Starbucks recently announced that it would be closing a small percentage of its stores. About 1% actually. In response, the stock notched up a bit. The goal: improve profitability. I had read that news with a reaction I have had often when companies announce they will be shrinking and letting people go: it’s one of the dumbest decisions that leaders make.
The capital invested to lease properties, buy equipment and supplies, get the permits and licenses is significant for each new location. Recruiting, hiring, training and leading teams of staff to serve customers takes a long time. It also takes time for the customer loyalty to be built. When a corporation’s leaders decide they must unwind all that investment of money, time and effort, it is an admission of leadership failure. There’s no other interpretation possible.
In my neighborhood, there is a Starbucks store that opened in 2000. I have been its customer weekly and daily for all of its existence. Lots of people in Kensington have similarly been faithful customers over the many years the store has been here. And while the range of product offerings has grown, the attraction to this store has always been the people: the staff and customers who have formed a strong friendship over the years, creating a community of friends that have made a huge difference in my quality of life as a resident of Kensington.
That quality of life has just gotten worse, because the Starbucks at 4134 Adams Avenue is closed as of tomorrow. The staff and the community just found out yesterday.
In my many years in business, I have seen and experienced the effects of poor leadership, the kind that doesn’t think ahead far enough, and doesn’t focus on the right things, which results in admission of failure–shrinking the company and separating people who are the true assets of any organization.
What are the leadership failures of layoffs and store closings? Not thinking far enough ahead. Not creating financial margin to allow for ups and downs such that firing people is never necessary. Not engaging the loyal customers in helping to solve operational challenges. Wasting money on fads, remodeling and expensive promotions. Not focusing on steady, slower growth that the company can afford without over-spending and borrowing. Ignoring front-line staff as a source of solutions and ideas. Not keeping corporate overhead costs controlled.
How many executive roles were eliminated in this latest announced shrinkage? None identified publicly, and likely none actually affected. High overhead forces higher profit margins to pay for the big salaries at the “head shed”, what we used to call the part of the building where all the mucky mucks had their offices. If corporate salaries and incentives continue to increase during Starbucks’ contraction, then the truth is clear: this is about paying executives more by cutting operational losses. As long as the shareholders feel like they are getting their cut, no one bats an eye.
The closure of the Kensington Starbucks will diminish my quality of life. I have lost good friends who I have appreciated for many years, because the leaders of Starbucks couldn’t lead with a telescope instead of a microscope, nor could they put their service staff in front of the line of priorities, ahead of themselves.