’ comments into English.

  The room as well as the farm was very quiet, and other than the voice of an individual speaking, all we heard was the occasional chirping of birds. I listened as a dapperly dressed man in a white collared shirt and gray sport jacket posed a question.

  “What is Starbucks going to work on so that they can help the farmers eliminate some of the challenges they are experiencing?” Embedded in his question was an issue that is not unique to Rwanda and that we need all of our farmers, in every country, to understand.

  “A reason we are successful as a company is our ability to source the highest-quality arabica coffee in the world,” I answered, stressing that quality is paramount. “One thing we want to try and do with the coffee here in Rwanda is help you become more efficient in how it is being grown.” I looked across the room at Peter Torrebiarte who oversees the farmer support centers and ensures our C.A.F.E. Practices are implemented around the world. I asked him to elaborate and passed the floor to him.

  Starbucks recognizes that we have to pay the best price for the best coffee, but helping you is not just about the price we pay. Myself, I am a third-generation coffee farmer, and what we can do through the farmer support center is help you make more money through sharing what we have learned from some of the best farmers around the world who faced similar problems. . . . We are coffee roasters, not farmers, but we can share with you better, cheaper solutions that will provide you with higher quality and higher yields. Some of the farmers we have helped through our first support center have reduced the cost of their fertilizers by 80 percent and increased their yields by 20 to 30 percent, and that means more money for you.

  The final objective is for you to be able to have more of your coffee with our stores by helping you establish a high-quality, consistent, and cost-efficient coffee so you can focus on farming and not worry whether you will sell your crops.

  After Peter spoke, I felt the need to reiterate our commitment to helping the co-op's farmers be the best they could be. “Starbucks is here to stay in Rwanda,” I stated succinctly. “We are deeply committed to Rwandan coffee and Rwanda. We are going to be buying Rwandan coffee for many years.” It was our shared responsibility, Starbucks’ and the farmers’, to ensure both fairness and quality, which would increase the amount we were able to purchase, the price we could pay, and the profit the farmers could realize. “We recognize the opportunity for the future,” I added. “We also see something in the hearts and minds of the people here, and we want to bring that to life in our stores all over the world.”

  As the meeting neared an end, Harriet from the Fairtrade Foundation smiled and posed a question to the half-dozen female farmers in the small room.

  “We would like to know, what are your dreams for your futures?” The question was a good one, significant because honoring Rwandan women—thousands upon thousands of whom had survived brutality during the genocide and now solely supported themselves and their children—was of utmost importance to the country. I listened intently, and the first response I heard through our interpreter was not what I had expected. The female farmers, said Gilbert, hoped to produce their own coffee one day, without men, and to prove to others that, as women, they could do a great, even better job on their own because of their patience and attention to detail. Several people in the room clapped.

  Then Harriet asked a young woman with blue heart earrings dangling from her lobes the final question of the session. “Can this lady tell us what is her dream for her family?” The woman, whose name was Mukamwiza Immaculate, responded clearly and quietly, and I sensed Gilbert was slightly taken aback as he translated her words. “She would like to make an income so she can buy a Friesian cow so she can get more milk for her family. That would be her dream.” I, too, was taken aback.

  “I just want to understand,” I said, leaning forward and looking at the woman. “What will a cow do, just so I understand?”

  Gilbert explained. “From cows you get milk, so the kids will obviously have better nutrition, but local breeds do not produce as much milk as Friesians, which have enough milk for consumption and more milk to sell, so the milk also becomes additional income for the family.”

  A cow. I mouthed the words silently, trying to wrap my head around just how difficult this woman's life must be. I closed the meeting with a final thought. “I believe very strongly that all of us are responsible for what we hear and what we see. We have heard your words, and we understand some of the issues and some of the challenges. We will not forget. We will understand, remember, and work hard for you.” I waited patiently as Gilbert interpreted my words, and then I looked at Mukamwiza. “And we're going to try and get you a cow.”

  A single cow, I was later informed, costs $500.

  “It is wonderful that you are helping her,” a government official who was accompanying us said to me, “but there are so many others . . .”

  That sentiment weighed heavily on my mind during the long flight back to the United States. How much could one person, or for that matter one company, really do? I did not
have an answer other than that doing nothing was unconscionable.

  Returning to Seattle was a bit like landing in another world, and it took a while to mentally and emotionally transition. But I was eager to share what I'd seen and heard in Rwanda. In an open forum, I told the story of our visit to the co-op, and when I finished speaking I asked, as always, if anyone had questions. In the back of the room, a woman I didn't recognize raised her hand.

  “My name is Linda O'Brien,” she said. “Five months ago, when I was out of work and needed a job, Starbucks gave me one. I would like to pay it forward and buy that woman a cow.”

  Linda not only donated money to purchase a cow, but within weeks her comment motivated us to initiate a relationship between Starbucks and Heifer International, a nonprofit that provides livestock to impoverished populations around the world. Through Heifer, more Starbucks partners—as well as the Starbucks Foundation—donated funds to send Friesian cows to Rwanda. Equally important, Heifer attended to the complexities of buying, delivering, and maintaining the livestock, training recipients like Mukamwiza how to properly care for them so they thrive.