Our guest for this week's CEOtoCEO presentation was Howard Behar, who served as President of Starbucks for over 21 years, and was part of the leadership team that took Starbucks from a local chain with 28 locations, to an international presence with over 15,000 stores on five continents. Howard spoke about lessons he learned about leadership at Starbucks, and why the Servant Leadership model is so important to creating lasting success in business.
To interview Howard, Jack Rhodes appeared as a special guest on the live stream. Jack and Howard have known each other from childhood, and have been friends ever since. They lived close to each other in the Wallingford neighborhood, but were not in similar economic circumstances. Jack recalled that Howard's father recognized that Jack's family was not as well off as they were, and made it a point to include Jack in activities in which he normally would not be able to participate, such as attending Mariners games, or playing basketball in the Jewish Temple's gymnasium when Jack was a Christian.
Howard recalled working for his father in his market. His father one day had him get a basket of strawberries to put in a customer's bag, but did not ring the customer up for the fruit. Later, when Howard asked his father why he didn't charge for them, his father said that he knew the customer could not afford them, but that it was important to help them in what way he could. He told Howard that it isn't necessary to get paid for everything that you do. Howard noted that this was the event that put him on the path of Servant Leadership, and trying to serve others before serving himself.
A lesson Howard received later in life after he left college came from the owner of a furniture store where Howard worked. He told him that when he closed the shop, he should occasionally take a seat on the showroom floor and just "sit and listen." Howard admitted that the practice seemed pointless for the first several tries, but that after the third or fourth time he actually felt like there was an energy absorbed by the walls which revealed the attitudes and emotions of the people who worked in that space. He came to rely on this practice, which he called "listening to the walls", which he said could tell him in a minute of being in any store, if the work environment and leadership were positive and effective or negative and ineffective.
Another lesson came from an assistant during one of Howard's first significant leadership positions, when he was working for Thousand Trails. Early into his tenure, it became apparent that it would be necessary to lay off much of the workforce to keep the company running. After much difficult deliberation, a list of employees to be laid off was finished, but it was unfortunately left in a public place, and soon the entire company was aware of the impending layoffs. Howard was given advice to hide the unpleasant truth from the employees, and considered taking it until his assistant told him, "Only the truth sounds like the truth", which struck Howard like a revelation. He understood that transparency was the only way the company would be able to have the support and cooperation from the employees that would be absolutely essential to surviving the difficult time ahead of them. The quote influenced Howard's leadership philosophy tremendously, and he had it printed and framed, and had it hung on his Starbucks office wall throughout his tenure there.
Howard mentioned that companies change as they grow and Starbucks was no exception. In the early days, he said that it was not uncommon to know the name of every store manager, and probably know the names of their spouses and children as well. He would also send birthday cards to every employee in the company (which became a significant logistical endeavor as the company grew) until the company surpassed 10,000 employees and it became infeasible. Howard noted that these gestures "kept a big company feeling small", but that a large company can maintain a similar connection to its roots by continually upholding and communicating the company's values. In fact, Howard said that when Starbucks reached about 300 stores that his duties shifted from managing operations to being the "Chief Communicator" and "Culture Manager", making sure that employees understood, embraced, and lived the values of contributing positively to the community.
Howard added that goals and values should be codified and written down so they are given substance, meaning, and accountability for their owner. He personally keeps his own values documented as "Howard in 50 Words", which is a carefully written list that he can look at to review and hold himself to account for living up to them. Similarly, Howard keeps both five-year and one-year plans written out to remind him of the goals he has set for himself, on-hand and nearby.
He admitted that his English teachers would never have predicted that he would write a book, and that he was only able to do so with a great deal of prodding and assistance. Howard's first book, It's Not About the Coffee, was the product of 50 years' worth of jotted notes and odd scraps of paper that were slowly assembled into the story of how his leadership style developed. His second book, The Magic Cup, was a completely different matter, and arose out of the anger he felt when leaving Starbucks, after becoming disappointed in the direction it had taken. During 2007 and 2008, Starbucks faced losses that required extensive layoffs. The leadership at the time decided to do the opposite of what Howard's assistant at Thousand Trails had advised him, and they hid Starbucks' financial situation from the employees, and lost much of the trust that Howard had worked so hard to develop as a leader there.
The Servant Leadership model is something very close to Howard's heart, and is something that he feels is of genuine benefit for companies and the human beings who work for them. He defined the Servant Leader as a leader who is there to help people reach their highest potential, so that they can take the company to future and higher achievements. He stressed that cultivating a sense of caring for employees is not the opposite of measuring performance and demanding high performance. Leaders need to understand that people are not assets, and that treating people like assets will not lead them or the company to greatness. Assets provide expected results like pieces of machinery. Their output and reliability can be gauged with a good degree of accuracy, but if you are really aspiring to greatness, then you need the unexpected revelatory contributions that only people can deliver.
To help illustrate the importance of people over empirical efficiency, Howard offered the example of Costco versus Sam's Club. While Sam's Club had operational efficiency mastered as well as any company, they did not place an especially high value on employee satisfaction or happiness. Costco was led by Jim Sinegal, who Howard considers a true Servant Leader. Costco placed a high value on employee happiness, and was always well-known for the remarkably high wages they paid for retail work. On paper, Sam's Club should be the more successful business, but in reality Costco has sales nearly double those of Sam's Club, and has over twice the profits of Sam's Club. Similarly, Microsoft has become more successful in recent years under a more people-centric CEO.
Howard re-stressed the importance and value of knowing your values, goals, and yourself. He recalled a college class where students were asked to write down their top three values, and how they inform their decisions and actions. The students could not identify their values in a substantive way. It was apparent that they had never given much thought to what their values were. Clarifying your values and purpose are equally important for individuals and companies. For companies, this clarification defines the culture, which is what employees identify with on an emotional level and provide their best effort to support. For individuals, knowing what you stand for will provide the consistency that others respect, and the motivation for you to pursue goals through any setbacks or difficulties.
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