The Work Wire
SHRM CEO Johnny C. Taylor, Jr. and Bob Goodwin, President at Career Club, host a lively conversation on how the latest news impacts all things work-related.
The Work Wire
CEO Departures - The Work Wire
What happens when a beloved CEO like Howard Schultz steps down, and how does that impact the corporate culture at a giant like Starbucks? We explore this and more with Johnny C. Taylor Jr., President and CEO of SHRM, as we dissect the leadership hurdles and cultural shifts following the latest CEO departure at Starbucks. Learn from the contrasting story of Brian Nickel's remarkable turnaround at Chipotle, emphasizing the necessity of clear company culture and how a CEO's influence can redefine stock performance and innovation. Dive into the intricacies of succession planning and the broader challenges companies face in retaining top talent in a rapidly changing corporate environment.
Moreover, this episode takes you through the nuanced process of CEO transitions and the vital importance of allowing new leaders to navigate without the shadows of their predecessors. We discuss why top CEO compensations can be justified, especially when leadership translates to substantial financial growth, benefitting employees and stakeholders alike. Drawing lessons from Chick-fil-A's clear articulation of its faith-based principles, we underscore the importance of aligning cultural values with the organization's identity. Tune in for our insightful conversation on establishing a robust organizational culture that aligns with both top-down directives and grassroots feedback for seamless business transformation.
Hey everybody, this is Bob Goodwin, President of Career Club, and welcome to another episode of the WorkWire, where I'm joined by my good friend, the President and CEO of SHRM, Johnny C Taylor. Jr, Johnny, how are you doing today?
Johnny C. Taylor Jr.:I'm doing well. Come on up and he's the President and President for the WorkWire. Good to see you.
Bob Goodwin:Good to see you, my friend. So we have a very interesting topic and while the specifics of it- which is I think a subplot story Placed here very recently by Brian Nickel, who has served extremely successfully as the CEO of Chipotle, where he kind of pulled them out of some trouble. They were going through a bunch of food related safety issues and their stock is up 800 percent since Brian took over, yeah, which is wild.
Bob Goodwin:So what I'm hoping is that we can kind of unpack some of the lessons learned, cautionary tales and maybe some things that Brian and the board can be thinking about moving forward. So but what's just baseline, what's your take on what happened at Starbucks?
Johnny C. Taylor Jr.:So, of course, none of us really know like you never know, and I can tell you, having been a CEO in the for-profit and nonprofit world. There are so many things that happen within the CEO and board dynamic that there's a public narrative about what happened, but we don't really know. What I will say, though, is that the stock was underperforming.
Bob Goodwin:And that fell on a cliff.
Johnny C. Taylor Jr.:And at the end of the day, that does not bode for a long tenure for a CEO. I mean it, just it. Just. That's not how it works. But I think there were signs of this. Many have said and again I don't anyone from Starbucks here was listening I don't know what's going on within your shop or what was, but I will tell you there were repeated signs that the culture of Starbucks was trying to figure out what it was going to be.
Johnny C. Taylor Jr.:It was kind of unclear and I remember, specifically post George Floyd. Do you remember when they they've had a couple of missteps even in that area, and I call them missteps and I think they've acknowledged them. But you know, like the, the barristers were going to talk about diversity issues. You remember that that experiment that was just roundly attacked and then there was we're going to shut our stores down for a couple of hours to kind of, you know, and that was just performative by many, I think, well intention, and that was just in the diversity context. And then you know, of course, october 7th became a big issue for them.
Johnny C. Taylor Jr.:I think this is an organization and you and I will likely talk about it in a minute, but it speaks to culture. I think one of the reasons Starbucks has been so incredibly successful at the end of the day, very clear culture, and it's been wobbling and now compare and contrast that to Chipotle, for example, where you know what they stand for. Again, it's not for everyone, but you know what they stand for. It was an organization that was culturally not quite as clear as it should be and, as a result, other things started to happen and ultimately that leads to losing the best talent, not being able to attract the best talent. There was a point when Starbucks could get any executive they wanted, not so much now. And all of that if you don't get the right people, right strategy and the co. And that's largely because the culture, the lack of cultural clarity, I think the business suffers.
Bob Goodwin:It's actually a really interesting story yeah, so so you're kind of getting back to what is the job of the ceo at the end of the day, right? It's this for a public company, it's the stock price, right? You? You have to manage the business. That's why you have investors and that's why they are paying you not a small amount of money to steward their ship in the right direction. Starbucks is interesting, right, because Howard Schultz, who's effectively the founder of Starbucks as we know it, is a very strong personality, personality and he, he, his. I think there's a whole succession planning story to be told in this too. Right, because he has to keep coming back to pull it out of the fire, right, kind of get it settled down again and then try and somehow pick his replacement. You?
Bob Goodwin:mean disney like, yeah, bob, ire coming back. It's like, yeah, so like you, you say, you said like we don't know everything that's going on. But for this gigantic company, there's some very small company, family owned business dynamics at play of like, how do you replace dad? How do you replace dad? And he continues to struggle to do that. How do you replace that? And he continues to struggle to do that. And I think Brian Nickell is a total rock star.
Bob Goodwin:He certainly doesn't need my endorsement on that. His record speaks for itself. But you know so, stock price Well, what drives stock price Right? It's sales and profits that you know comes from innovation, right, and they the proliferation of stuff that they do is very hard to manage, which creates operational issues. But then there's also that, what you're describing, there's the culture piece of this and the whole vibe of what it means to work at Starbucks, to be a barista. You didn't say this part, but like the whole unionization thing and it's like that's like the opposite of.
Bob Goodwin:We're a family and I'm part of this.
Johnny C. Taylor Jr.:It's like no, now we're kind of into us and them.
Bob Goodwin:And you know we're going to protect our rights and everything else and they never got a handle on that very well. And so you know you got to run the business right and you got to keep your people focused and motivated and he kind of did not do a great job on either one of those. It's interesting too. I love your take on this. Early on in his tenure he would go and be a barista. He was. He was trying to get so embedded into the business because he's a McKinsey consultant. Then he was CEO or GM of Reckitt Benckiser, who actually underperformed their peer group during COVID when they're selling sanitary stuff, which is kind of hard. But for me I mean, I get that you want to understand the business and you're trying to get imbued in the business, but it didn't feel very CEO-ish to me to see him wearing an apron.
Johnny C. Taylor Jr.:Well, yeah, so that's gosh boy. Have you unlocked something that I feel strongly about? Listen, there's something to be said for the CEO understanding a little bit about what happens on the front line, and I get that. And that is something that you do a day or two and I don't mean literally a day or two but your ultimate job is to come up with the right strategy and then ensure that it's being executed. You can't do that if you're spending a disproportionate amount of your time in a store. There are people who do that, and the store and the field hierarchy has store managers and district managers and regional. So they have people who do that. That is execution. You, at the CEO level, you've got to ensure that execution is happening, but you do that through your people. That execution is happening, but you do that through your people. But your real job is the vision, the culture, the strategy, and I agree with you.
Johnny C. Taylor Jr.:When I first thought I said okay, interesting, first couple of days. Who can be wrong by going into a store to kind of experience for a second, as I said, a day or two, some period of time? But after that you've got to get to what's the big picture of macroeconomic environment to your point, unions. How differently are employees thinking about work and their relationship with work All of that stuff requires? And you only have 24 hours in a day. So if you're spending a disproportionate amount of your time messaging that you're going to work in a store, I'm not sure, especially for a new CEO. So let's say that, new in role, you are so busy trying to figure this thing out, particularly with a group, a business that has been struggling, that you just so again, no judgment here, because I hate Monday morning quarterbacks when it comes to being a leader because you're not sitting in the seat. But I'll tell you that was questionable from day one.
Bob Goodwin:That was questionable from day one. Yeah, so anyway we could keep going on that. Yeah, because what does it say? What's your take on? They kind of keep churning through CEOs and sort of the Howard Schultz shadow that looms really large. And then you're on a couple at least public boards Like how does all that work and what is Starbucks not getting right?
Johnny C. Taylor Jr.:So again, and I will say as it may sound like because I don't know, what are they not getting right? Let me tell you what I don't. I don't know, but I will tell you that the evidence would indicate right the evidence would indicate, mr Warrior, but but no, I think it's.
Johnny C. Taylor Jr.:I think you've got a couple of things. When you leave your role as a CEO whether you're the founding CEO or just a big you have a big presence. You've got to make room for the next person. We saw it at Disney that I referred to, where Iger had an office in the building. He continued to essentially influence and hold court over the major decisions within the business. It actually is unfair to the new CEO that you know, when I joined Sherm seven years ago and my predecessor, they had asked us to sort of run parallel for a while to transition the business and, to his credit, hank said no, no, no, johnny's got to do this and I've got to go away. Like I really have to step away and not allow people to think they can go to me because I can manage from afar. And I would say to Howard as much as you care about your business, there's a lot to be said for allowing the new person to be the boss, and so that concerns me and I hope that they learned from that.
Johnny C. Taylor Jr.:The second thing is a real big issue is this is a board issue. This is not a Howard issue. This is a board issue. The board ultimately has one employee and it's the CEO and the board should literally this time, I hope, and knowing the Brian that I think I know in business, part of it is he likely said now I can't come in and be Howard's guy. Howard might be on the board, might be chairman, but I have to be the CEO. You have one employee. I have 100,000 employees or whatever the number is, and hopefully the board has said that going forward. Howard has an opinion as a founder and an important opinion, but it's not dispositive. The CEO has to chart his or her own course, including modifying, resetting the culture.
Bob Goodwin:Right. So it feels like with Brian Nichols' appointment as CEO, they're like we need somebody who understands food service. So we're not starting from ground zero, trying to figure out our business back to wearing aprons and stuff. But you know, we've done a previous episode on CEO comp and I think you know kind of where I'm at on that. But you're going. But, by the way, do that.
Bob Goodwin:But if there was ever, I mean, on both sides of this, like while Luxembourg was still there, their stock tanked like 20% or some giant number that was measured in tens of billions of dollars of market cap in a day, just being taken off the board Like holy cow. And then brian comes in and people will look at his compensation package and I think if you total all of it up, it approaches 100 million dollars. Right, okay. So which part of me is like really, but but and this is this is your point, which is extremely well made in this case Do you know what the ROI is on Brian? Already? He hasn't even started. No, it's 18,000%. Their stock is up $18 billion on the announcement of Brian Nicol.
Johnny C. Taylor Jr.:Right, Right, and you know. You know I've been very underpaid at that point. Right, and I've said that. You know you and I've had, on the work wire, a lot of debates about that. Listen, you can sit down all day and do the fancy math of that's. You know 100 million dollars is a gazillion times what the average employer it's. Just, it is a horrible way to think about this.
Johnny C. Taylor Jr.:The better and more appropriate way to think about this as a from a company, and particularly the financial markets perspective, is investors have now are benefiting significantly, in fact disproportionately, from his appointment. He should share in that and as he takes this company and makes it better, he should absolutely be financially rewarded. You know, I feel this way. We talk about team language a lot and we talk about, you know, stars and our marquee players, et cetera. In sports, if someone name her Caitlin Clark or someone LeBron James, if a team gets someone in there and they fill those stadiums and the owners are making a ton of money, then that talent should be paid. And it might be disproportionate to the person who's a ticket taker at the athletic building, but if they're putting butts in seats, that star is adding to the value of the organization and the revenue and ultimately the profitability. He or she should share in that and I feel strongly about it, and I feel the same way about your CEOs.
Bob Goodwin:So, unpredictably building on your point because you said investors and I know you meant this more broadly because it's stakeholders employees If Starbucks is healthy and growing and feeling financially stable and sturdy, guess what that means they're not having layoffs.
Johnny C. Taylor Jr.:Layoffs. That means they're giving merit. It means they're paying bonuses. More importantly, they are growing and creating opportunities and communities and various communities. Well, that's what I was going to.
Bob Goodwin:And then sort of the next circle out is the communities are benefiting from a healthy Starbucks. A dying Starbucks doesn't benefit anybody in their ecosystem.
Johnny C. Taylor Jr.:Hey, I can tell you, I was at Blockbuster, you remember. I know how this works. At one point we were Starbucks. We were on every corner, ubiquitous people knew our brand and then we weren't. And so you're absolutely right.
Johnny C. Taylor Jr.:If you're focused on, if it takes $100 million to attract someone who can put $18 billion heck $10 billion on the books and with promises of more, then it was money well spent and that's what we've got to do, is not the temptation is to get into what I think is really really not strategic thinking. When it comes to compensation, focusing on the headline number is just the headline number whatever. And, by the way, as you and I know and anyone listening here I'm sure knows a lot of that He'll get the equity, but it only really gets his value if he can bring the stock price up. So he, you know it's not like someone wrote him a hundred million dollar check, although I did read that he got a $10 million signing bonus. Right, good for him. This guy we do $10 million signing bonuses every day in professional sports and none of those individuals, as great as they might be, will create the kind of economic activity that a CEO of a Fortune 500 company will. Period, full stop.
Bob Goodwin:Yeah, and so yes, yes and yes. So let's think about because I think for people listening, the next piece of this will be germane as well which is change management. So we're in a company environment right now. I mean what he's getting inserted into is not a fine-tuned, well-oiled machine. They're getting crushed in China. Their US, which is their largest market, of course, is going backwards, like same-store sales are negative. Right, you've got this proliferation of air quote innovation which is just making their business way too complex and at the ground level it's too hard to go execute against all this stuff. Right, you've got consumers who are like inflation is eating me up, like I'm not sure I can do $7 every day at Starbucks anymore. So he clearly has a lot of headwinds. What are some of the leadership and kind of change management, either priorities that you might think for him or, more broadly, how leaders listening to this can think about difficult change at their company?
Johnny C. Taylor Jr.:how leaders listening to this can think about difficult change at their company. Well so I alluded to it in the beginning, but let me put a real point in it, pin in it. He's got to get the culture right. They run a business. They kind of know what he will.
Johnny C. Taylor Jr.:Very quickly, given his background, he will be able to determine whether operational efficiency is, he'll right-size the organization, management, et cetera. He'll do all of that, but his ultimate, ultimate and I will use that word penultimate opportunity is to say what are we going to be going forward? And that's vision, but it's also like what's the culture? How are we going to turn this thing around? And that requires some real in-depth conversations with his management team that will cascade throughout the organization. You get input from wherever, but at the end of the day, they're going to have to give and arrive at this phrase that I use, which is cultural clarity.
Johnny C. Taylor Jr.:He's got to say to the organization this is who we're going to be and this is how we're going to do it. And therefore, some of you are going to come on the journey, some won't, and we're all going to be good. But you can't do this without achieving a level of cultural clarity that that, like it's, it's number one, it's job number one, number two and number three. You just have to, and I tell you so. I spent Monday of this past week with the management team of Chick-fil-A. Spent Monday of this past week with the management team of.
Johnny C. Taylor Jr.:Chick-fil-A oh awesome, yeah, they invited me down and one of the things at the end of the day is chicken, right. But one of the things that they are so clear about is their culture. I mean, unapologetically, we don't open on Sundays and if you don't like that, too bad, we are a Christian faith-based organization. You don't have to. We're not recruiting new members. Christian faith-based organization, you don't have to. We're not recruiting new members. But guess what? This is our culture. We will pray, we won't curse.
Johnny C. Taylor Jr.:They have rules of engagement and I think it's why rarely do you ride past a Chick-fil-A anywhere where there's not a line. I mean, it's totally period and it's usually a long line and they move those lines. This is what Brian and, frankly, any CEO has to do is get real clear about our culture, so that to me, that's it. You can. Yes, they'll run the numbers and again, they'll determine efficiencies and all of that, but at the top, this entire thing, his success is largely dependent upon it being making it very clear to people. This is who we are and this is how this transformation is going to be underway.
Bob Goodwin:How much of that is I hope I can say this the right way how much of that is listening, kind of soliciting from people what they think it is or should be, and how much of it is Brian say. I'm kind of telling y'all this is what our culture is going to be.
Johnny C. Taylor Jr.:So I can tell you from a C I had to do this and that's a really great and insightful question, bob. So I think the answer is it's both, but using. Hopefully he has, will have a great relationship with the head of HR there, but someone does need to solicit from the organization. It can't be purely a treetop strategy. It has to be treetops and grassroots at once. My take on it was I literally believe that you find I randomly, when I joined SHRM, talked to oh, 150 people I don't know the number, but it was a significant number of employees without managers, in a room and not in group settings.
Johnny C. Taylor Jr.:I actually talked one-on-one with people to say tell me, how do things actually work here? What is the culture now? So let's start with what it is. We can get to what we aspire for it to be. But what is it right now?
Johnny C. Taylor Jr.:Doing that assessment work, and I talked to a ton of people, from the janitor to the executive offices. I wanted to understand no filter. With that in hand, the next step so I've gotten information, insights from the organization. Then we convened the management team and said okay, guys, this is what I've heard. Gut, check it. Does this resonate Because you all were here before I was. But now let's talk about what we want it to be. And we collectively, talking about crowdsourcing, we kind of said this is what we want to be going forward.
Johnny C. Taylor Jr.:And then the CEO ultimately is the owner of the culture. Hr facilitates it and is the keeper of the culture, but I ultimately, at the CEO level, have to own it. And then you tell people this is what we're going to be and he has to be prepared, as you do in any organization, with some people saying that's not where I want to work anymore, okay, and some of those people will be stars. But you say but this, you've got to be really clear. Back to the Chick-fil-A's. Be clear about what your culture is, and then the right people will gravitate towards you. And when everyone's aligned on culture, the business transformation and turnaround becomes a lot easier, because you're not fighting from within. You already have the external factors that you're fighting. The Duncan now running and growing and you've got all of this happening to you. He's got to get real clear about his culture.
Bob Goodwin:Yeah, so I learned this from you and I'm going to actually build on it for a little bit. But you know what you just described is, you did discovery first. You did, you know, kind of very intense listening, right. So discovery, then we'll call it debate, but discuss, debate, right, Decide and ultimately that decision lives with you as the CEO and then commit.
Johnny C. Taylor Jr.:Period, period. The commit part is the biggest thing and the CEO can't make you commit to anything. Hr can't make you commit but you can't get to the commitment if you don't have clarity Like people can't commit to you and what this is like and how we're going to do it. I found that we jumped to the commit CEOs say this is our culture, I need you to commit to it and you haven't engaged in the discovery work because he could come in and the temptation is to come in and say I was very successful at my last gig and I'm going to overlay how I did it and the culture on Starbucks. That could be really risky. I've seen that done. That is a horrible playbook, right? Clearly, we're all informed by our successes, but every organization is unique. It's unique in its own how it operates and you've got to. That's why you have to go through the discovery phase, because you do need to understand the nuances and the intricacies of how this organization. It's an organization right how it operates and it's an organization that right how it operates.
Bob Goodwin:Yeah, and you know, one of the things that I have learned from you, among many, is culture at the end of the day. Well, two things Culture is not right or wrong. It is, it just works for you. If you can't commit to this, this may not be a good culture for you. It doesn't mean our culture is bad, it just means it's not for you. Chick-fil-a is like a perfect example of that. But then the second thing is it's not mission statement, it's not vision statements, it's not value, it's how stuff actually gets done, actually gets done. That's really, really, really gets done. And at Starbucks, looking at the evidence, the way stuff gets done is broken. Yep, and in whether it's idea, people know there's a problem and it's hitting a ceiling and not getting done, or there's active non-listening going on. I, I've got my own idea. I don't want your feed, but whatever it is isn't working there, and you know, I think. Just going back to Brian for a second, he walked into a mess at Chipotle.
Bob Goodwin:That's right, I did not want to go to Chipotle because I'm going to get salmonella. That's not a benefit many people are looking for and he turned it around. As I said at the beginning, they've had an 800% gain in their share price. Slash market cap. Everybody's a happy camper.
Johnny C. Taylor Jr.:Right and that's sustained. It's not a blip, it is. He's done this over time and that proved investors love it, employees love it because they have opportunity and that's something I'm glad you called me back on that earlier. When I say investors is to me, I include financial investors and other stakeholders, but everyone who's invested, because, by the way, a lot of these organizations as an employee, your 401k is contributing to invest in the company. 401k is contributing to you invest in the company. You may not know it directly, but if you're in the market then you're likely to be in some chipotle somewhere somehow.
Bob Goodwin:So this idea that all of us have a vested interest in ensuring this thing works is critical yeah, and I mean, everybody wants to be on a winning team, nobody wants to be on a losing team. Right, your very best players are going to go find a better team to be on, because nobody wants to be on an under 500 team. And then at some level, I have to believe that creativity, innovation, suffers, because what's the point? I don't want to. It's all kind of hopeless versus no, we've got this and there's this renewed vision for who we can be and why we want to be who we can be, and I can get aligned around that, which is all the culture stuff. Last question is I'm going to guess that he might bring some trusted advisors along with him. That's right. How do you do that in a way that is not completely disruptive? But at the same time, as a CEO, you need to be surrounded by people who get you and can help you hit the ground running a little faster than not having a core group of people around you.
Johnny C. Taylor Jr.:So that is one of the most hotly debated and contested conversations in boards and in leadership generally. Partially because, well, there's some practical realities. My guess is raiding Chipotle either they will contractually not be able to do it, they're in the same space. One is a different type of food, but at the end of the day there's probably something in his former contract with his company and in the contracts of his other executives that say you can't exactly rate us. So that's one. Secondly, there's some practical realities in that that company is doing well Chipotle, his people aren't quick to jump and go jump into this situation, which is still a question mark. Right, we've seen a blip because, for sure, but he won't be the first person who you know. So am I going to leave the thing that I know is working this Chipotle, my security and if they have all sorts of compensation plans, as you might expect, that tie these people to the company. So I think, practically I don't think there's a chance that he just goes and raids his former organization, probably not in the best taste anyway. But you do need a certain number, some number of people who come with you, who know you, so that you can work faster.
Johnny C. Taylor Jr.:When I joined Sherm as CEO, I brought a couple of people, two or three, and I was intentional not to displace other people. So that's the key you come in the door and I need these two or three people and I say I'm going to fire my otherwise nicely performing CFO and I'm going to fire my GC and I'm going to bring in and replace those jobs. That's dangerous because it creates a lot of angst within the rest of the management team. Okay, so at one point does he just replace me with someone from his past? You gotta be careful there.
Johnny C. Taylor Jr.:So you bring in advisors and if they're open jobs currently, let's say he has an open CFO job well then, great, you can bring someone who you've worked with in the past or you've experienced through some other interactions in the past. You're like I wanna bring them, but I caution leaders. This is not like becoming the president of the United States, where the entire cabinet goes away and you replace them all. And frankly, I think the federal government could learn from that too, because you do lose some very, very important culture when you do that and you create instability. But he's got to and every leader I know, and the way that I did it, you do bring two. You create instability, but he's got to and every leader I know and the way that I did it. You do bring two or three people who allow you to get to market a lot faster because they know how you operate, they know how you think and you all have a playbook of sorts.
Bob Goodwin:Any final thoughts? Sean, I'm just looking at the time and I want to make sure I'm mindful of your time and listener's time.
Johnny C. Taylor Jr.:I think the biggest thing is early on, brian, when you come into an organization either that needs to be transformed just because, or because they've committed to transforming, or that's in trouble, you've got to win the hearts and the minds of your employees. At the end of the day. While it's really important to sit in corporate and talk about what they're talking about in corporate and design new plans and everything that frontline staff has got to believe in you, because if they don't believe in you, they can sabotage the business, they can leave the business and find other opportunities, et cetera. So I would just encourage and he doesn't need to hear this from me, but any leader when you walk into the situation, you do have to very quickly capture the minds and the hearts of the masses.
Bob Goodwin:Yes, yes, yes. So we talk about this. A lot is convictions. What do you believe is true Leads to clarity, which will define their strategy moving forward Once you've got clarity. Clarity breeds confidence. We've done the homework, we've done the listening, we're committed to it, and confidence is contagious. People want to believe Johnny. I believe people want to believe. Give me something to believe in and I think he's got a great chance. I think, again, the broader application is exactly what you said you have got to bring these employees along with you and if he can do that, that's a tidal wave waiting to happen. It could be amazing.
Johnny C. Taylor Jr.:Unstoppable. If he can pull this off, all right, my man.
Bob Goodwin:Fun, as always, to our friendly audience here at the WorkWire. Thank you so much for investing a few minutes of your day listening to Johnny and I talk about what's going on in the news and how it impacts the world of work. And with that, johnny, I will let you go. Come on the WorkWire, let's do it. Have a great, great weekend, everybody, and we'll see you on the next episode.
Johnny C. Taylor Jr.:All right Be well.
