corner office-Don’t Cry over Spilled Coffee-June 2011

corner office-Don’t Cry over Spilled Coffee-June 2011

Starbucks’ experience offers tips for turning mistakes into learning opportunities.

Failure is simply the opportunity to begin again, this time more intelligently.”

—Henry Ford


Most business leaders will tell you that the principle of gaining wisdom from mistakes and failures is irrefutable. But when it comes to their own organizations, how many can tell you they’ve applied that principle? In my experience, not too many!

It’s not that business leaders shy away from learning; they just shy away from taking risks that could turn into fiascoes. And that’s where the thinking goes wrong: Instead of using wisdom gained from the lessons provided by mistakes and failures, most quickly absolve themselves, assign blame, and sweep bad news away faster than Charlie Sheen. Leaders with the courage to acknowledge their missteps, and then effectively learn from them, are an endangered species.

For an example of a company that has demonstrated that courage, look at Starbucks.


A Latte of Mistakes

In 2000, the coffee chain was one of the most recognizable brands around the world, with a growth record that seemed almost unstoppable. Then a combination of the Great Recession, higher gas prices, and internal mistakes led to trouble. 

Howard Schultz, who’d built Starbucks nearly from the ground up, stepped down as CEO in 2000 (but remained chairman). He retook control in 2008. One of his first initiatives was to personally confess to the entire company that its leaders, including himself as chairman, had made some mistakes. In an interview last July in the Harvard Business Review, Schultz said: “We had to admit to ourselves and to the people of this company that we owned the mistakes that were made. Once we did, it was a powerful turning point. It’s like when you have a secret and get it out; the burden is off your shoulders.” 

Most of their mistakes involved expanding too rapidly, with a myopic focus on growth at the sacrifice of quality and customer satisfaction. Having learned from their mistakes, leadership at Starbucks closed 600 coffee shops and changed store operations to bring back the quality experience consumers had come to expect from Starbucks.

Schultz was under institutional shareholder pressure to cut expenses by reducing health care benefits (offered to eligible employees who work at least 20 hours per week), sacrificing a small percent of quality (Starbucks roasts 400 million pounds of coffee a year—who’d notice even a small deviation?), or franchising company-owned stores (thereby raising quick cash). But he refused to succumb to the pressure for short-term solutions that would hurt Starbucks’ reputation and long-term success. 

“The challenge was how to preserve and enhance the integrity of the only assets we have: our values, our culture and guiding principles, and the reservoir of trust with our people,” Schultz told the Harvard Business Review.

Schultz cut nearly $600 million by improving supply chain efficiencies, reducing waste, and rightsizing the internal support structure. Almost all of the cuts were in areas that didn’t affect customers. At the same time, Schultz invested in training, shutting down every Starbucks for three and a half hours to retrain employees.

As Schultz has noted, the comeback of Starbucks was a difficult transformation—from a maturing company that lost sight of its core values to a rededicated company that’s profitable once again. In short, Starbucks’ leadership owned its mistakes and learned many valuable lessons from them. Today, Starbucks’ reputation and brand image are once again as hot as a grande espresso topped with steamed milk.


Unlearning the “Teflon Rule”

It’s not easy to admit to mistakes and failures. We are taught in school that we should avoid them. Then when we start working in the real world, we quickly learn the unwritten “Teflon Rule” of not allowing mistakes or failures to stick to us. Instead, we learn how to assign blame elsewhere in order to keep our jobs, get promoted, and land raises and bonuses.

I think we can all agree that for any organization to succeed, it must grow. To grow requires taking risks through innovation, acquisitions, or mergers. Each of these strategies can be fraught with relatively high failure rates. So the very nature of leadership includes mistakes and failures. But to be an effective leader requires learning from these mistakes and failures so that they are not repeated over and over—until you get fired. 

Doing this at an organization level, however, requires a wide-angle view from the corner office—which Starbucks has. It also requires the development of a culture where leaders are patient enough to understand what has happened, find ways to fix things, and avoid such mistakes in the future. In other words, a culture where leaders help employees feel comfortable with, and responsible for learning from, any mistakes they may make.

Above all, learning from mistakes and failures requires the courage to admit to them rather than assigning blame, to speak up rather than keep quiet, to respond with patience rather than anger, and to embrace all of the above as a part of continual improvement. Organizations that cultivate the courage to identify, fix, and learn from their mistakes will succeed, while those that practice the Teflon Rule and get stuck playing the blame game will suffer a slow demise.

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