At Starbucks, a plan to reap the benefits from a benefit

Schultz shares with the Post's Lillian Cunningham what he has learned about adapting his leadership style to different cultures as Starbucks has grown internationally. (Gillian Brockell, Lillian Cunningham, Julio Negron and Jayne Orenstein/The Washington Post)

Earlier in the week, Starbucks CEO Howard Schultz announced an education partnership with Arizona State University. Starting this fall, employees can complete an online college degree that ultimately costs them nothing, between university scholarships and reimbursement from Starbucks for the remainder of the costs.

This isn’t the first time Schultz has attracted attention for employee investments. Before the passage of the Affordable Care Act, Starbucks announced it would provide health care to its part-time employees. And last fall, it pledged to hire at least 10,000 veterans.

Schultz spoke with The Washington Post about his latest initiative and why he thinks it’s good business to help solve broader social problems. The interview has been lightly edited for length and clarity.

Q. How do you define leadership?

A. The primary currency of leadership has to be truth. And truth is based on being authentic, being open and transparent, and being vulnerable. I don’t believe you can build a great, enduring organization without that.

Q. How does your new tuition program fit with your leadership strategy?

A. Starbucks has enjoyed great success, but that success is directly linked to the unusual business model that has been the foundation of Starbucks, where we’re trying every day to achieve the fragile balance between profitability and social conscience. We did that when we created comprehensive health insurance and equity in the form of stock options for all our people. We were the first company to provide those two benefits to part-time workers. We feel very strongly that investing in your people is investing in your company. You cannot build long-term value for the shareholder, in my view, without building long-term value for your people.

Q. There’s obviously a business case here for Starbucks. Walk me through how this investment will pay off for your company.

A. Not everything is an economic decision. But I strongly believe it will reduce attrition, it will enhance performance, it will attract and retain great people, and it will add value to the equity of the brand and the relationship we have with our customers.

We spent over a year trying to understand how we could bring this to market. Whenever we try to take the road less travelled, we have to learn a lot. We first had to find the right partner, and we also had to figure out how to do this in a way that would create flexibility. ASU has over 40 online degrees, and our people can do it on their own time.

Going back to the issue of trust, which I believe is the primary characteristic of any company and any consumer brand, it will make a big deposit in the reservoir of trust around how Starbucks is viewed by our people and our customers.

Q. For context, how does this investment compare to the cost of some of your other investments?

A. The tuition-free plan could ultimately affect, over the next 12 to 18 months, about 10,000 students. That will cost Starbucks tens of millions of dollars. We’re prepared for that cost. Over the last decade, we have spent on average about $250 million a year on health care for our employees. Equity in the form of stock options to our people last year was about $300 million of realized gains. So this is nothing new for Starbucks.

Q. What do you see as the right role for business leaders in broader social and policy issues?

A. Unfortunately over the last 10 years, maybe longer, there’s such a strong level of polarization within government that business leaders have gotten to the point where, not unlike the American public, we are losing confidence in the government’s ability to get things done. The average student that has gone to college has about $30,000 in debt. That’s an issue that should be addressed by Congress. But I think business leaders have to recognize that we can’t wait for Washington. We have to stop complaining and pointing fingers, and we have to do what is necessary to create our own level of leadership to the people we’re responsible for.

Q. Would you ever consider running for office?

A. No. I feel very strongly that in the role I’m in I can do a lot more.

Q. How have you seen your own leadership style evolve over the years?

A. In 1987, Starbucks had 11 stores and 100 employees. Metaphorically we were like a little speedboat — you could turn it five degrees and the entire company would turn. Now Starbucks has over 250,000 employees and 21,000 stores all over the world. It’s more like an aircraft carrier. So it requires a different kind of planning and strategic thoughtfulness. We constantly need to hire people who have a skill base and experience that is stronger than my own, so that we can get the best and the brightest around the table to answer these key questions.

I also think that in many cases success and growth can cover up mistakes. We have to be very, very mindful that success is not an entitlement. We have to earn it, which means we have to push for self-renewal and reinvention.

Q. What’s one example of a specific management lesson you learned?

A. Starbucks has been doing business now in China for over 15 years, and we have 1,200 stores and 20,000 employees. About 3 1/2 years ago I had an idea that, given how close-knit the family unit is in China because of the one-child policy, we should do something that we had never done before: have an annual meeting with the parents of our employees. Just last week we had our third, and I was there in Guangzhou. These meetings produce an unbelievable level of emotion around the relationship the parents and children now have with Starbucks.

The reason I tell this story is that there isn’t one rule for how to build a company or how to lead an organization. Many times you have to customize your leadership style for what it is you’re trying to do and make it as relevant as possible to the people you’re trying to lead and manage.

Q. What’s your best piece of advice?

A. I was born on the other side of the tracks in public housing. My life story is not a Hollywood movie. Use my story and my example to realize wherever you come from, whatever your social status, America is still a place that rewards hard work and the entrepreneurial spirit.

View: VIDEO | Howard Schultz on customizing your leadership style

Read also: What makes the Starbucks tuition perk so unusual

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Lillian Cunningham is the editor and feature writer for The Washington Post's 'On Leadership' section.
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