Kevin Johnson with Howard Schultz at the latter’s farewell event in 2018 – Photo: Starbucks
Howard Schultz is back again at Starbucks
Starbucks is looking for a new CEO following Kevin Johnson’s decision to retire after 13 years at the company.
Mr. Johnson, who has led Starbucks since 2017 when he succeeded Howard Schultz, said that he informed the company’s board over a year ago that he was considering retirement.
The coffee giant’s board said that it has been engaged in continuous succession planning since last year and anticipates it will have a new CEO in place by the fall. Mr. Schultz, who built Starbucks into an international powerhouse, will return on April 4 for his third stint in the CEO position.
“As I make this transition, we are very fortunate to have a founder who is able to step in on an interim basis, giving the board time to further explore potential candidates and make the right long-term succession decision for the company,” said Mr. Johnson in a statement. “I have enjoyed every minute of the job and am proud of what we have achieved together. It has been an honor to serve the 400,000 Starbucks green apron partners around the world and I want to thank them for their service, resilience and optimism.”
Mr. Johnson steps down at a time when the company faces some labor unrest. The chain has sought to forestall union organizing activity that arose as a result of adverse working conditions during the pandemic as demand remained high and staffing was short. Six Starbucks stores have voted to this point to be represented by the Workers United union. Another 130 locations — Starbucks has about 9,000 in the U.S. — are seeking votes through the National Labor Relations Board.
There doesn’t appear to be a clear frontrunner to replace Mr. Johnson as CEO, but Starbucks has plenty of candidates, CNBC reports. These include: John Culver, president and COO of Starbucks North America business; Troy Alstead, former COO and CFO for the company; and Roz Brewer, another Starbucks alum who is currently the CEO of Walgreens Boots Alliance. Starbucks might seek to convince Mr. Schultz to remove the interim tag or turn to a board member such as Mary Dillon, former CEO of Ulta Beauty, or Ritch Allison, CEO of Domino’s.
Not making CNBC’s list but also a former Starbucks executive is Michelle Gass. She left the company after 16 years to join Kohl’s as chief customer officer before being named CEO.
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DISCUSSION QUESTIONS: What is your assessment of Starbucks’ business at present? What type of leader does it need at this point in its history?
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Starbucks is facing a number of challenges, so the timing of this is curious. With the unionization effort and geopolitical issues, one might think this is poor timing. On the other hand, given these challenges, perhaps this is exactly the right time. The next leader needs to focus on corporate culture and especially employee relations. The unionization push is a symptom of a bigger problem, and the next leader needs to resolve this.
I agree with you Mark – this came (apparently) out of the blue but maybe it was the right time for the company. The unionization issue and the closing of stores in Russia seem to be big issues for the company and those issues (especially the unionization effort) are not something that are going away anytime soon.
Richard, in all fairness over a year isn’t exactly out-of-the-blue.
We don’t really know why Kevin Johnson is stepping down. He’s only 61, but who knows? Maybe he just wanted to take some time off to smell the roses, or maybe he had enough of the stress of leading through a pandemic.
We will probably never know for sure, but he isn’t exactly leaving a well-oiled machine for the next CEO, whoever she or he is.
I’m not a big fan of the founder CEO returning to the business after retiring. I get it that their enthusiasm and vision can be great to help a company focus on what made them successful, however I’ve seen too many examples where this has hampered a company’s ability to make needed changes to support growth. Starbucks is at a crossroads at the moment. Between labor concerns and inflationary pressures on what is a 100 percent discretionary business, they need innovation and change to continue their success. Mr. Schultz may be the leader to bring these changes. I hope I’m proven wrong.
Gary,
As a rule I agree, but there are some exceptions like Steve Jobs returning to Apple. It all depends on the founder and how long he or she plans to stay around.
Starbucks is facing a number of sticky issues that the new CEO must address head-on and resolve as quickly as possible. More than anything else, I believe this stems from a larger cultural issue that has been in place for several years. Can Mr. Schultz resolve this while he’s the interim CEO? Perhaps, but it will likely take longer than his tenure will allow, which makes the board’s next hire extremely important. They would be wise to find someone with deep labor experience and expert negotiating skills because it will be at the top of the priority list on day one in the role.
Starbucks is at a crossroads and there is precious little margin for error in its decision of which path to take. Hard hits to staffing and operations during COVID-19, being a potentially high-visibility notch on modern trade unionism’s belt, having been so successful in the past that the future becomes problematic (a la The Gap), changing consumer attitudes and life and work styles, some terrible social justice missteps, and a failure to get a handle on what seem to be intractable problems, such as optimizing every day part the stores are open, are a lot for any incoming CEO to inherit, even if the board has been planning for Kevin Johnson’s retirement for over a year. And there is the problem of “new CEO disease” — bold pronouncements by the incoming team of “getting back to our core value s while preparing for the future of our customers and associates,” possible rebranding, experimental programs, etc. — which generate lots of press but never quite balance out the adverse effects of the disruption they create in their wake. Life has changed in very fundamental ways and Starbucks needs to recognize that. I think the company needs a leader who will spend most of their time dodging photo ops and really listening to – and more importantly hearing associates. If I were the new CEO I’d get my house in order before I planned a major remodel.
If you look at stock price as an indicator, the market is leery about the state of Starbucks. The shares have fallen from $118 to $85 and even lower with pandemic levels in the $50s. That said, the Starbucks user is dedicated and resilient. The company has always been a leader in employee relations, offering online education and other benefits.
Unionization and inflation are definitely causes of concern for $4 luxury beverages, but I still think strapped consumers will shell out the cash to “treat” themselves to an affordable luxury. I expect frequency will drop and the company will need to expand average order values to make up the loss.
Regarding new leadership, post COVID, consumers are looking for experiences again. A returned focus to the in store experience should be a key focus rather than app pick up and drive through. Finding a CEO who can deliver against a physical environment will be key.
Back? Did he ever really leave? In theory more than fact, I’m thinking.
You raise an excellent point.
I think there’s a strategic issue in play for the direction of the company, where the board will have to decide in the hiring of their new CEO.
When Howard Schultz retired, Johnson and his team quickly shut down initiatives in and reduced emphasis focused on store expansion, brand/coffee quality story telling and the development of high-end roasteries. While that quickly improved the bottom line, it also represented the soul of Starbucks. Schultz built the company brand on the mystique of enjoying something special, in a really good drink and in the serendipity of meeting in the third place. And yes, rallying green apron associates toward this vision was also key. Take this emphasis away and you look more like a Dunkin’ shop as each day goes by, with evolution more towards fast service, coffee and convenience. Is that where the company should go?
Surely the new CEO coming in will feel pressure to make Wall Street and the board happy. They can find a good leader and operator to clean up the current mess and go forward as is. Or will the board take the extra step to hire someone who also loves coffee, who knows how to build back some of the mystique, and the brand?
Howard always comes back during times of need … some can argue that he never completely left as the head of the business.