How the Wrong Judgement of a CEO Brings Down a Company
EX-CEO of Starbucks: Laxman Narasimhan
When Laxman Narasimhan took over as Starbucks CEO in April 2023, he inherited challenges but also had the resources and brand power to address them. Instead, his 17-month tenure was marked by a series of strategic missteps and operational failures that ultimately led to his ouster in August 2024.
Under Narasimhan's leadership, Starbucks has struggled to maintain its market position, with the company reporting two consecutive quarters of declining comparable sales. The situation deteriorated rapidly, with quarterly revenue dropping by 2% in May, signaling fundamental problems with his approach to running the coffee giant.Poor Operational Execution
Interviews with former colleagues reveal Narasimhan's digital and e-commerce expertise but also highlight execution difficulties and a challenging personality.
This assessment proved prophetic. Narasimhan's background as a strategist didn't translate into effective operational leadership. His focus on digital initiatives and corporate restructuring missed the fundamental issues plaguing Starbucks stores - long wait times, inconsistent quality, and employee dissatisfaction.
Disconnect from Core Operations
Perhaps most damaging was Narasimhan's apparent disconnect from Starbucks' core coffee culture. Howard Schultz blasted the company's leadership for not spending enough time in stores or focusing on coffee drinks. This criticism from Starbucks' founder highlighted a fundamental problem: Narasimhan was managing Starbucks like a typical CPG company rather than understanding its unique culture-driven business model.
Even when Narasimhan attempted to address operational issues, his efforts appeared superficial. After experiencing product shortages and burning his hand on a sandwich, Narasimhan is introducing store-level changes to combat employee frustration. These reactive measures came too late and failed to address systemic issues that had been building for months.
His tenure, marked by strategic missteps and declining sales, ultimately led to a loss of confidence among key stakeholders. The swift nature of his replacement demonstrated how completely he had lost the confidence of the board, investors, and the company's founder.Boeing's Safety-First Rhetoric vs. Profit-First Reality
While Boeing's current CEO David Calhoun isn't of Indian origin, the company's ongoing crisis provides a stark example of how prioritizing financial metrics over core business fundamentals can lead to catastrophic failure. The contrast is particularly relevant when examining different leadership approaches to crisis management.
Boeing CEO David Calhoun admitted that the company had retaliated against whistleblowers during Senate hearings in 2024. This admission revealed a corporate culture that actively suppressed safety concerns in favor of protecting the company's financial interests.The Boeing whistleblower case reached tragic proportions when John Barnett, the Boeing whistleblower who died a year ago as he pursued a lawsuit against his former employer, with his family claiming that Barnett's "PTSD, depression, anxiety, and panic attacks, all caused by Boeing's wrongful conduct, caused him to take his own life".
Systemic Cultural Problems
The PSI released new evidence provided by whistleblowers regarding safety risks resulting from Boeing's manufacturing processes, including two whistleblowers who had gone public for the first time. This pattern of whistleblower revelations indicates systemic problems with Boeing's safety culture that goes well beyond individual leadership failures.
The Pattern of Executive Misjudgment
What emerges from these cases is a pattern of executives making fundamental strategic errors:
Misreading Company Culture: Narasimhan treated Starbucks like a traditional consumer goods company, missing the cultural elements that made the brand successful. His approach to store operations and employee relations reflected a corporate mindset that was incompatible with Starbucks' service-oriented culture.
Short-term Focus Over Long-term Value: Both cases show executives prioritizing metrics that looked good in quarterly reports while ignoring fundamental business health indicators. Narasimhan's digital initiatives and cost-cutting measures may have appeared strategic but failed to address core operational problems.
Operational Disconnect: Successful retail and service businesses require hands-on operational leadership. Narasimhan's failure to spend adequate time in stores and understand frontline operations echoed criticisms leveled at other failed retail executives.
Resistance to Feedback: The pattern of ignoring or suppressing critical feedback - whether from founders, employees, or safety experts - appears consistently across these failures.
These executive failures carry massive costs, including financial impact, brand damage, low employee morale, and slow down the strategic momentum.
As corporate boards face increasing pressure to make successful leadership selections, these high-profile failures serve as cautionary tales about the dangers of prioritizing credentials over capability and failing to ensure proper alignment between executive skills and company needs. The stakes are simply too high for anything less than rigorous, comprehensive executive evaluation processes.
