Starbucks CEO, Kevin Johnson, surprised markets with an announcement that he would retire next month without a succession plan in place. Instead of being spooked, investors seemed delighted, as reflected in the 7% jump in the shareprice on the day.
That response can be attributed, in part, due to who will take over, at least in the short-term. The interim CEO will be Howard Schultz, the person who built the company in the first place.
Johnson’s tenure was not a mixed success. He held the reins at a difficult time in the company’s history, steering the business through the Pandemic and rising the challenge of entering the Chinese market.
Johnson had a background in software engineering, so some of the technology adoption, such as a bitcoin loyalty wallet, and a blockchain traceability app were initiatives that Johnson probably felt comfortable with.
But although he accelerated the move to China, they somehow fumbled the opportunity when Luckin Coffee nearly collapsed, leaving a vacuum for Starbucks to enter. But they didn’t capitalise on the space leaving other players and local companies to grow, while Luckin too recovered.
But perhaps the most egregious of Johnson’s failures to the Board was the inability to stop the unionisation of Starbucks stores.
Schultz, who is believed to still be a significant shareholder in the company with shares worth up to 3 billion dollars, had himself battled a nascent unionising effort during his tenure. Schultz is known to be strongly against forming unions at Starbucks, believing instead that the company should be able to offer their employees what they need to have a fulfilling and rewarding career.
The union issue was so crucial to Schultz, that he went to Buffalo, NY, in November last year, to try to persuade the workers not to form a Union. However, according to workers there, he failed to make the right impression. One Buffalo worker described him as lecturing them like a disappointed father. However, I think the fact that Schultz made the effort to engage directly, shows how important the relationship is between the company and its employees, whom it refers to as partners.
We have to take a hard look at how we are doing as a company, and as a community of partners. These are the questions on my mind as we renew a journey to see beyond what Starbucks has been and what it is today, to what it will become.A memo from Howard Schultz
It’s become a difficult environment for hospitality business in the US who are struggling to find workers. Many of us may have seen stories in your regular newsfeed of Starbucks barista’s complaining about being short staffed, and facing increasing numbers of customers ordering complex customised drinks, adding to the pressure.
Johnson had reported to the board last year that he was considering retirement, and the original plan was to appoint Roz Brewer, the company’s chief operating officer, to run the company. But Brewer left Starbucks in February 2021 to become the top executive at Walgreens, and it seems like poor planning on behalf of Johnson, who knew retirement was on the cards, not to be more active in looking for a permanent replacement.
Timothy Hubbard, assistant professor of management at the University of Notre Dame’s Mendoza College of Business agrees. “It’s curious that they were not able to find a successor within a year. For a company, the size and stature of Starbucks not to have a solid succession plan is surprising.”
Board chairwoman Mellody Hobson however, focused on the positive when she said Schultz is “singularly qualified” to be the company’s interim CEO.
I’m very interested in seeing how Schultz operates over the next six months, particularly how he addresses the Union question and whether he will become more directly involved in the China strategy.
Photo by Gage Skidmore | Flickr