In 2008, Howard Schultz returned to Starbucks as CEO after an eight-year hiatus. Doing so required ousting then-CEO Jim Donald.
In his 2011 book “Onward,” Schultz writes about how difficult it was to tell Donald — someone Schultz had a lot of respect for — that he would be replacing him.
Schultz says he started thinking about coming back as CEO in fall 2007. It was the beginning of the Great Recession and the company’s sales were hitting unprecedented lows. Schultz, who at the time was Starbucks’ chairman, recognised multiple problems with the company — most notably that it was focused on rapid growth at the expense of its brand.
Donald had been Starbucks’ CEO since 2005, when he was promoted from president of the company’s North American division. Under his leadership, the number of Starbucks stores grew by about 5,000 to around 15,000, and in 2007 revenue increased 21% to $US9.4 billion. But that same year, the stock price dropped by a whopping 42%.
Once he made the decision to resume leadership of the company, “I dreaded the prospect of telling Jim [Donald],” Schultz writes in his book. “He is a good person, and I did not question his love for Starbucks. Upending his life was one of the most unsettling things I would have to do.”
Schultz asked Donald to come to his house one weekend in January 2008. Presumably, Donald had no idea what was about to transpire.
Schultz had practiced how he would deliver the news and express his sympathy. But in the end, he says the “conversation happened so quickly that I cannot recall the exact words I spoke to Jim before he looked at me with what I perceived as disappointment and surprise, accepted several legal documents that had been prepared for him, and left my house.”
It’s one of the more moving moments in the book. And it suggests that being a leader means putting your allegiance to the organisation as a whole above your relationship with any one employee — however difficult that may be.
The episode also indicates that there’s no “good” way to fire someone, but there are ways to do it with dignity and make it a less painful experience for everyone involved.
According to five-time CEO George Bell, it’s imporant to communicate regularly with employees about their performance, so that it doesn’t come as a total surprise when you let them go. For the actual termination meeting, Bell suggests rehearsing what you’re going to say and keeping the discussion short to minimise irrelevant questions.
As for Donald, the firing wasn’t the end of his career. He went on to become CEO of Extended Stay America in 2012.
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