Howard Schultz
speaker
633 appearances
1 recordings
1 series
first heard Jun 2024
last heard Jun 2024
Howard Schultz’s voice in public audio — every appearance, attributed to the second.
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benefits that would in a way uh take the company in direction no one's ever been in before and so early on we started talking about exceeding the expectations of our people so they can exceed the expectations of the customer and the first time we actually were able to manifest that was a year before the ipo and and that was an incredible struggle because i had on my board
to venture capitalists and i was proposing something that had never been done before and that was i wanted to give equity in the form of stock options to every single employee in the company and they just said what what are you talking about we're not doing that and so the fight became ultimately we gave 14 of everyone's base pay in the form of stock options at the end of the year based on the strike price and i had to do it the year before the ipo had to so everyone wouldn't miss it
And I think the turning point of the culture of the company was the day we announced that and we became partners. And to the credit of Craig Foley, who was the VC, and Jamie Shannon, They believed that performance would be enhanced, attrition would be lowered, and that the brand would just elevate as a result of that. And it was true, completely true. That changed Starbucks for decades.
And along with some other events based on doing the right thing.
I mean, the healthcare for part-time workers.
So then, you know, healthcare, I think... 25 years before the Affordable Care Act, what we did was company for health insurers. And that also, I grew up in a family with no health insurance. And I saw what happened. So all of that is that origin story of mine. And the tragedy is my father passed away and never saw what we're able to do.
Do you want the stats on that initial employee stock grant? I'd love to hear it. So the program was called Beanstalk listeners that Howard was alluding to. Amazing name. In 1988, the health benefits roll out even to part-time employees, including gay couples in domestic partnerships. I believe the first of its kind. That was a 33-store company at that point.
A few years later, you had grown to 55 stores. You did the LA expansion. Then in 1991, which is the year before the IPO, Beanstalk happens. Equity in the form of stock options goes out to everyone working 20-plus hours a week. There were 1,300 employees at the time. And I believe it was the first time in history that part-time employees were offered a program like this.
So those initial grants, the strike price was $6 per share. Today, as we speak, the share price is $77. But there have been six splits since then, which comes out to a 64x. So that initial grant has 800x'd since even the part-time employees and baristas were offered the opportunity to buy Starbucks stock.
Yeah. A lawyer, I think Scott Greenberg at the time, came to me and said, we can't do this unless we get approval from the SEC because we're over 500 shareholders.
Both from a it's-the-right-thing-to-do perspective and the amazing business model benefit of the retaining employees. I mean, it's so expensive to train a new employee. It's not expensive to keep an existing employee, and so you can just pay people more if you keep them for longer. You know, you just... basically have extra money lying around is what Costco discovered.
There's so much about Starbucks, to David's point, that's similar to Costco. Did you ever speak with Jeff Brotman or Jim Senegal or any of those guys about this concept? Do you know the answer to that? I actually don't. No, we don't know the answer. I assume the answer to this, but I don't know it.
First, Jeff Brotman invested in Starbucks in the round to buy Starbucks.
Yeah, in that 87 round. That's when I met Jeff for the first time. Jeff became a board member of the early imprinting of Starbucks. and clearly a mentor, mentor of mine. And then he introduced me to Jim Sinegal.
And so there were many moments of me sitting with Jeff and Jim, including the huge decision to put Starbucks coffee in Costco, which there was a revolt inside the halls of Starbucks saying, no effing way.
And we did it. And Jeff and Jim took me to a parking lot in Kirkland when I said, I don't know if we can do this. I don't know if I can sell it inside. Okay, meet us on a Sunday morning, whatever it was. Look at the cars. These are your customers. In fact, putting Starbucks in Costco, we were able to measure directly
the increase in volume in the stores on the east side as a result of the proximity to the Costco store.
You sold beans. We sold beans. In Costco. Yes. And that brand awareness of I buy Starbucks beans at home meant that that group of people went to the stores more often.
Because we introduced thousands of beverage customers to Costco through the beans. So Jeff and Jim were instrumental in so many things and were so kind to me as a young kid.
Then we went nationwide with Costco. So this is a thing that I think many people don't realize now that Starbucks is ubiquitous. We sort of forget about this time when it wasn't and where people had to find some way to experience Starbucks. You know, you only get a few stores in each of these cities. You're only in a few cities. But there are ways to scale brand awareness.
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