How closing all the stores for a day saved Starbucks from insolvency?
In 2008, after the financial crisis and a number of self induced mistakes, Starbucks found itself in tremendous financial trouble, and later its founder, Howard Shultz himself stated that "In less than a year, the people didn't realize it, we were facing insolvency".
But, was it just because of the global crisis, no!
It was just worsened by it.
Starbucks had been doing rapid expansion in the past few years before 2008, opening 5 new stores everyday. While this looked like a positive sign from outside, it had been covering a sinister problem bubbling under the surface. As Howard Schultz stated "The growth and success of the company in many ways covered up mistakes".
Due to this rapid expansion, the brand had lost its founding core principle "Experience". This is what differentiated Starbucks from every other competitor and helped them sell coffee at a very premium price!
Howard Schultz had identified this problem and was reappointed as CEO in 2008. After getting in-charge, he removed automatic espresso machines, re-introduced in-house grinding of coffee beans and many other decisions to drastically improve the user experience and restore Starbucks to its founding principles!
And then comes one of the most unorthodox decisions ever made by a corporation, Starbucks decided to close all the 7,100 stores in America for an afternoon to retrain 135,000 people about the perfect customer service at a cost of $33 million.
Many were shocked by this, and many critics and experts said that by shutting the stores for training, Starbucks was admitting that it had lost its quality and that it was a 'Grande' mistake.
Events of the subsequent months confirmed that the move worked well for Starbucks. Company's growth sky rocketed up by 143% in 2009. And best of all, morale in the organization sky-rocketed. Employees were thrilled to be part of a team where the leader was willing to take such bold, customer-centric decisions.
The lesson learned here was simply stated by Howard Schultz himself
"It's very easy to embrace the culture, values, and guiding principles of a company when you've the wind at your back, but the hardest thing is to really stand up for what you truly believe in when you've the wind in your face".
