By Joann S. Lublin and Julie Jargon
It's good to be the boss -- unless the former boss is looking
over your shoulder.
Howard Schultz, who is relinquishing his role as Starbucks
Corp.'s chief executive, says he will truly step back from daily
decision-making, unlike the last time he gave up the top job 16
years ago.
Mr. Schultz, who over the past two decades changed the way
Americans drink coffee, said last week that he plans to hand over
the CEO title in April to Starbucks President Kevin Johnson, who
has served on the company's board for seven years and has been
second in command for nearly two years.
Instead of managing the day-to-day business, Mr. Schultz will
stay on as chairman and take on a new project to build luxury
coffee shops within Starbucks. Investors are expected to get more
details Wednesday on the company's plan to open high-end stores
serving rare coffees.
The transition plan is fairly unusual in corporate America. More
typically, a successful exiting CEO remains board chairman for a
transition period that lasts no longer than a year.
The handover comes at a pivotal moment for the coffee chain.
After many years of posting strong same-store sales growth in its
key U.S. market, sales have begun to slow. Starbucks has missed
sales targets in the U.S. for four straight quarters, which it says
is due to economic uncertainty. It may be years before the new
high-end stores have an impact on results.
Keeping the former CEO hanging around in another operational
role is more common at tech start-ups than at large, established
companies, experts say. It can succeed if the current and former
CEO have distinct areas of expertise, said Jeffrey Sonnenfeld, a
senior associate dean at Yale School of Management who has written
leadership books.
But such an arrangement won't work if the company is "trying to
appease" its former chief, according to George L. Davis Jr., leader
of the global CEO practice at executive recruiter Egon Zehnder.
Then, "it usually is a recipe for friction."
People who have worked with the 63-year-old Mr. Schultz say he
has created a culture in which staffers feel free to disagree with
him.
But Mr. Schultz, who helped build Starbucks into a global brand,
has had a hand in the direction of the business as far back as
1982, when he joined the company as its director of marketing and
retail operations.
Orin Smith, who served as CEO after Mr. Schultz stepped down
from running the company in 2000 to focus on opening more stores
overseas, said "we had our share of conflicts" over issues such as
whom to promote and which new countries to enter. But the two
executives knew how to collaborate and settled disagreements
privately, Mr. Smith said.
Yet, Mr. Schultz also remained highly involved in other major
strategic decisions and "had the last call on all matters," Mr.
Smith said.
Mr. Smith retired in 2005 and was succeeded by Jim Donald, whom
directors fired three years later after the company's sales
faltered and traffic at its U.S. stores declined for the first
time. Under Mr. Donald, the chain had ventured into selling books,
music and movies, which distracted Starbucks from the business of
selling coffee.
In a 2011 book, Mr. Schultz said his relationship with Mr.
Donald became complicated. "I tried to give him space to do his job
by forcing myself to stay out of meetings and keeping some
opinions, but not all, to myself," Mr. Schultz wrote. He wrote that
he had continuing disagreements with Mr. Donald about which people
to promote into key roles. Mr. Schultz retook the helm in 2008.
Mr. Donald couldn't be reached for comment.
Mr. Schultz said leaving the CEO post this time will be
different. Through a spokesman, he said Mr. Johnson, once he
becomes CEO, will have the final call on all company decisions.
But pairing a company's visionary with an operations executive
doesn't always work out in a CEO handover.
At Martha Stewart Living Omnimedia Inc., for example, founder
and chairman Martha Stewart was appointed chief creative officer
when the company elevated operating chief Lisa Gersh to CEO in July
2012. Less than six months later, Ms. Gersh announced plans to
resign. Her tenure had been marked by a difficult relationship with
Ms. Stewart, people familiar with the company said at that
time.
Messrs. Schultz and Johnson have a close working relationship
and a unique friendship, according to people familiar with the
matter. The two men, who are known to finish each other's
sentences, work in adjacent offices at Starbucks's Seattle
headquarters and plan to continue doing so.
Analysts say Mr. Johnson, a former Microsoft Corp. executive and
CEO of Juniper Networks Inc., has the know-how to oversee the
chain's 25,000 stores.
In an interview last week, Mr. Schultz credited Mr. Johnson as a
co-architect of the strategy of moving upscale. Mr. Schultz, who
began talking with Mr. Johnson about becoming CEO this spring,
said: "Our skill base couldn't be more complementary."
(END) Dow Jones Newswires
December 07, 2016 07:14 ET (12:14 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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