Advance Performance | Leading With Transparency Through A Crisis
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Leading With Transparency Through A Crisis

Leading With Transparency Through A Crisis

Howard Schultz carries a key with him, the key to the Seattle waterfront store where Starbucks started. This coffee place has been preserved as it was in 1971, never changed, as a reminder of the company’s roots and purpose, its values, and its history. He sometimes returns there in the early morning before it opens to centre himself and remind himself of what is truly important in the company especially when facing a crisis.

Howard Schultz is no stranger to a crisis in business. Just last year, months before he was stepping down as CEO of Starbucks, the company gained the media spotlight over a racism incident. The CEO dealt with the issue openly and swiftly – by apologising for the wrongful arrests of the two black men at the Philadephia store, and organising a shut down of all US stores for an afternoon so that all staff could be trained about race bias. Schultz told CNN’s Poppy Harlow: “Racial bias does exist. Unconscious bias exists, We need to have the conversation. We need to start.”

This transparency of acknowledging and dealing with the core of a problem, as well as communicating openly both with all the employees in the company and the customers is the key to Schultz’s leadership which he shares in “Real Leadership: What Do You Do In Crisis,” the first in a series of lessons he’ll be teaching on MasterClass, the online education platform, and shared on the Forbes website.

Schultz shares his invaluable advice and experience on leading people at the most critical time in a company – when jobs need to be cut. He had to make those decisions within months of his second term as CEO at Starbucks whose stock had plummeted by 42% in 2007 and they were losing on average 50 customers per day.

When he returned as CEO in 2008, Howard stood up on his first day in front of whole company in Seattle and apologised to them and their families for “letting you down.” He accepted as Chairman he was culpable and had not been paying close enough attention. He expressed his difficulties in having to balance the values of the company with the strategies needed for financial viability. He went against advice and said he was 100% honest and transparent on the reality of the challenges facing the company.

As Schultz says the keys to transparency in leadership are: Trust, Values and Belief.

“How could I ask something of them if I wasn’t willing to share with them the total picture and total understanding of really what the situation was and how dire it was?”

The returning CEO followed up this meeting with a conference for 12,000 store managers in an arena in New Orleans a few months later where he stated the reality of the situation, and the strategies – the closures of underperforming stores and job cuts that were needed for the company to survive and return to growth and profit as well as back to its true purpose of coffee and The Third Place between home and work. Schultz stressed the transparency he needed to share with these store managers who would be directly affected – and would have to share the details with the teams at each store:

It’s going to have a significant impact on the people who remain, because they’ve worked alongside them, they know them, they know their families,” says Schultz. “This has to be done in a way where you are demonstrating 100% empathy and compassion for them and you are explaining why you have to make this decision.”

When formalising the strategies, he knew that he was asking the staff to rise to difficult challenges, but the trust, values, belief and complete transparency of information were keys to taking his people on that journey.

I just feel so strongly that people today, if you’re asking them to do something that hasn’t been done before, if you’re asking for something that is quite difficult and they have to sacrifice something and they’ve got to bring all of themselves to it then they deserve to have the information that you have, to understand what it is we’re trying to do, what are the challenges, what are the financial issues and what is it we have to overcome.”

And how did Schultz ask his people to take on these challenges? He returned to the “why” of the company – the coffee, The Third Place, and where it had all started. His advice to all of us is return to that key to that original store and purpose.

Remind people, through storytelling, about the heritage of the company, how hard it was to get here. Success is not an entitlement. It has to be earned, and it has to be earned every day.”

You can follow the whole 90 minute series of talks by Howard Schultz on Business Leadership: Leading a Values Based Business on the MasterClass programme (there is an annual fee).