The Perils of Picking a CEO

The Perils of Picking a CEO:
5 Things Starbucks Can Teach Us All About Leadership Hires

Red flags were all over the field when Starbucks hired Laxman Narasimhan as CEO in 2023, so it was not a big surprise when there were challenges during his tenure, and his time there ended after just sixteen months. The five red flags below could happen to any company, and they are shared to help others avoid the same outcomes Starbucks and its employees and customers experienced.

CULTURAL MISALIGNMENT

Starbucks has a strong and unique company culture that emphasizes community, employee engagement, and a commitment to social responsibility. Narasimhan's previous roles, particularly in the more corporate and profit-driven environments of PepsiCo and McKinsey, signaled a potential misalignment with Starbucks' values. His approach to leadership which focused on financial performance, may not have fully resonated with the Starbucks ethos.

Outcome: During his tenure, there were reports of declining employee morale and dissatisfaction among baristas, who felt overworked and underappreciated. This could be seen as a sign that Narasimhan's leadership style was not effectively fostering the inclusive and supportive environment that Starbucks prides itself on.

LACK OF RETAIL EXPERIENCE

One of the most obvious red flags was Narasimhan’s lack of experience in Starbucks’ core business. Narasimhan had a background in consumer goods, particularly at PepsiCo, and twenty years consulting at McKinsey & Company, but he lacked direct experience managing the core of Starbucks' business: retail. The retail sector, especially at the scale of Starbucks, requires a deep understanding of operational complexities, supply chain logistics, and frontline employee management—areas where Narasimhan's experience was limited.

Outcome: This gap in experience became apparent when Starbucks faced operational issues with the mobile order-ahead system. The new system was intended to enhance customer experience, but instead led to store-level chaos. Long wait times frustrated customers and stressed employees, highlighting a disconnect between corporate strategy and on-the-ground execution.​

STRATEGIC MISJUDGMENTS

Narasimhan's decision to prioritize and rapidly implement mobile order-ahead services was seen as a strategic move to modernize Starbucks. However, this strategy underestimated the operational strain it would place on stores and did not account for the complexities of managing increased digital orders alongside in-store customer service.

Outcome: The mismanagement of this initiative led to customer dissatisfaction, with many frustrated by long wait times and a decline in service quality. The strategy also alienated some loyal customers who valued the in-store experience over the convenience of mobile ordering​. The operational strain negatively impacted employee morale too.

POOR CRISIS MANAGEMENT

Starbucks, like many global brands, often finds itself at the center of social and political debates. Narasimhan's handling of the Israel-Gaza conflict, which sparked backlash from both pro-Palestinian and pro-Israeli customers, highlighted a lack of adeptness in navigating sensitive issues that require a nuanced and careful approach.

Outcome: The company's handling of this situation not only led to a public relations challenge but also negatively impacted sales. Narasimhan might not have fully appreciated the complex dynamics of leading a brand like Starbucks, which is deeply intertwined with its global customer base's social values​.

INVESTOR AND BOARD RELATIONS

Howard Schultz, the former CEO and a key figure in Starbucks' history, had a significant influence on the company and its strategic direction. Despite Schultz initially endorsing Narasimhan, there were signs that Schultz's confidence in Narasimhan waned as financial and operational issues surfaced. Additionally, activist investors like Elliott Management began to pressure the board for changes, indicating growing dissatisfaction with Narasimhan's leadership.

Outcome: The eventual loss of support from Schultz and activist investors contributed to Narasimhan's premature exit. The fact that these influential stakeholders lost confidence relatively quickly could be seen as an indicator that Narasimhan was not the right fit for the role​.

While the first two red flags were visible prior to hiring Narasimhan, the others evolved. The first two should have been enough to either not hire him in the first place or create a different onboarding plan.

For his onboarding, Narasimhan spent six months training as a barista, which gave him insight into daily store operations. He saw the anxiety over keeping up with long lines of customers and their orders, tension between stores and corporate, and supply chain management issues. He burned his hand during his time in the stores. He had good intentions but his misunderstanding of the culture and lack of experience with operations would have taken too long to repair the challenges Starbucks faced at the time.

The takeaways for our companies and us as leaders? Pay attention to the red flags you see when you are interviewing as the candidate or company.

A thorough understanding of the challenges facing the company, the skills needed to face them in the timeframe required, and a customized onboarding plan would have helped Narasimhan and Starbucks.

That understanding might have prevented Narasimhan from getting burned literally or figuratively by taking on the role in the first place.

New research reports there is happiness in the world. Thank God.

In the midst of a war enveloping our hearts, minds, and energy, the United Nations released its tenth World Happiness Report last week. (Link to full report.)

Irene Stachon/AP

The good news is there is good news. Finland ranked first for the fifth time in a row. The United States (#16) made it into the top twenty out of the 146 countries ranked by the Gallup survey. Considering the Great Resignation, ranking that high gives hope for happiness in the months ahead.

In the midst of this crazy world, the really good news is the global average of what the report calls "benevolence" was up 25% in 2021, as summarized by CNN.

Benevolence includes three things:
🤍 Donating to charity
🤍 Helping a stranger
🤍 Volunteering

It's good to live in a world where those three benevolent actions are rising.

More good news is that stress grew at a much slower rate than in prior years. Considering the pandemic roller coaster of 2020-2021, that's a welcome surprise.

All in all, happiness was on the rise in 2021, and it is owed to benevolence and trust.

What can business leaders glean from the UN report?

Happiness, benevolence, and trust are important to people. How can you influence more of those three in your company? It could make a difference in whether you're working on retention or resignations.

Coincidentally, a new study from the Pew Research Center this month reports the top three reasons people in the US quit their jobs last year were:
❌ Low pay
❌ Lack of opportunities for advancement
❌ Feeling disrespected at work

Do the results of the UN’s happiness report and Pew research align with how your people feel? It would be wise to find out before your time, energy, and dollars are spent replacing people who leave because of something you could have addressed.

Check these reports out and reflect on what would serve your company and people best. If you need help, get in touch with us. We are here for you.

Take care of yourself and each other.

What a year last week was!?!

The first full work week of 2021 began with the excitement of a new year, a clean slate. Sure, many of us were a bit tired and out of our routines after the holidays, but all-in-all, the energy was upbeat. Then Wednesday’s hostile takeover of the United States Capitol in Washington D.C. occurred.

The week changed. Our time management, conversations, focus, and energy in and out of work changed.

As leaders, you may have intended to kick off 2021 a certain way but had to adjust.

🔷 Did the way your company shows empathy change over the course of the week?
🔷 When you think about how the "company" shows empathy, who are you thinking about?
🔷 What have your leaders done to show empathy in the last week?
🔷 What have you done to show empathy for your coworkers? Yourself?

All of that, and more, was part of the #CultureMatters live conversation January 8th. We talk about issues and ideas that impact culture each month, and we bring them back to business.

As facilitators of the monthly Culture Matters forum, Kathy Holmes and I chose to start the year with empathy because it aligns with the values of our #culturematters friends.

When companies value empathy, it shows in how they treat people and goes further into how they make decisions, prioritize, innovate, and more.

A company that tells people to leave their emotions at home and just keep their mouths shut, for example, shows it does not care about its people. Back in the old days, that command-and-control style of leadership was rarely questioned. People did their jobs and went home.

Now, however, that company would struggle to stay alive. A company who treats people that way would struggle with collaboration needed for innovation, along with retention of employees and customers. Makes sense, right?

The research is clear: people want to work for companies and leaders who care about them. Companies who develop empathy gain a strategic advantage for retention of employees and customers.

Empathy is worth attention. Plus, it is a nice, basic value.

Join the Culture Matters conversations via Zoom each month and on LinkedIn. All are welcome!

Do you have a perception problem?

Yesterday afternoon I met a friend for coffee. We had not seen each other since May, so we enjoyed catching up for a while. At one point, I was telling her about an upcoming activity with some high school students, and she encouraged me to show a lot of confidence when interacting with kids that age. Another time in the conversation, I mentioned the first year with MRIGlobal flew by yet I feel so new, and she again urged me about confidence. After her second mention of it, I began to wonder if I come across to her, or in general, as if I don’t have confidence.

So, now I’m paranoid and lacking confidence!

The conversation prompted me to dig a little about perceptions. How do our impressions of others impact our behaviors? How do our perceptions of ourselves impact our performance? If anyone reading this has a perception problem, what I learned and pondered might help you too.

The psychology gurus are pretty set on the definition of perception: it is the process by which we translate our environment into our view of the world. Of course, our view affects our behaviors and behaviors lead to success or failure with work and people.

Take a look at the photo to the left. How old is the woman you see? The way you see the woman will impact how you treat her, if she were a real person in front of you. Or, perhaps you see something else entirely?

A colleague told me a story recently. The story was about selling shoes in India. As the story goes, an Indian leader wanted to set up a shoe business in a specific region, so he sent an ambassador there to do some recon work. The elder ambassador spent little time in the region and told the leader that selling shoes in that region would be a waste of time because the people don’t even wear shoes.

In the meantime, an enterprising young man met the leader. The young man was eager to prove himself worthy of a position with the leader, so he offered to go to the same region to assess the shoe business potential. He spent time in the region, interacted with the people, noted their interests and needs. When he returned to the leader, he was excited about the potential shoe business. There was great potential because the people don’t wear shoes! Turns out, the young man was right and the shoe business prospered.

Perception affects behavior, and behavior affects success with work and people. Watch out for three common perception problems to make sure you see things as they are and act accordingly.

Self-fulfilling prophecy: Believing something is true causes it to come true. The best example I can think of for this is “parking karma.” I believe in such karma and it almost always works for me. When people in the car doubt or make fun of it, it always works. Right when a passenger laughs off my parking prayer (“Hail Mary full of grace, help me find a parking space”), someone pulls out of the front spot. Another common example is when searching for a lost item. It is better to say, “I will remember to print the report” instead of “I hope I don’t forget to print the report.”

I read a statistic a long time ago that said 70%-90% of what we say to ourselves is negative. Pay attention to how you talk to, and about, yourself to see if that number could be taken down a notch or two.

 

Self-sabotage: Self-sabotage goes deeper than self-talk. Sometimes people procrastinate or do mediocre work as a way to sabotage themselves. A technique that helps self-sabotagers is Stop-Challenge-Focus. (SOURCE: Turn Self-Sabotage Into Success By Geoffrey James on www.inc.com)

When you avoid taking an action that would help you reach your goals, use the three steps:

1.       STOP. Identify the belief that's causing you to feel emotions that aren't helping you succeed.

2.       CHALLENGE. Question the validity of that belief and find reasons why it's not really true or not true in this case.

3.       FOCUS. Create a specific inner dialog that supports your goals and then take action immediately.

Fundamental attribution error: This is when we give positive explanations for our results and negative ones for others. For example, I got the “A” on the exam because I studied hard, while Joey got the “A” because he was lucky. At work, this might relate to positions, promotions, evaluations, or project assignments. A flawed sense of oneself leads to career stagnation or failure. It is difficult for others to give feedback when our vision of ourselves differs from how others view us, so watch for it yourself.

One of the great philosophers of our day, Stephen Colbert summed this issue up nicely, “It used to be, everyone was entitled to their own opinion, but not their own facts. But that's not the case anymore. Facts matter not at all. Perception is everything.”

Whether we are with friends, colleagues, or customers, perception is everything. Remember, that includes your perception of others and of yourself, not just their perception of you.

Team commitment requires more than Kumbaya

Think of all the teams, formal and informal, you are on at work: project teams, client teams, strategic teams. You also are on teams at home as the leader of a family, or sibling, or son or daughter. You are on teams in your church, neighborhood, kids's school, nonprofits you support, and with friends. Some of you are on athletic teams--professional or not.

Sometimes you are a teammate and other times you are the team leader. Are you always a team player?

How committed are you to your teams and their goals? How committed are you to your teammates? Does your commitment waiver when the teams are winning v. losing? Or, does it waiver depending on how the teams are led? Or, is your commitment dependent upon commitment demonstrated by other teammates and leaders?

Our commitment to the teams we are on is not a one-time promise. It is impacted all the time and must be renewed frequently. Team leaders in any field who expect a version of Kumbaya at the start of a project or season will form and keep player commitment will cause their teams to lose.

Work teams lose when projects take too long or cost too much. They might get finished, but the lack of commitment is costly and lack of trust will impact future projects too. I was on a project for a nonprofit training event several years ago. The leadership of the team was so bad (wasteful of our time by lack of preparation), the team has never heard from him again. Another team I was on was run by a leader whose ego was bigger than everyone else, and the only things that were completed were what she micromanaged and instructed. She personally caused the finances and membership of the group to decrease, plus, she missed out on so many great ideas. You have been on similar teams, right?

As a team player, it is important to assess your commitment to your teams. When you are not All-In, assess your behavior and reasons. It is okay if the team changes its Mission for you to change your commitment; however, it is not acceptable to sabotage the team overtly or with poor performance.

Players often make self-centered decisions when they have not bought in to the culture, leadership, or goals. If you are a teammate over the age of twelve, it is unacceptable to behave in a selfish manner. You are taught by that age to put the team first.

When players put themselves first, they reflect their own character and how they feel about their teammates and leaders. Good leaders know team commitment can be fleeting and must be renewed frequently. Slogans like "There is no "I" in TEAM!" don't work when hollered once. There may be no "I" in team, but there is "ME". Experienced, talented leaders pay attention to player commitment and build it often, even when a player makes a mistake and puts himself first. It takes more than punishment or discipline to earn a player's commitment.

As a player and leader, pay attention to commitment all the time. Paying attention to it once is not going to lead to success in any field.