fourth quarter ending September 28, 2008 saw profits plummet 97%, from $158.5 million in Q4 2007 to $5.4 million; for the fiscal year, net earnings were down 53 percent to $316 million.240 Comp-store sales were negative 7 percent, similar to other struggling retailers’ numbers, and the outlook for 2009 was grim.241 In the wake of the company’s faltering financials, the board asked Schultz and his team to model the results of comp store sales falling past negative 15 or 20 percent. “The exercise alone spoke to our dire straits,” Schultz recalled. “If comps reached negative 14 percent, Starbucks wasn’t going to make it.”242
Given this and the worsening financial crisis, Starbucks board members balked at plans to move forward with the Leadership Conference, which was expected to cost $30 million.243 Why, directors pressed, should Starbucks prioritize donating time, resources and manpower to devastated New Orleans? How could the company justify a huge financial commitment to a conference when it was pulling back in so many other areas?
Schultz held fast. In the end, he got the Leadership Conference. It opened in New Orleans on October 27, 2008. Over four days, ten thousand partners converged on the areas of the city hardest hit by Hurricane Katrina, and took part in community service projects. They cleaned storm drains, constructed playgrounds, painted murals, restored homes and schools, and landscaped public and private grounds. They worked with local nonprofit and community building organizations to put in more than 54,000 hours of work, and invested more than $1 million in neighborhood projects. It was the largest concentration of community investment New Orleans had seen since Katrina.244
Parallel to the community service activities, Schultz and senior leadership hosted “galvanizing” events for partners. The October 29 General Session, for example, resembled a rock concert. When Schultz took the stage, he reviewed the six guiding principles that comprised Starbucks mission and reminded the 10,000-person audience of their critical importance. He encouraged them to take pride in, and be accountable for, every single customer interaction; “MAKE IT PERSONAL,” became a conference rallying cry.245 Schultz also announced the company’s commitment to FairTrade certified coffee, and outlined 13 environmental goals to be achieved by 2015. As a final bonus, Schultz brought Bono, humanitarian front man of the band U2, on stage to announce Starbucks partnership with (PRODUCT) RED. Through the partnership, a percentage of proceeds from holiday beverage sales and additional programs would be channeled into the Global Fund, which supported AIDS relief programs in Africa (Exhibit 10).246
During the conference, Starbucks introduced new technologies that would streamline store operations, including laptops for each store, a new point of sale system in all company-operated stores in the United States and Canada, mobile devices for district managers, and a new web-based labor scheduling tool. Partners also participated in educational programs designed to help them focus once more on Starbucks core offering — the customer experience of great coffee.247 An elaborate pavilion housed a “walking history” of coffee, from trees to a working roaster, and partners wrote about their commitment to their jobs and to Starbucks on a commitment wall (Exhibit 10).
Reflecting on the impact of the conference, Schultz said:
[A] word I’d not consciously thought of for what seemed like a long while came to mind. “Love.” I’ve always loved this company. Love is why I had come back as CEO and why I feel so personally responsible for its failure and success. Yet somewhere along our journey, the love our people had for Starbucks had blurred. New Orleans had brought it back into focus, and once again our values stood in stark relief. I felt confident that thousands of others also loved what we had built, and because of everything we