How the power players do it - by Fortune senior editor at large Patricia Sellers

Starbucks' Schultz: from cocky to vulnerable

July 31, 2008: 2:42 PM ET

Seeing Starbucks (SBUX), once America's model retailer, post its first-ever quarterly loss, you realize how dire the retail category is these days. Just about everybody except the low-price players like McDonald's (MCD), Wal-Mart (WMT) and TJX (TJX) are losing.

But beyond being a victim of the harsh economy, Starbucks made real mistakes. It dramatically over-expanded. And when Howard Schultz, who built the company from a tiny Seattle chain, fired CEO Jim Donald last December - blaming him for the over-expansion - Schultz got cocky, I think. Returning to the CEO role, Schultz assumed he knew best and could save the day. More key defections followed. Many investors believe that Schultz now lacks a viable plan to grow with a profit profile they'd come to expect. So the stock is stuck, 44% below its price a year ago.

I've been critical of Starbucks lately, but I'm actually biased on the company in the positive direction. I start each day sitting in my local Starbucks reading three newspapers (the New York Times, the Wall Street Journal, and the New York Post - always the Post first!) And I've long been a fan of Schultz, whom I've met but don't know well. My boss, Fortune managing editor Andy Serwer, knows him better. Andy recently sat down with Schultz and former UCLA basketball coach John Wooden, now 97, at UCLA's Anderson School of Management. "You could see on his face that this is a very trying period for him," Andy says about Schultz.

When Andy asked the two legends what the key to leadership is, Schultz, 55, replied, "The hardest thing about being a leader is demonstrating or showing vulnerability.... When the leader demonstrates vulnerability and sensibility and brings people together, the team wins."

Winning, of course, is more difficult than that - but good luck, Howard.

P.S. For ex-CEO Jim Donald's take on what went wrong at Starbucks, see my recent Q&A, Lessons of the Fall, with him and two other former chiefs, Ed Zander of Motorola (MOT) and David Neeleman of JetBlue (JBLU). Click here for video of Donald. And for an interesting take on Howard Schultz, the humanist leader, check out this Fortune excerpt from True North by former Medtronic (MDT) CEO Bill George.

Fortune's Most Powerful Women
Fortune's Most Powerful Women For the latest on the most influential women in business, philanthropy, government, and the arts, like us on Facebook.
Guest Posts
Fortune Most Powerful Women Fortune Most Powerful Women The rolodex that redefined power
Profile in The Washington Post
Sheryl Sandberg: Sheryl Sandberg: Don't leave before you leave
COO of Facebook
Wendy Clark Wendy Clark Exec learns firsthand how the homeless live
SVP of the Global Sparkling Brand Center at Coca-Cola
Marissa Mayer's 3 biggest decisions as Yahoo CEO With company stock up over 100% since she began running the company 16 months ago, Mayer reflects on her choices to date. Watch
Chelsea Clinton on running for office: 'I don't know' The vice chairman of the Clinton Foundation talks about her diverse career path and growing up in the spotlight. Watch
MPWomen go Global

The Fortune/U.S. State Department Global Women Leaders Mentoring Partnership brings rising-star women from countries around the world to the U.S. for three-week mentorships with participants of the annual Fortune Most Powerful Women Summit - among them Ursula Burns of Xerox, Laura Lang of Time Inc., Marissa Mayer of Yahoo, and Tory Burch.

Read more

Current Issue
  • Give the gift of Fortune
  • Get the Fortune app
  • Subscribe
Powered by VIP.