Recently Starbucks’ Chairman and CEO Howard Schultz published his newest book, Onward: How Starbucks Fought for Its Life without Losing Its Soul. Schultz is credited with growing the company from a small Seattle-based chain to the huge multinational company it is today. After stepping down from the company’s leadership in 2000, Schultz returned as CEO in 2008 to prompt a turnaround.
While the company had been faltering – as a result of “carcinogenic growth,” Schultz said – the company is now enjoying record-breaking profits.
Schultz has explained the reason behind the company’s turnround was a strong investment in the customer experience. At a very basic level, he explained, Starbucks has focused on its people, rather than strictly on its profit margins. Here are three ways the company leveraged relationships to fuel its success.
1. Reorienting Stores around Relationships
Schultz said one of the best things he’s done to bring the focus back to the employee/customer relationship was to quit reporting on monthly store profits. In an interview with the McKinsey Quarterly, he said, “An albatross around the neck of most retailers and restaurant companies is this metric that Wall Street created many, many years ago: the calculation of the growth of stores open for more than one year.”
“So I announced, one day when I came back, that we were going to stop reporting monthly comps. …what I was trying to do was make sure that our people were managing the business for the most appropriate constituent, which is the customer.”
Together with other relationship focused, the company has come back. As Jack Maher of KUSA reported, “It reemphasized training for employees, allowed customers to customize drinks more, opened stores with more local flavor, increased its Wi-Fi offerings and launched a rewards program.”
Schultz said, “We’re sitting today with record revenue, record profit; the stock price is at a five-year high. This isn’t an accident.”
2. Rebuilding the Connection to the Community
Refocusing on the community has meant a stronger commitment to community service for the company. This has meant initiating not only projects at the corporate level, but also encouraging employees to volunteer within their communities. As Schultz told KUSA, “I think that from the very beginning we’ve tried to balance a need to make a profit with a deep sense of social conscious and giving back to the community. So it’s not just about what’s going on in our stores, it’s really demonstrating the humanity of our company.”
This month, for example, the company is embarking on a huge commitment in honor of community service month. As Cliff Burrows, President of Starbucks USA and Michelle Nunn, CEO, Points of Light Institute, recently wrote in the Huffington Post, “April is going to be a month of community service for our company. And that’s not unusual for us. But we are going to donate, or commit to, almost 200,000 hours and 2,000 projects around North America.”
3. Refocusing on the Employee Experience
Finally, Schultz has worked to rebuild the employee experience at Starbucks – ensuring it’s not just a coffee shop or a fast food restaurant, but a place were people are energized to work. As Carmine Gallo reported in Forbes.com, Schultz said the Starbucks experience really starts with its people, so it’s critical that they are engaged with the company’s mission. He said:
“Starbucks is the quintessential experience brand and the experience comes to life by our people. The only competitive advantage we have is the relationship we have with our people and the relationship they have built with our customers.”
In fact, Schulz said that one of his biggest business challenges is getting the right people on board. He told McKinsey:
“[Our biggest growth constraint is] human capital. We want to attract world-class people who have values that are well aligned with the culture of the company. And we want to make sure that the growth of Starbucks in the future doesn’t in any way cover up the mistakes we’ve made in the past.”