He turned a small chain of coffee shops in Seattle into a worldwide caffeine empire. He taught millions of people the difference between a latte and a cold brew. He even put off his corporate retirement to help handle a major crisis.
But now that the world’s most well-known barista, Howard Schultz, is finally hanging up his apron at Starbucks, a major question arises: How does Starbucks, or any firm, move forward when its iconic boss departs? “Starbucks is a pretty dynamic organization, but the challenge is where do you go from here?” says Craig Rowley, senior client partner and global practice leader for the consumer sector.
Schultz announced this week that he would give up his seat as chairman of the board on June 26. Whether as board chairman or CEO (which he was from 1987 to 2000 and again from 2008 to 2017), Schultz is widely credited for being instrumental in growing Starbucks into a 28,000-café chain in 77 countries (and having its stock soar 21,000% during his tenure). But he’s also known for being the driving force behind the purpose-driven culture at the company, one that eschewed maximum profitability in favor of creating a comfortable place for customers to sit and pass the time served by happy, well-taken-care-of employees.
Starbucks is in good shape, experts say, but the departure of an iconic leader provides both challenges and opportunities for his or her successors. Schultz and the company took care of the most obvious one: who would be his replacement on the board. Schultz told The New York Times that he let the board know last year that he wanted to leave. Creating that time frame can help ensure a smooth transition, says Alan Guarino, Korn Ferry vice chairman and co-CEO of the Board & CEO Services practice. Starbucks’ new chairman will be Myron Ullman, the current lead independent director and a member of the company’s board since 2003.
Unless there is some overriding strategic reason, the board chair’s successor should come from inside the board, Guarino says. That’s a departure from succession plans for a CEO, where a board can be a little more willing to consider an outsider. Picking an existing board member can continue any good working relationship directors already have with one another, Guarino says. Plus, it ensures that the company retains a high amount of institutional knowledge.
But the bigger questions may be more existential. For instance, should a company continue on the path its iconic leader spent decades laying out? Starbucks may not be facing the complete disruption hounding the rest of retail—people just need their regular coffee fix—but it still has to contend with the general trend of people going to physical stores less often. “You can’t sell a cup of coffee online, so how do you drive that experience?” Rowley says.
Then there’s a question about the company’s ethos—putting profitability behind other goals. Schultz and his peers set up Starbucks cafés as “second living rooms” where people were encouraged to stay for hours on end. But that can depress sales during busy times, and stakeholders always want to see growth. Leaders will have to walk a fine line, Rowley says; making a decision on what of Schultz’s legacy to keep and what to refine will have ramifications on everything from employee benefits to store size.
Finally, will a company’s new generation of leaders want Starbucks at the forefront of various social causes? Indeed, when two black men were arrested for waiting in a Philadelphia café without purchasing anything, Schultz was out next to his handpicked successor, Ron Johnson, apologizing for the company’s behavior and getting more than 8,000 US stores to close for an afternoon to train its employees in unconscious bias.
It’s a tall order at Starbucks, or any company, says Jane Stevenson, Korn Ferry’s global leader on CEO Succession. “Managing history and the future—that is very tough to do,” she says.