Starbucks CEO Howard Schultz's Fresh-Brewed Tips for Business Owners

by Kristine Hansen on June 13, 2013
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At the National Restaurant Association trade show in May, Starbucks CEO Howard Schultz discussed how the coffee conglomerate strengthened its brand and solidified its customer base after the company opened too many stores in a short period of time and despite the dismal economy.

Schultz left Starbucks in 2000 but returned eight years later, vowing the turn the company around. Starbucks, which opened its first store in Seattle in 1971, has grown exponentially since. The company operated 125 stores nationwide when it went public in 1992; today, it counts 18,000 stores in 62 countries.

After a moving video, Schultz, 59, took the stage. He touted the company’s commitment to causes like literacy in the United States, clean water in Africa, education in China, and microfinancing services in various coffee-growing communities through the Starbucks Foundation.

In 2011, Schultz rolled out the Create Jobs for USA campaign – teaming with Opportunity Finance Network — to support the creation of small businesses. Worried about national politics and the trend to source workers and supplies from overseas, ultimately destroying the hopes and dreams of business owners, he rolled out the campaign to effect change. Each customer’s $5 donation led to a total of $15 million in funds (translating to 5,000 jobs either created or retained).

Back at headquarters, change has been brewing for years: Since 1988, the company has offered comprehensive health-care coverage and access to stocks in an equity-sharing program to eligible employees (including part-timers).

“We wanted to create the kind of company that our parents never had a chance to work for,” Schultz said.

Growing up in Brooklyn, N.Y., Schultz saw first-hand “the fracturing of the American dream” when his father slipped on a sheet of ice in 1960 and lost his delivery job. “It imprinted me, and it scarred me,” Schultz said.

He offered the following four tips for business owners.

1. Don’t take your success for granted.

“For 20 consecutive years, Starbucks was on a magical carpet ride. Everything we touched turned to gold — every store, every product, every country,” Schultz said.

In recent years, however, the company began “to measure and reward the wrong things. All of a sudden the bloom was off the rose of Starbucks Coffee Company.” He took some of the responsibility for that. “I stood up in front of everyone, and I offered a deep, humble apology, and I broke down and I cried. We, as leaders, had let our partners [employees] down.”

A year later, all Starbucks stores closed for a one-day training to get everyone on the same page. “Imagine that — the admission of guilt, but it was truthful to a capital T,” Schultz said.

2. Empower your employees.

Starbucks makes it a point to listen to store managers around the world in lieu of a top-down approach. This has led to an “intoxicating” daily experience in many Starbucks stores, where employees get to know customer profiles very well and can predict how new products and services might fly, Schultz said. With Starbucks’ blessing, they have flexibility to bend operating rules when necessary, if it means locking in a customer’s happiness.

“You see the customers much more so than anyone sitting in an office [in Seattle],” he recalled recently telling employees in Thailand and Japan. “The worst thing we can do as managers today is find someone doing something wrong and reprimand them. The store manager creates the excitement and the brand. The brand has been built by the experience that happens every day in our stores. When it’s not (functioning), it’s sad, unpleasant, and unrecognizable.

“Starbucks Coffee Company was built hand by hand by the people who care so much about the customers. We want happy people. We want people who like people.”

Each store, Schultz said, brings in an average of $1.3 to $1.4 million per year.

3. Listen to your customers.

Schultz also called on store employees to truly engage with customers. To move forward, he said, “We had to make it personal. Every customer’s experience matters more than any other time in the history of the company. Customers can also get a cup of coffee across the street for cheaper.”

The new goal became not only to retain customers during these cash-strapped times, but also to convince them to gush to friends about Starbucks.

“We must go back to the entrepreneurial DNA of our company. We must be curious. We learned there is a seismic change in consumer behavior because of technology,” Schultz said. Between 2010 and 2013, Starbucks became the #1 brand on Facebook, Twitter, and Foursquare.

“There is nothing more important to us than building a reservoir of trust with multiple constituents [and having a] heartfelt commitment to the communities we serve. The customer wants to support a company whose values are comparable to their own.”

4. Don’t forget your beginnings.

Starbucks began without a marketing department yet still succeeded. “We’ve never focused on the singular fact that we were selling coffee,” Schultz said.

Instead, he pinpointed “the third place” concept: neighborhood Starbucks stores function as comfortable gathering spots, in addition to home and the office. Starbucks still markets this today.

Photo courtesy National Restaurant Association.

Kristine Hansen is a business writer for Intuit and is passionate about solving small business problems.

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