Why I Appreciate Starbucks

It’s not just that Schulz doesn’t favor suits (at the talk I heard him give last week, he was wearing a cardigan sweater) but also that he has a heart, which he is willing to wear on his sleeve, and a mission in life that’s not limited to profit.

What makes Schulz a different kind of leader is his recognition that any company today must see itself as part of a larger community, serving a universe of stakeholders far beyond its immediate shareholders.

Specifically, Schulz is out to prove the power of a different kind of business model — one that, in his words, “balances profit with social responsibility.”

In his new book Onward: How Starbucks Fought for Its Life without Losing Its Soul. Schulz talks about his mission in a way that’s very different from most CEOs. “Everything we’ve tried to do,” he writes, “is steeped in humanity.”

At Starbucks, that has meant contributing both money and time to meet local needs in the communities it serves, promoting sustainable farming communities and ethically sourcing coffee, and packaging and transporting its products with sensitivity to their environmental impact.

It’s also meant creating what Schulz calls a “third place” between home and office, where people can connect with each other or spend time alone, comfortably and relatively inexpensively.

As Schulz sets across the country to promote his book, I’m hoping he’ll help to launch a national conversation about a different kind of leadership, and a different kind of business model. He’s now proved, for a second time, that his approach can work.

The first one began in 1986 when Schulz purchased a small group of Seattle-based coffee stores and built the company into a household name over the next two decades. In 2000, he stepped down as CEO of Starbucks. Over the next two years, as the company expanded at a blinding rate, its business went into something of a freefall.

In 2008, Schulz returned as CEO and engineered a transformation that had its bumps along the way, but ultimately led Starbucks back to its best financial performance ever in the last quarter.

There are a slew of fascinating details in Onward about the business moves Schulz made to reposition the company, including his harrowing decision to lay off hundreds of nonperforming stores along the way and lay off thousands of employees.

“Slimming down the company [was] brutal,” he writes. “Absolutely brutal. And even as we did so as compassionately as possible, our actions still seemed unfair. But the tragedy of not doing so would have been far worse.”

Most interesting for me was what Schulz did to reignite the passion of Starbucks employees, and reconnect the company to its customers.

Two powerful examples:

In the mad rush to expand, Schulz concluded that the quality of its signature product had been sacrificed. With that in mind, Schulz decided to close every one of its stores in order to retrain its 135,000 “baristas” in how to brew the perfect espresso. And that’s what he did, beginning at 5 pm on a Tuesday in February, 2008.

“If the Barista does not care and produces an inferior espresso that is too weak or too bitter,” Schulz writes, “then Starbucks has lost the essence of what we set out to do 40 years ago … Starbucks has always been about so much more than coffee. But without great coffee, we have no reason to exist.”

Closing the stores cost Starbucks $6 million in lost revenues, a slew of media sniping, and the possibility of antagonizing its loyal customer base. Instead, Schultz is convinced — and I believe him — that the closings turned out to be a turning point, reinstilling a spirit of excellence among employees, and ultimately providing a better product to customers.

The second event was a leadership conference for 10,000 employees that Starbucks held one month after the crash of the stock market in September 2008 — in flood-damaged New Orleans. Many at Starbucks favored postponing the biennial event in order to save the $30 million it would cost to put it on. Schulz felt it was critical to go forward and especially liked investing in New Orleans.

The first day of the conference was devoted to volunteering. All told, Starbucks employees invested50,000 hours — painting, planting grass, laying mulch, cleaning storm drains and even constructing playgrounds. The rest of the conference focused on reenergizing the gathered employees.

“Somewhere along our journey the love our people had for Starbucks had blurred,” Schulz writes. “New Orleans brought it back into focus.”

Schulz deeply understands two connected keys to the success of companies in the decade ahead. First, employees — especially in Gen Y — feel far more committed to companies whose values and mission they find inspiring. Second, customers and clients increasingly prefer to support companies whose values are consistent with our own.

I admire Howard Schulz, which is why I want to suggest another leadership challenge to consider.

Starbucks already offers one of the better compensation packages to its employees, including full health benefits, the right to buy Starbucks stock at a discounted rate and modest matching company contributions to employee 401(k) plans. Why not continue to lead the way in fairness by finding ways to create more equity in pay for employees, and less disparity between the highest and the lowest?

The Rise of India: What It Means for the United States

Xerox CEO Burns tells MIT Sloan students, “You have to be authentic.” Leadership lessons

In the 1980s, Xerox Corp. Chairman and CEO Ursula Burns couldn’t have blended in if she wanted to. At the time there were “literally, virtually no women” engineers, Burns said at MIT Sloan last week. And there were just “no” black women engineers.

So it’s a good thing, then, that Burns found a company that encouraged her to be herself.

“Never did they say ‘It’s really important that you fit in,’” Burns said in a talk for the Dean’s Innovative Leader Series. “The thing that was great was that I was able to morph myself into a place that was comfortable.”

As a black woman, Burns—who will provide the commencement address at MIT in June—stood out immediately when she joined Xerox in 1980 in Rochester, N.Y., as a mechanical engineering intern. One of three children born to a poor single mother living on the Lower East Side of Manhattan, Burns was a city girl. And once in Rochester, she took to working alone in her office with the door closed. It was only later that she met her husband, a chemist at Xerox, and ascended, step-by-step, to become the first black woman CEO of a Fortune 500 company. That was in 2009.

“By entering Xerox as an engineer, I was able to learn the company from the smallest embodiment of the company all the way up through,” Burns said. She advised students to work hard (“because the people paying you deserve it”) and learn their companies inside out. She also cautioned against job-hopping, saying the personal investment in a company would be valuable and rewarded.

Burns periodically mentioned her mentor—attorney, activist, and Xerox board member Vernon Jordan. She called him as a constant personal cheerleader, one who convinced her to stay at the company when she nearly left to work at Dell in 2000. Jordan, she said, was a major influence on her ability to form her own leadership style at Xerox.

“If you don’t check yourself early, you’ll become these ugly people, these ugly leaders who think they have so much,” Burns said.

“You have to be authentic. You have to try to figure out your space and be in your space.”

 

 

ACLU Reports More Than 900 Complaints This Month Over “Enhanced” TSA Security Measures

The American Civil Liberties Union has received over 900 complaints in the month of November from travelers who have been subjected to the Transportation Security Authority’s (TSA) new “enhanced” screening procedures. The procedures include sending travelers through backscatter X-ray machines that produce naked outlines of travelers’ bodies and subjecting them to thorough pat-downs that include TSA agents touching their breasts and genitals on the outside of their clothing.

Most of the complaints, which were submitted through an online form on the ACLU’s website, came from travelers who reported feeling humiliated and traumatized by the procedures. Some of the excerpts include:

• “The TSA agent used her hands to feel under and between my breasts. She then rammed her hand up into my crotch until it jammed into my pubic bone.”
• “I cried throughout the groping and have had intrusive thoughts since. It was humiliating.”
• “The procedure was violating, degrading, invasive and humiliating.”
• “It was so rough that I felt the effects of it throughout the day.”
• “I do not feel safer. I feel violated.”

The following can be attributed to Laura W. Murphy, Director of the ACLU Washington Legislative Office:

“The government must keep us safe, but it must do so in a way that is sensible, effective and constitutional. The new ‘enhanced’ security methods are far more intrusive than other methods but have not been shown to be any more effective. Nobody should be forced to choose between ‘naked scans’ and intrusive groping by strangers to keep our airplanes safe.”

Kmart

Kmart, a wholly owned subsidiary of Sears Holdings Corporation (NASDAQ: SHLD), is a mass merchandising company that offers customers quality products through a portfolio of exclusive brands and labels.

As of January 30, 2010, Holdings operated a total of 1,327 Kmart stores across 49 states, Guam, Puerto Rico, and the U.S. Virgin Islands. This store count consists of 1,292 discount stores, averaging 93,000 square feet, and 35 Super Centers, averaging 168,000 square feet, and includes 21 Kmart stores that we have announced plans to close in early 2010. Most Kmart stores are one-floor, free-standing units that carry a wide assortment of general merchandise, including products sold under such well-known labels as Jaclyn Smith and Joe Boxer, and certain proprietary Sears brand products (such as Kenmore, Craftsman, and DieHard brand products) and services.

As of January 30, 2010, 274 Kmart stores were selling an assortment of major home appliances, including Kenmore-branded products. Kmart began operating its own footwear business, which had previously been operated by a third party, in January 2009. There are 1,021 Kmart stores that also operate in-store pharmacies. The Super Centers generally operate 24 hours a day and combine a full-service grocery along with the general merchandise selection of a discount store. There are also 20 Sears Auto Centers operating in Kmart stores. Sears Auto Centers offer a variety of professional automotive repair and maintenance services, as well as a full assortment of automotive accessories. Kmart also sells its products through its kmart.com website.

Big Kmart – Big Kmart signals a different kind of Kmart. These stores are bigger, brighter and offer big savings, big value, big selection and big convenience.

• Big Kmart stores are designed to increase store sales by increasing the frequency of customer visits. The format focuses on three distinct businesses – home fashions, children’s apparel and consumables – and features an expanded food area known as the “Pantry.”
• The layout makes it easier for customers to shop by placing the departments our customers want to shop near one another, and closer to the front of the store.
• The average Big Kmart carries nearly 100,000 stock-keeping units (SKU’s).
• Big Kmart stores average between 84,000 to 120,000 sq. ft. in size.
• The first Big Kmart opened in Chicago, Illinois on April 23, 1997.

Kmart Super Centers – Kmart Super Centers are combination full-service grocery and general merchandise stores. Most Kmart Super Centers operate 24-hours a day and offer special services.

• Kmart Super Centers range in size from 140,000 to 190,000 sq. ft..
• Kmart Super Centers feature in-house bakeries, USDA fresh meats, fresh seafood – delivered daily of course, a full delicatessen and a variety of specialty food kiosks.
• The average Kmart Super Center carries between 100,000 and 150,000 SKU’s.

Traditional Kmart Stores – The traditional Kmart store is the one most people recognize

• Traditional Kmart stores average between 80,000 to 110,000 sq. ft. in size.
• Kmart stores carry a full selection of general merchandise and include a Pharmacy.
• The average Kmart store carries between 60,000 and 80,000 SKU’s.
• The first Kmart store opened in Garden City, Michigan in March 1962.

 

 

 

Bank of England chief warns of ‘currency war’

Bank of England governor Mervyn King has warned that tensions between countries over their respective exchange rates could degenerate into trade protectionism amid talk of a potential ‘currency war’.

Ahead of a meeting of G20 finance ministers and central bankers in South Korea this weekend, King told British business leaders late on Tuesday that “the need to act in the collective interest has yet to be recognised”.

“Unless it is, it will be only a matter of time before one or more countries resort to trade protectionism as the only domestic instrument to support a necessary rebalancing” of economies.

“That could, as it did in the 1930s, lead to a disastrous collapse in activity around the world. Every country would suffer ruinous consequences — including our own.

“But, to borrow a phrase, in order to be tough on protectionism, we need also to be tough on the causes of protectionism.”

King called for a “grand bargain among the major players in the world economy”.

The world needed “a bargain that recognises the benefits of compromise on the real path of economic adjustment in order to avoid the damaging consequences of a move towards protectionism.

“Exchange rates will have to be part of such a bargain,” he stressed.

The United States and European Union, trying to export their way to economic health amid lacklustre domestic demand, accuse China of significantly undervaluing the yuan to boost its own exports.

China says it is being made a scapegoat for US domestic problems.

And it points out that expectations of US “quantitative easing”, a move to pump more dollars into the market, are swamping emerging markets with destabilising capital inflows as investors chase higher yields.