19 Amazing Ways CEO Howard Schultz Saved Starbucks


Photo: AP

On January 8, 2008, the second day Howard Schultz was the newly-reinstated CEO of Starbucks Corp., its stock jumped 8 per cent. A few days later, Schultz read a MarketWatch article about turnaround CEOs. Its author advised that Schultz follow the lead of CEOs like Steve Jobs and Charles Schwab, who led successful turnarounds and “recognise what they had built isn’t a religion.”During his eight year hiatus — when Schultz served as chairman — the company grew from approximately 5,000 stores to 15,000. But it was all too fast. In 2007, Starbucks’ stock dropped 42 per cent. 

“The damage was slow and quiet, incremental, like a single loose thread that unravels a sweater inch by inch,” Schultz says in his book, Onward.

In early 2007, Schultz wrote a memo to then-CEO Jim Donald about the company’s slow demise, which was later leaked to the media. A few months later, the board ousted Donald and brought Schultz back in.

Beginning in the depths of the recession, the turnaround took two years. Today, Starbucks has more than $10 billion in revenue and employs 150,000.

In February 2008, Starbucks closed 7,100 U.S. stores for 3 1/2 hours to retrain its baristas on how to make the perfect espresso

All major news outlets covered the closings: CNN, ABC, NBC, CBS, Fox News. Stephen Colbert even covered it during his show. Starbucks lost $6 million that day.

Upon taking the post, Schultz invited people to email him directly -- no sooner did he receive 5,000 emails

He also made personal phone calls to stores across the nation to see how things were going.

For the first time in company history, Schultz looked to outside consultants for ideas on how to revive the company

Also for the first time ever, Starbucks invested in a major national advertising campaign, employing BBDO

This commercial aired during SNL in the heat of the fall 2008 presidential election season. It got 70 million media impressions.

He appointed a chief technology officer, Chris Bruzzo from Amazon.com

Bruzzo updated Starbucks' website and improved its overall social media presence.

Starbucks introduced Pike Place roast to show it was serious about coffee

The company also decided to only deliver whole-bean coffee to its stores, and required baristas to grind the beans in the stores. Any coffee that had been sitting more than 30 minutes was to be tossed.

Schultz made the executive decision to nix heated breakfast sandwiches from the menu

He decided the aroma from the sandwiches was overpowering the smell of coffee in stores. A few months later, after the company improved the sandwiches with healthier ingredients, Schultz restocked the stores with the heated sandwiches.

The company replaced all of its outdated cash registers and computers

Up until then, stores operated on an old Microsoft-DOS platform that even Microsoft had stopped supporting in the mid-1990s. The company estimates the new system is saving 700,000 wait-in-line hours.

In January 2009, Starbucks closed 600 stores -- or 7 per cent of its global workforce -- cutting $850 million in costs

And 70 per cent of these stores had been opened within the previous three years.

Starbucks replaced all of its espresso machines with the Mastrena, a sophisticated Swiss-made machine

Schultz also completely reorganized supply chain operations -- getting products to stores more efficiently and improving inventory

In 2008, only three out of every 10 orders were delivered perfectly to stores. Today, it's nine out of 10 orders.

Costco's CEO once said that losing customers in a down economy is much more expensive than investing in them. Taking this advice, Schultz created a customer rewards card

By July 2008, customers had loaded $150 million onto the cards.

Starbucks overhauled the entertainment division, scaling back on all the CDs and books that had started to overpower the stores

Schultz decided to continue offering health insurance to his employees -- in order to stay aligned with the company's guiding principles

In 2009, this cost $250 million -- which was up nearly 50% more per partner compared to 2000.

Starbucks was the first U.S. company to offer comprehensive healthcare coverage and equity in the form of stock to the part-time worker.

Schultz shook up senior management, and later added members of tech companies to its board of directors, including Google's COO Sheryl Sandberg

Starbucks rolled out a new design for all of its stores

Schultz re-hired Arthur Rubinfeld to redesign its stores and 'recapture the coffeehouse feel.' After firing nearly all of Starbucks' design staff, Rubinfeld designed stores with softer colours, more exposed architecture, unique lighting and more strategically-placed furniture.

In June 2009, Schultz announced that he would increase partners' salaries according to merit

Schultz took a chance on instant coffee with VIA. It turned out to be a hit and got tons of media attention

The company committed to doubling its annual purchase of fair-trade certified coffee to 40 million pounds in 2009

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