How to Scale Impact: Lessons from Starbucks Founder Howard Schultz
Every successful company scales more than just revenue. It scales your worldview. And I believe you can scale positive social impact along with your business. But only if you’re as creative and cash-conscious about doing good as you are about your business itself.
As the founder, former CEO, and now executive chairman of Starbucks, Howard Schultz’s job is to ask: How do you scale the intimate experience of a neighborhood coffee shop across tens of thousands of locations worldwide? How do you keep a quarter million employees positive, consistent, and loyal? How do you ensure that 100 million weekly customers — that’s U.S. alone — have delightful experiences?
When your business scales massively, you’re going to touch lives on many different levels. You impact employees, customers, and entire communities. Depending on your business, your choices can impact their mood, the quality of their interactions, their outlook on their own future. You have the opportunity to shape the world, for better or for worse.
Here are 3 key lessons about balancing business and social good, drawn from my conversation with Howard on Masters of Scale. You can listen to the entire episode here, or subscribe on iTunes, Stitcher or Art19.
Lesson #1: It’s not all about profit
“I think I’ve always been sensitized to people living on the other side of the tracks, and as Starbucks evolved, I think I was trying to build the kind of company my father never got a chance to work for. A company that would try and balance profit with conscience.”
Howard wants to balance profit with conscience — as if too much profit will strain his conscience and vice versa. And there’s some truth to that — but it’s not the whole truth. Profit and conscience are neither enemies nor friends — they’re frenemies. You have to be creative about how you bring the two together. Howard didn’t put benefits ahead of profits. But he didn’t put profits first either. He started tackling both problems simultaneously.
Lesson #2: The smartest investment is your team
“I want to invest in our people and I think I will be able to prove that we will lower attrition, raise performance, but most importantly create the kind of company in which people feel part of something larger than themselves.”
—Howard Schultz, remembering a conversation with his investors when he proposed health benefits and equity for Starbucks’ first 100 employees, before the company turned a profit.
Notice how Howard didn’t say “I want to invest in our people because it’s the right thing to do” or “I want to invest in our people because no one invested in my father.”
To promote social good as a founder, you have to think creatively about how it will help your business. You have to frame benefits and social impact as a means to an end. And you may have to do it in a way that no one has ever thought of before. The social good may be touchy-feely, but the business results should be undeniable. If you require yourself to adhere to that level of discipline, your impact can scale.
Howard is a master at this. He honed his abilities through years of tough conversations with Starbucks investors. As Howard connected the dots between employee good vibes and shareholder returns, his investors might be forgiven for questioning his logic. But this gets back to Howard’s hypothesis. He just didn’t see his business the same way other people did.
Innovation, to Howard, doesn’t just mean the latest frappuccino flavor. It means new programs for employees that make them happier, more engaged, and more loyal — like covering college tuition for all employees, including part-timers. You might start with health insurance, or equity. You might add free meals or an office ping pong table. But if you want to remain competitive over time, you have to stay attuned to deep foundational employee needs as they evolve. Especially as they evolve.
Lesson #3: Don’t underestimate the power of human interaction
“Starbucks will do between $23 and $25 billion in revenue this year, but our average sale is $5. So just think about that, we’re in the pennies and small dollar business, so in order to do that much revenue, we’re totally dependent on human behavior…We’re seeing it through a different lens, not only in terms of the coffee innovation and store design, but mostly what can we do from a people perspective?”
As companies reach the kind of massive scale that Starbucks achieved, they inevitably face a new set of challenges. Those twin questions: “How do I do good?” and the “How do I do good business?” become more complicated as your opportunities — and your responsibilities — grow massive.
How do you keep what Howard calls their “entrepreneurial DNA”? How do you keep a human focus? How do you prevent customers from becoming “revenue” and employees from becoming “headcount”?
This tension is at the heart of every great scale company. And this is the perspective Howard brings as he enters new territory. He asks what innovation he can bring to the market, and what innovation can he bring to the employees.
But when it comes to thinking about people broadly, all businesses could stand to learn a lesson here. When we build something that could take over the world the way Starbucks did, there’s an opportunity to ask: What do we want to stand for? What impact can we have? How can we make people’s lives — the whole world, really — better? And how can we do that in a way that strengthens our business?
The key to Starbucks’ success? Howard’s years of focusing on employee happiness and asking, “What can we do from a people perspective?” This is a question that all businesses could ask themselves more often.
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