Howard Schultz: Building a People-Based Company
In the winter of 1961, 7-year-old Howard Schultz was throwing snowballs with friends outside his family’s apartment building in the federally subsidized Bayview Housing Projects in Brooklyn, New York. His mother yelled down from their seventh-floor apartment, “Howard, come inside. Dad had an accident.” What followed has shaped Howard throughout his life.
He found his father in a full-leg cast, sprawled on the living room couch. While working as a delivery driver, Howard’s father had fallen on a sheet of ice and broken his ankle. As a result, he lost his job—and the family’s health care benefits. Howard’s mother could not go to work because she was seven months pregnant. His family had nothing to fall back on. Many evenings, Howard listened as his parents argued at the dinner table about how much money they needed to borrow. If the telephone rang, his mother asked him to tell the bill collectors his parents were not at home.
Howard vowed he would do things differently. He dreamed of building “a company my father would be proud to work at” that treated its employees well and provided health care benefits. Little did he realize that one day his own company would have 350,000 employees working in 32,000 stores worldwide. Howard’s life experiences provided the motivation to build Starbucks into the world’s leading coffeehouse.
“My inspiration comes from seeing my father broken from the 30 terrible blue-collar jobs he had over his life, where an uneducated person just did not have a shot,” Howard said. These memories led Howard to provide access to health coverage, even for part-time employees.
That event is directly linked to the culture and the values of Starbucks. I wanted to build the kind of company my father never had a chance to work for, where you would be valued and respected, no matter where you came from, the color of your skin, or your level of education. Offering health care was a transforming event in the equity of the Starbucks brand that created unbelievable trust with our people. We wanted to build a company that linked shareholder value to the cultural values we create with our people.
Unlike some who rise from humble beginnings, Howard is proud of his roots. He credits his life story with giving him the motivation to create one of the great business successes of our lifetime. But understanding the meaning of his story took deep thought because, like nearly everyone, he had to confront fears and ghosts from his past.
The Bayview Housing projects in southeastern Brooklyn are burned into Howard. When he took his daughter to see where he grew up, she surveyed the blight and said with amazement, “I don’t know how you are normal.” Yet his experience growing up there is what enables Howard to connect with practically anyone. He speaks with a slight Brooklyn accent, relishes an Italian meal, dresses comfortably in jeans, and respects all types of people. He has not forgotten where he came from or let his wealth go to his head: “I was surrounded by people who were working hand-to-mouth trying to pay the bills, felt there was no hope, and just couldn’t get a break. That’s something that never leaves you—never.
“From my earliest memories, I remember my mother saying that I could do anything I wanted in America. It was her mantra.” His father had the opposite effect. As a truck driver, cab driver, and factory worker, he never earned more than $20,000 a year. Howard watched his father break down while complaining bitterly about not having opportunities or respect from others.
As a teenager, Howard clashed often with his father, as he felt the stigma of his father’s failures. “I was bitter about his underachievement and lack of responsibility,” he recalled. “I thought he could have accomplished so much more if he had tried.” Howard was determined to escape that fate. “Part of what has always driven me is fear of failure. I know all too well the face of self-defeat.”
Feeling like an underdog, Howard developed a deep determination to succeed. Sports became his early calling, because “I wasn’t labeled a poor kid on the playing field.” As star quarterback of his high school football team, he hoped to earn a scholarship to play at Northern Michigan University, becoming the first in his family to earn a college degree. When the scholarship did not come through, he paid his way through college with student loans and multiple part-time jobs. His fierce competitiveness never faded; it just shifted from football to business.
Working in sales at Xerox, Howard felt stifled by the bureaucratic environment. While others thrived in Xerox’s culture, Howard yearned to go his own way. “I had to find a place where I could be myself,” he said.
I could not settle for anything less. You must have the courage to follow an unconventional path. You can’t value or measure your life experience in the moment, because you never know when you’re going to find the true path that enables you to find your voice. The reservoir of all my life experiences shaped me as a person and a leader.
Howard encountered Starbucks Coffee in 1982 while making a sales call at Pike Place Market in Seattle for a houseware company. “I felt I had discovered a whole new continent,” he said. He actively campaigned to join the company, which was then a wholesaler to other coffee shops. On a buying trip to Italy, Howard noticed the Milanese espresso bars that created unique communities in their customers’ daily lives. He dreamed of creating similar communities in America, focusing on creating coffee breaks, not just selling coffee products.
When he learned he could acquire Starbucks from its founders, Howard worked tirelessly to round up financing from private investors despite facing more than 200 rejections. As he was finalizing the purchase, he faced his greatest challenge when his largest investor proposed to buy the company himself. “I feared all my influential backers would defect to this investor,” he recalled, “so I asked Bill Gates Sr., father of Microsoft’s founder, to help me stand up to one of the titans of Seattle because I needed his stature and confidence.”
Howard had a searing meeting with the investor, who told him, “If you don’t go along with my deal, you’ll never work in this town again. You’ll never raise another dollar. You’ll be dog meat.” Leaving the meeting, Howard broke into tears. For two frenzied weeks, he prepared an alternative plan that met his $3.8 million financing goal and staved off the investor.
If I had agreed to the terms the investor demanded, he would have taken away my dream. He could have fired me at whim and dictated the atmosphere and values of Starbucks. The passion, commitment, and dedication would have all disappeared.
The saddest day of Howard’s life came when his father died. Sharing with a friend the conflicts he had with his father, his friend remarked, “If he had been successful, you wouldn’t have the drive you have now.” After his father’s death, Howard reframed his image of his father, recognizing strengths such as honesty and commitment to family. Instead of seeing him as a failure, he realized his father had been crushed by the system. “After he died, I realized I had judged him unfairly. He never had the opportunity to find fulfillment and dignity from meaningful work.”
Howard channeled his drive into building a company where his father would have been proud to work. By paying more than minimum wage, offering substantial benefits including health care, and granting stock options to all its workers, Starbucks offered employees what Howard’s father never received. As a result, the employee turnover at Starbucks is less than half that of other retailers.
Among Howard’s greatest talents is his ability to connect with people from diverse backgrounds. While CEO, he would tell his story and the Starbucks story at special events, typically visiting two dozen Starbucks stores per week. Each day he woke up at 5:30 am to call Starbucks employees around the world. He said, “Starbucks gave me the canvas to paint on.”
Starbucks is the quintessential people-based business, where everything we do is about humanity. The culture and values of the company are its signature and its competitive difference. We have created worldwide appeal for our customers because people are hungry for human connection and authenticity. Whether you’re Chinese, Japanese, Spanish, or Greek, coffee is just the catalyst for that connection. I don’t know if I was drawn to this business because of my background, or whether it gave me the opportunity to connect the dots, but it has come full circle for me.
In 2000, Howard turned the reins over to a new CEO, Jim Donald, but remained as board chair. In 2007, a controversial e-mail he wrote to Donald and Starbucks’ executive committee expressing his concerns that the Starbucks experience was becoming commoditized was leaked to the press. This created a firestorm in the media and among Starbucks’ customers and employees. In January 2008, Howard returned to Starbucks as CEO. One of his first moves was to shut down all U.S. stores for a half day of employee training to emphasize Starbucks’ need to restore its original culture. During Howard’s second tour, Starbucks’ market capitalization grew by more than $100 billion. Howard officially stepped down as chairman in 2018. After flirting with a 2020 run for president, he now devotes significant time to philanthropy and service.
Like most leaders, Howard deals with both positive and negative thoughts that compete in his mind as he reflects upon his life story. I call this phenomenon “dueling narratives,” and it is common for even the most successful leaders.
Howard retains a deep fear of failure emanating from his father’s disappointments. Rather than let his negative narrative drag him down, he accepted it and reframed it. His positive narrative keeps him focused on his dream of creating a better type of company that provides opportunity to employees and treats them with respect.