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Outgoing Chipotle (CMG) CEO Brian Niccol is a “beast.”
That’s what a former colleague from my days at Procter & Gamble told me out of the blue this week.
Nicol will be breaking a lot of ground quickly in what could be the most defining role of his career. As CEO of Starbucks (SBUX), he will also be subject to intense global scrutiny.
If he’s successful at turning it around, the 50-year-old could become governor of his home state of California by age 60. If he fails to do so, his 30 years of great work at P&G, Yum! Brands, and Chipotle could be gone, not to mention the smearing he’ll face on social media, TV, and elsewhere.
“Brian is a phenomenal leader,” Kevin Hochman, CEO of Brinker International (EAT), told Yahoo Finance’s Morning Brief. “I’ve learned a lot from him personally, which is one of the reasons I got into restaurant operations at Yum! Brands.”
Hochman held leadership positions at Yum Brands’ KFC, while Nicol rose through the ranks at Taco Bell, and the two worked together at P&G before joining Yum Brands.
“They’ve obviously made a great pick,” Hockman added. “He’s going to bring the usual Brian Nicol magic and I’m excited to see what they do.”
Starbucks names Brian Niccol chairman and CEO. A look back at his long tenure in the restaurant industry. (Yahoo Finance)
Given the risks mentioned above and the monumental task of turning Starbucks around, I have no confidence that Nicol will waste every penny of his flashy compensation package.
Nicol will receive $10 million in cash and $75 million in stock-based compensation when he starts at Starbucks on Sept. 9. If certain milestones are met, Nicol will earn total compensation of about $117 million in his first year.
At first, this amount sounds completely ridiculous, and you can see the interpretation.
But Nicol is no idle, rich CEO looking to grab one more big payday from a struggling company: This is a man at the peak of his career, with a track record that suggests he can deliver big results for Starbucks within three years.
And Starbucks needs help, too: The coffee chain is in the midst of several operational and cultural crises that will require all the skills Nicol learned from top leaders at P&G and Yum Brands (both of which have produced some of the best leadership out there, as well as PepsiCo (PEP)).
Starbucks saw a 6% drop in North American transactions in its most recent quarter as consumers put off the chain’s rising coffee prices and long wait times.
The story continues
Executives said on the earnings call that they were considering strategic options for the business after international sales fell 7% and same-store sales in China plummeted 14%. Non-GAAP operating margin fell to 16.7% from 17.4%.
Another factor affecting the results is low morale at the store level.
Starbucks management has taken heavy-handed tactics to crush stores that want to unionize, continues to list ridiculously complicated drinks on the menu that are nightmares for busy baristas, and the app has become an infinite customization machine that makes life even more complicated for Starbucks workers.
I recently went to an airport Starbucks and it took me 12 minutes to get a simple morning iced coffee. While I was waiting in line, I made note of the following: 1) there were two people behind the counter. 2) the drink order was overly complicated. 3) there was a menu board filled with strange new drinks that left people staring at them wondering if they wanted to try them.
The stores have been thrown into cultural upheaval by the double whammy of cranky billionaire Howard Schultz and his handpicked successor, Kevin Johnson, whom he essentially fired.
Nicole won’t fix this overnight, or in a month, or even in six months, but it will involve overhauling total rewards for employees, clarifying career advancement opportunities, and removing a lot of clutter from menu boards and apps.
It may take more than a year to turn Starbucks’ culture around.
But Nicole is the man who can do it. Nicole is the man who has spent much of his earnings calls highlighting Chipotle’s regulars ascending to leadership positions. Nicole is the man who has proven that doing the right thing for employees is better than beating profit expectations by a cent. Nicole is the man who split Chipotle’s stock 50-to-1, allowing more people to invest in the company’s growth story.
“It looks like they’ve got a really good guy in Brian,” Bill George, leadership expert and former CEO of Medtronic (MDT), told my Opening Bid podcast (video above, or listen here). George knows both Howard Schultz and ousted Starbucks CEO Lakshman Narasimhan personally.
I think Nicole is a man worth $85 million.
Three times each week, I have insightful conversations with some of the biggest names in business and markets on the Opening Bid podcast. Find more episodes on our video hub, available on your favorite streaming service, or listen and subscribe on Apple Podcasts, Spotify, or wherever you find your favorite podcasts.
In the Opening Bid episode below, Max Levchin, co-founder of PayPal (PYPL) and founder of Affirm (AFRM), talks about his journey as a CEO.
Brian Sozzi is editor-in-chief of Yahoo Finance. Follow Sozzi on X Brian Sozzi You can also find me on LinkedIn. Looking for tips on deals, mergers, the activist landscape, and more? Email me at brian.sozzi@yahoofinance.com.
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