Is Howard Schultz's Spin Bad for Starbucks?

Savior, showboat, and spin-master, the Starbucks CEO was recently named the Business Leader of the Year. But he's now pushing the spin too far for the $40 billion company's own good.

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Reuters

At this week's annual meeting of Starbucks shareholders, Chairman and CEO Howard Schultz focused his opening remarks not on beans, baristas or lattes, but instead on "the fracturing of the American dream" and "sending a signal to Washington."

That was no surprise to Starbucks followers, given that the New York Times' Joe Nocera teed up last week the fact that Schultz would be giving a speech articulating the importance of the "larger societal role the company has embraced."

That same basic theme prompted Fortune magazine to pick Schultz as "Business Leader of the Year" for 2011, saying Starbucks boss distinguished himself from the pack of other top-performing CEOs because he now "blends capitalism and activism."

But there's another award, if it existed, that Howard Schultz would have also won: "Business Spinner of the Year." In fact, he's probably earned a lifetime achievement award.

VENTI SPIN

I say that largely as a compliment. Much of the business world runs on self-fulfilling prophecies, and many major businesses owe their existences to tenaciously spinning entrepreneurs who insisted on making the story they were telling come true. Would Apple, for instance, be the most valuable company in the world today without Steve Jobs' notorious Reality Distortion Field?

The same is true for Schultz and Starbucks. In his first tenure as CEO, Schultz turned a tiny company into an international giant by doggedly contending the world was looking for a $4 cup of coffee. That concept may seem obvious now, but it certainly was not when Schultz bought the company in 1988, given that the coffee business in America had been in serious decline for decades.

A highly able executive in virtually every dimension of his business, Schultz also innately understood from the beginning that successfully managing his business depended on successfully managing his story. Long known as an irrepressible salesman, Schultz has always applied that same determination to engaging the news media, learning that his willful, winning personality could overcome many obstacles that would stop others.

But it wasn't until several years after Schultz gave up the role of CEO that his spin skills jumped to a whole new level.

Consider that the current typical sound-bite summary of the Starbucks narrative goes something like this:

Howard Schultz returned to Starbucks in 2008, rescuing the company by ending its over-emphasis on growing rapidly at all costs. By refocusing the company on its original strengths, Starbucks is now producing its best results ever.

Nice and tidy, not to mention completely Schultz-centric.

Now consider the actions that essentially created that narrative.

To "return," Schultz had to first "go away," something most Starbucks observers say he never really did when he gave up the CEO title in 2001, remaining in the headquarters offices as a highly active chairman, not to mention the originator of the company's emphasis on rapid growth.

Schultz then set the context for his return with his famous Valentines Day memo in 2007 to then-CEO Jim Donald. Entitled "The Commoditization of the Starbucks Experience," the memo outlined in crisp, stark terms how the reckless pursuit of growth and profits had caused Starbucks to abandon what had made it successful.

The memo was leaked through Jim Romenesko's Starbucks blog, which triggered widespread media attention. The intentionality of the leak was denied by both Starbucks and by Schultz in his book.

The commoditization memo neatly defined the problems, and when Schultz formally returned as CEO and president in January of 2008, he hit the ground running on Day-1 with an explicit, 5-point "transformation agenda" that just as neatly defined the solutions.

Schultz also did what every savvy CEO does when taking the reigns of a troubled enterprise, resetting the financial baseline from which the company would be evaluated in the future. That required writing off inferior assets, which meant closing nearly 1,000 stores worldwide and reportedly firing tens of thousands of people.

Always good at leveraging symbolic non-events into news, Schultz then famously chose to close Starbucks stores for three hours to "retrain" the baristas. Simple and concrete, the clumsy publicity stunt quickly aged well as a sturdy plot point in the lore of The Return.

And then, after the reset, as the business results began to turn positive, Schultz wasted little time in trying to dictate the narrative by almost literally dictating that narrative in the form of his latest book, Onward.

Some reviewers panned the book as a bromidic self-hagiography. But it effectively crystalized the basic storyline for the Fortune piece, which also dutifully moved that story forward by adding the capitalism/activism chapter.

He rescued the coffee chain. It had record financial results this year. Now the CEO is on a campaign to save the country from its politicians. Here's how he blends capitalism and activism.

The Fortune profile chronicled Schultz's two most recent public campaigns: calling for a temporary boycott of corporate contributions to politicians, and selling plastic bracelets to bankroll small businesses and create jobs.

Presented by

Jack Flack’s observations on business spin are written by Paul Pendergrass, a communications consultant, speechwriter and career "flack."  He has been published in numerous sources, including DealBook.

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