At one time, Starbucks was golden. “Everything Starbucks did in the past, more or less, had worked,” Howard. Schultz, the CEO, said in an interview in January, 2011 at the company’s headquarters. “Every store we opened was successful, every city, every country.” This led--not inevitably though seemingly so--to a phenomenal intoxicating growth in the number of stores. In 1987, Schultz bought Starbucks, which at the time had just six stores. By 1995, it had 677 shops, and by 2000, when he stepped down as CEO, it had 3,501. According to Schultz, “Growth had a life of its own — and that’s O.K., when you’re hitting the cover off the ball every time, but at some point, nothing lasts forever."  The New York Times reports that after decades of "breakneck expansion . . . tight-fisted consumers abandoned" the megachain's stores during the recession. Starbucks' overreaching under Schultz was thus exposed. Ironically, it was then, in 2008, that Schultz returned to Starbucks as CEO to keep it from becoming the target of a take-over or going bankrupt. Starbucks "ultimately closed 900 locations worldwide and cut $580 million in costs." Fortuantely, by April 2009, "same-store sales, though still down from a year earlier, were finally rising. By the holidays, they had turned positive." In spite of this turnaround, lest history repeats itself, is should be asked whether Schultz had been cured of his taste for the growth drug.

According to The New York Times, "Friends and colleagues say this hellish experience left [the CEO] a changed man." Specifically, he had become more humble or realistic concerning how much expansion a given customer base could allow. “We have won in many ways,” he told employees after the recession, “but I feel it’s so important to remind us all of how fleeting success and winning can be.” In actuality, business is not like a game that lasts for a set period then ends; a business does not "win" or "lose."  That analogy fails even if it seems to have value in motivating susceptable sycophants. Instead, running an ongoing company is like riding a roller coaster through boom and bust. One does not "win" or "succeed" during the ongoing ride. Even this analogy can only be partial, for managers are not passive riders; their stategic decisions can affect their firm's profitability.

Even if the so-called hellish experience changed the CEO, "(o)ne thing hasn’t changed: the man dreams big." Specifically, his post-recession strategy as of Starbucks' annual stockholders' meeting in March of 2011 involved expanding into still more products and in markets like China. According to USA Today, there was "one core item on the agenda"--growth--"but in a very un-Starbucks-like way." In fact, the reporter took pains to stress the different nature of this growth. "Still smarting from the lessons of the recession and about expansion, it’s clearly not growth in the traditional sense for Starbucks." I beg to differ with respect to this qualification; the growth being planned was very Starbuckian, and thus not reflecting any lessons that could have been learned from having overexpanded before the recession of 2008. While diversifying the product line into a variety of consumer packaged goods may seem at first glance to represent a different kind of growth, opening more stores abroad is errily similar to the overexpansion that occurred prior to the recession.  Simply stated, Schultz loves to open new stores, even if they happen to be on the same block as an existing store. Although power comes with expansion, it is growth itself that is being sought in such an exercise of empire-building.

In Success, Ostdick writes that Schultz referred to China as a significant opportunity and to diversifying into consumer packaged goods as growing another business. Ostdick cites a stock trader after a Starbucks' presentation in December of 2010 as being convinced of Starbucks' "ability to evolve from a predominantly retail business into a well-diversified consumer packaged goods--of CPG--and retail platform." The company may indeed have been able to diversity thusly; the question is whether that strategy fits with the company, given its track-record of over-expansion. In other words, it hasn't done well under the growth drug.  Similarly, an alcoholic might be able to work in liquor store, but that doesn't mean that he or she should.

As of early 2011, Starbucks already had roughly 430 stores in mainland China and the company was planning to have 1,500 there by 2015. India beckoned as a potential growth market in this "go-go growth" strategy as well. Additionally, Schultz had the words “Starbucks Coffee” removed from the company’s green mermaid logo because he wanted, according to the paper, to "waltz his brand up and down the grocery aisles." The product strategy was to sell a wider variety of drinks and foods, such as Kind fruit and nut bars, in grocery stores as well as in the company's own stores. The company was even selling a book on love. Observing one being purchased, I asked the customer if it was a book on coffee. "No, it's on love, actually. I didn't know Starbucks was into that sort of thing." This statement illustrates the risk to Starbuck's brand identify from wandering off into fields of love and even packaged goods. Diversifying packaged products rather than concentrating on developing new coffee-based items could stretch the talent too thin and compromise Starbucks' identity.

At the stockholders' meeting, Schultz said new Starbucks-branded products could include teas, juices “and who knows what?” One might also ask: who knows what Starbucks will be?  He said the consumer products expansion will ultimately “rival” the size of sales at Starbucks retail stores. What the company is known for could thus change substantially--perhaps into something like a nondefinitive blob. Trying to be everything to everyone, as though conglomerated P&G wannabe, the company almost synonymous with the American coffee house was positioning itself to lost its strategic advantage--essentially losing the soul of its identity to wander the isles of grocery stores rather than try to capture the coffee isle. Does taking such a risk, particularly in the wake of excessive expansion, merit a record CEO bonus? Beyond bad strategy, Starbucks might have been suffering from a corporate governance system too cozy with its CEO.

Howard Schultz did not give up the growth ghost after all; in fact, he was bragging about it at the stockholder meeting, saying "fasten your seatbelts"--essentially saying, "you ain't seen nothing yet!" He was simply shifting the expansion off shore and actually widening it by expanding by diversifying at the product level. That is to say, he was still being seduced by the drug of what he had called "go-go growth." Even so, The Wall Street Journal reports that he received a  record $3.5 million bonus for the year ended October 3, 2010. The bonus, his biggest ever, far surpassed the $1 million he had received the year before.  The board was presumably discounting the chance of repeating the bubble of over-expansion that had almost ruined the stockholders' value--perhaps being overconfident of Schultz's recovery. The board would be well advised to remember that what goes up too high or too fast is apt to come crashing down when it is least expected, and that the "vision" of a charismatic leader can be intoxicating. The surging Chinese economy could falter, for example, with Chinese consumers quickly going back to basics, especially given their history of subsistence consumption and saving. 

A Changed Starbucks.

                 A Changed C.E.O.

The New York Times reports that in early 2009 at Google, "statisticians . . . embarked on a plan code-named Project Oxygen. The 'people analytics' teams at the company produced what might be called the Eight Habits of Highly Effective Google Managers. 'My first reaction was, that’s it?' says Laszlo Bock, Google’s vice president . . .  for human resources. 'The starting point was that our best managers have teams that perform better, are retained better, are happier — they do everything better,' Mr. Bock says. 'So the biggest controllable factor that we could see was the quality of the manager, and how they sort of made things happen. The question we then asked was: What if every manager was that good? And then you start saying: Well, what makes them that good? And how do you do it?' He tells the story of one manager whose employees seemed to despise him. He was driving them too hard. They found him bossy, arrogant, political, secretive. They wanted to quit his team. 'He’s brilliant, but he did everything wrong when it came to leading a team,' Mr. Bock recalls. Because of that heavy hand, this manager was denied a promotion he wanted, and was told that his style was the reason. But Google gave him one-on-one coaching — the company has coaches on staff, rather than hiring from the outside. Six months later, team members were grudgingly acknowledging in surveys that the manager had improved." (1)

Analysis:

"What if every manager were good" sounds a lot like "What is everyone were above average?" One might reasonably ask: In what sense good?  Good people as in kind-hearted?  Good as in having mastered managerial skills?  Or good as in having a good style--meaning that it fits the particular corporate culture? The question of what makes a manager good hinges on what is meant by "good." In the case of the bossy and arrogant manager at Google, I contend that what was "bad" was not limited to or sourced in his style; rather, the problem was his personality, which transcends style. Arrogance, for example, is a basic attitude rather than a style. It is no surprise that "coaching" (a mismomer outside of sports even if a fad in business circles) did not turn the guy around. It sounds to me that the guy needed therapy or counseling. That Google would reduce a "bad" personality to leadership style and prescribe "coaching" rather than a therapist is no accident.

It is commonly taught in business schools and believed in business settings that the science of management is applicable for virtually any business in any industry. In fact, one can theoretically manage a "team" (another misnomer from sports--is business really so boring that such faddish terms need to be borrowed and used out of their context?) without having any skill or knowledge particular to the product.  The idea, in short, is that anything can be managed, and that knowledge of the particular thing is not requisite. Hence it is not surprising that managers would overstep onto psychology without having a knowledge of that field. What is actually a psychological problem is thus transmuted into managerial terms such as "style" and "coaching." Personality, in other words, is reduced to the extent to which it fits within leadership and the manager is assessed from the standpoint of leadership style (e.g., task vs. relationship). Moreover, reducing managing to behaviors, as if that which is inside the manager is a black box, is to ignore that which separates the mice from the men as managers in terms of getting along with others (i.e., "good" as interpersonal relations).  In other words, improving a manager's "style" by trying to change (manipulate?) her behavior is apt to be insufficient. It is like paddling a row boat without moving the anchor; the boat isn't going to move very far.
With this in mind, I turn now to critique the "Eight Good Behaviors" that the good people at Google recommend.

• Be a good coach. Included: provide specific feedback without being too negative and "present" solutions to problems. But isn't this just management?  I don't see much actually transferred from what coaches do in sports.
• Empower your team and don't micromanage. Freedom vs. advice. Challenge the "team" with "big" problems. Sounds like this was written by a "team" of kindergarden teachers (no offence to the latter). Empower is a faddish politically-correct term that is rarely defined adaquately. With regard to micromanaging, every micromanager I have encountered has had control issues--meaning psychological problems involving or impacting personality and interpersonal conduct (but not rooted in conduct, or style!).
• Express interest in team members' success and personal well-being. Get to know about their lives outside of work and make new team members feel welcome. Helping new people to feel welcome is laudable; it is perhaps the area where a manager can truly be most human. Success, however, is a vague term implying an ending (e.g., Did you succeed in getting the kids to sleep last night?), whereas business typically is ongoing and thus not like a race or contest.  Another unsuccessful analogy unless used for particular tasks that have a clear end-point.  With regard to getting to know things about subordinates outside of work, this can be viewed as invasive and with a hidden agenda (e.g., to manipulate better "performance"). Also, ethical problems can arise if subordinates feel pressured to discuss matters such as their religion and politics. If a manager, as a human being, is genuinely interested in other people at work, subordinates will likely sense it; otherwise, they could feel manipulated.
• Don't be a sissy: Be productive and results-oriented.  Focus on the "team" setting achievement goals and priorities.  We are back to kindergarden language (e.g., sissy and be productive!) and to what is essentially management itself (which is inherently geared to producing results). A business is a results-oriented enterprise.  A focus "on what employees want the team to achieve" belies a manager's true intention to set goals for the people working under them.
• Be a good communicator and listen to the team. Two-way communication. "Hold all-hands meetings and be straightforward" in communicating . . . Encourage open dialogue and listen." All-hands? At any rate, should we really be encouraging managers to have more meetings?  Being straightforward is laudable, however, as is open dialogue. The question is perhaps whether this is even possible where managers view their subordinates as lower. In other words, can there be straightforward dialogue where there is a power relation between boss and employee?
• Help your employees with career development. Here too, the difficult matter of being able to be straightforward is relevant, given how organizational politics and a manager's own interests can relate to others' career development.
• Have a clear vision and strategy for the term even in the midst of turmoil. Involve the team in setting the vision.  Here is yet another vague analogy that has been a fad: leadership vision. How does this differ from coming up with a goal? Has anyone in the study of leadership or management successfully defined vision?  The think about faddish words use as weak analogies is that people can use them without knowing what they mean--even as they are using them! Everyone just sorta looks the other way rather than asking: well, what do you mean exactly by vision as distinct from goal-setting? Long-term goal setting?  But is that to have sight or merely to plan further out? Lastly, the use of the word turmoil, particularly when one considers how a turbulent business environment pales in comparison with the protests in the Middle East and the Japanese earthquake in 2011, seems to be excessive. Do managers have a tendency to overstate--or overdramatize--what they face on a daily basis?
• Have key technical skills so you can help advise the team. Work side by side with your subordinates when needed and understand the work they are doing. This principle, or "habit," challenges the notion that a person can learn management skills and apply them to virtually any business--knowledge of how to make the particular product being unnecessary.  I suspect this is an American view of management. The Japanese have traditionally hired managers from the factory floor precisely because they are familiar with the technical skills being used to make the particular products.  A good manager, I contend, is one who is already proficient with most of the tasks of his or her subordinates and can therefore help out when needed.  So it would appear that Google got one right.