Start with why

New York Times
in September 2007. The company had in fact become so dysfunctional that some
managers were compelled to falsify earnings reports between 2003 and 2006 in
order to meet sales targets, suggesting a corporate culture that put undue
pressure on managers to meet bottom-line targets. In the meantime, the company
had missed significant market shifts, most notably the potential of the consumer
market, and lost its edge with component suppliers as well. And in 2006,
Hewlett-Packard swept past Dell as the largest seller of PCs worldwide. Dell had
gone through the split and failed to recognize the reason it wasn’t the company it
used to be.
Starbucks is another good example. In 2000, Howard Schultz resigned as
CEO of Starbucks, and for the first time in its history and despite 50 million
customers per week, the company started to crack.
If you look back at the history of Starbucks, it thrived not because of its coffee
but because of the experience it offered to customers. It was Schultz who
brought that WHY to the company when he arrived in 1982, ten years after
Gordon Bowker, Jerry Baldwin and Zev Siegl first started selling coffee beans in
Seattle. In the early days it was about the coffee. Schultz, frustrated that the
founders of Starbucks couldn’t see the larger vision, set out to put the company
on a new course, the course that ultimately turned Starbucks into the company
we know today. Schultz had been enamored of the espresso bars of Italy, and it
was his vision of building a comfortable environment between work and home,
the “third space,” as he called it, that allowed Starbucks to single-handedly
create a coffee-shop culture in the United States that had until then only existed
on college campuses.
That was the time when Starbucks stood for something. It reflected an
underlying belief about the world. It was that idea that people bought, not the
coffee. And it was inspiring. But Starbucks, like so many before it, went through
the inevitable split. They, too, forgot about WHY the company was founded and
started focusing on the results and the products. There was a time when
Starbucks offered the option to sip your coffee out of a ceramic cup and eat your

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Danish off a ceramic plate. Two perfect details that helped bring the company’s
belief to life in the place between work and home. But ceramic crockery is
expensive to maintain and Starbucks did away with it, favoring the more
efficient paper cups. Though it saved money, it came at a cost: the erosion of
trust. Nothing says to a customer “We love you, now get out” like a paper cup. It
was no longer about the third space. It had become about the coffee. Starbucks’s
WHY was going fuzzy. Thankfully, Schultz was there, the physical embodiment
of the WHY, to remind people of the higher cause. But in 2000 he left, and
things got worse.
The company had grown from fewer than 1,000 stores to 13,000 in only ten
years. Eight years and two CEOs later, the company was dangerously
overextended just as it was facing an onslaught of competition from
McDonald’s, Dunkin’ Donuts and other unexpected places. In a now famous
memo that Schultz wrote to his successor, Jim Donald, just months before
returning to take the helm, he implored Donald to “make the changes necessary
to evoke the heritage, the tradition and the passion that we all have for the true
Starbucks experience.” The reason the company was floundering was not that it
grew too fast, but that Schultz had not properly infused his WHY into the
organization so that the organization could manage the WHY without him. In
early 2008, Schultz replaced Donald with a leader who could better steer the
company back to a time before the split: himself.
None of these executives are considered God’s gift to management. Steve
Jobs’s paranoia, for example, is well documented, and Bill Gates is socially
awkward. Their companies are thousands of people deep and they alone can’t
pull all the strings or push all the buttons to make everything work properly.
They rely on the brains and the management skills of teams of people to help
them build their megaphones. They rely on people who share their cause. In this
respect, they are no different from other executives. But what they all have in
common, something that not all CEOs possess, is that they physically embody
the cause around which they built their companies. Their physical presence
reminds every executive and every employee WHY they show up to work. Put
simply: they inspire. Yet, like Bill Gates, these inspired leaders have all failed to
properly articulate their cause in words that others could rally around in their
absence. Failing to put the movement into hard words leaves them as the only
ones who can lead the movement. What happens when Jobs or Dell or Schultz
leave again?
For companies of any size, success is the greatest challenge. As Microsoft
grew, Gates stopped talking about what he believed and how he was going to
change the world and started talking about what the company was doing.

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Microsoft changed. Founded as a company that believed in making people more
productive so they could achieve their highest potential, Microsoft became a
company that simply made software products. Such a seemingly subtle change
affects behaviors. It alters decisions. And it impacts how a company structures
itself for the future. Though Microsoft had changed since its founding, the
impact was never as dramatic because at least Bill Gates was there, the physical
embodiment of the cause that inspired his executives and employees.
Microsoft is just one of the tangible things Gates has done in his life to bring
his cause to life. The company is one of the WHATs to his WHY. And now he’s
off to do something else that also embodies his cause—to use the Gates
Foundation to help people around the world wake up every day to overcome
obstacles so they too can have an opportunity achieve their potential. The only
difference is he’s not doing it with software anymore. Steve Ballmer, a smart
man by all accounts, does not physically embody Gates’s vision of the world. He
has the image of a powerful executive who sees numbers, competitors and
markets. He is a man with a gift for managing the WHAT line. Like John
Sculley at Apple, Jim Donald at Starbucks and Kevin Rollins at Dell—all the
CEOs who replaced the visionary founders or executives—Ballmer might be the
perfect man to work alongside a visionary, but is he the perfect man to replace
one?
The entire culture of all these companies was built around one man’s vision.
The only succession plan that will work is to find a CEO who believes in and
wants to continue to lead that movement, not replace it with their own vision of
the future. Ballmer knows how to rally the company, but can he inspire it?
Successful succession is more than selecting someone with an appropriate
skill set—it’s about finding someone who is in lockstep with the original cause
around which the company was founded. Great second or third CEOs don’t take
the helm to implement their own vision of the future; they pick up the original
banner and lead the company into the next generation. That’s why we call it
succession, not replacement. There is a continuity of vision.
One of the reasons Southwest Airlines has been so good at succession is
because its cause is so ingrained in its culture, and the CEOs who took over from
Herb Kelleher also embodied the cause. Howard Putnam was the first president
of Southwest after Kelleher. Though he was a career airline guy, it was not his
résumé that made him so well suited to lead the company. He was a good fit.
Putnam recounts the time he met with Kelleher to interview for the job. Putnam
leaned back in his chair and noticed that Kelleher had slipped his shoes off under
the desk. More significantly, Putnam noticed the hole in one of Kelleher’s socks.
It was at that point that Putnam felt he was the right man for the job. He loved

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that Kelleher was just like everyone else. He too had holes in his socks.
Although Putnam felt Southwest was right for him, how do we know if he was
right for Southwest? I had a chance to spend half a day with Putnam to talk. At
one point in the afternoon I suggested we take a break and grab a Starbucks. The
mere suggestion incensed him. “I’m not going to Starbucks!” he cracked. “I’m
not paying five dollars for a cup of coffee. And what the heck is a Frappuccino
anyway?” It was at that point I realized how perfect a fit Putnam was for
Southwest. He was an everyman. A Dunkin’ Donuts guy. He was a perfect man
to take the torch from Kelleher and charge forward. Southwest inspired him. In
the case of Howard Putnam, Kelleher hired somebody who could represent the
cause, not reinvent it.
Today it has become so acculturated there that it’s almost automatic. The
same could be said for Colleen Barrett, who became president of Southwest in
2001, some thirty years after she was working as Kelleher’s secretary in his San
Antonio law firm. By 2001, the company had nearly 30,000 employees and a
fleet of 344 planes. By the time she took over, Barrett says that running the
company had become “a very collective effort.” Kelleher stopped his day-to-day
involvement in the company, but left a corporate culture so strong that his
presence in the hallways was no longer needed. The physical person had largely
been replaced by the folklore of Kelleher. But it is the folklore that has helped
keep the WHY alive. Barrett freely admits she’s not the smartest executive out
there. She is self-deprecating in her personal assessment, in fact. But as the
leader of the company, being the smartest was not her job. Her job was to lead
the cause. To personify the values and remind everyone WHY they are there.
The good news is, it will be easy to know if a successor is carrying the right
torch. Simply apply the Celery Test and see if what the company is saying and
doing makes sense. Test whether WHAT they are doing effectively proves WHY
they were founded. If we can’t easily assess a company’s WHY simply from
looking at their products, services, marketing and public statements, then odds
are high that they don’t know what it is either. If they did, so would we.

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