Starbucks Vs. Radio

Two proud industries have hit the skids -- radio and the high end coffee business.

Radio is finding that there is no future without the next generation. They lost that long ago and there is little chance of getting it back.

Starbucks has lost its way by over charging and under serving.

Radio has competition from new technology.

Starbucks from McDonalds and Dunkin' Donuts -- two corporations looking to sell "joe" for less.

But that’s where the similarities end.

This is not to say that both Starbucks and radio haven’t made a lot of mistakes. They have. Starbucks grew too fast. Had a top management change where the CEO made it possible for everyone in the company to take their eyes off of what they were doing right.

Radio, well – you know that story.

Now Starbucks is rebuilding and radio is not.

Let me repeat that.

Starbucks is rebuilding and radio is not.

True, radio is cutting back and downsizing. But it has done very little that could be described as fighting back. Even in the face of 17 down revenue months, you can hardly call the industry's response rebuilding. In fact, you can't even call it a response.

For Starbucks, their rebuilding plan got off to a good start.

The former CEO, Howard Schultz, was returned to power not long ago and as a show of purpose he closed down the stores one day – all of them – for several hours – to conduct company-wide training sessions with its employees. Seems like they lost their way under their old boss and Schultz wanted to send a message about the importance of being better at pleasing their customers.

Farid Suleman has presided over quarter after quarter of lousy revenue performance and a stock worth less than a buck and all he could do was fire more people. See, no similarity there.

Sit down for the next one – I don’t want you to hurt yourself.

Starbucks' Schultz announced recently that top executives will not be getting any raises soon after the company posted its first-ever quarterly loss. How alien is that? Revenues dive, salaries go up except for the top people who in essence are taking responsibility for the disappointing performance.

What am I saying -- I forgot. Farid responded a few years ago by cutting his salary from $14 million to $11 million a year (and yes, the company still paid all his taxes). He didn't start handing out raises. He fired many talented employees.

Starbucks execs not only refrained from taking a pay raise, they did something miraculous as far as radio would be concerned. He handed out even more pay increases -- eligible workers in the U.S. – assistant store managers, store managers, retail management trainees, district managers and most hourly roasting plant workers were awarded a 3.5 percent raise.

For God’s sake, what kind of a message does that send to your employees?

That they are wanted, appreciated, encouraged to get better. All that makes no sense in the world of radio mismanagement. Why not just fire 10% of them and be on with it. That’s how radio does it.

Take Farid.

Oh, forget about Farid. I know I'm picking on him and most of the other radio CEOs are just as guilty but geez -- his compensation is just plain excessive especially in light of the performance he turns in.

Let’s get back to Starbucks' approach.

They passing out even more raises.

Still sitting?

All other employees get a 2% increase. A 2% raise. I had to say it twice because I didn’t believe it the first time. What are they trying to do – tell their employees, customers and investors that they are going to turn that ship around by investing in them that brung them -- as they say in Texas.

You could argue that Starbucks has a future in coffee when radio has no future in terrestrial broadcasting.

You would be correct.

But keep in mind that radio has all the assets (talent, managers, sales people) to redeploy to the digital frontier if anyone in the corporate suite could figure that out.

It’s fair to say that radio cutbacks and the ones that are most assuredly coming soon have done little to help radio groups. The next firings will have to wait for a major holiday like – say, Christmas. That’s when Clear Channel seems to fire people.

Mark Mays issued a Labor Day memo to his loyal troops through his Mark Gram encouraging them to embrace and capitalize on the changing media environment and to encourage Clear Channel customers to benefit in the changing environment – according to an account in Radio & Records.

Maybe Mark has nothing to do, but a Labor Day memo already? From him?

Here's a better idea.

Mays writes a corporate email saying the new company (Lee & Bain) has put a one year moratorium on further layoffs (what they call firings) and will give everyone a raise of some kind or another.

What kind of message do you think that email would send to the troops?

I know. I've been fantasizing again.

But if he did it, Mays would be borrowing a strategy from an executive like Howard Schultz in realizing that there will be no turnaround unless his talented people are treated with respect, dignity and rewarded with some kind of security.

Some may think it is unfair to compare Starbucks with radio and I can understand that. Starbucks employees are low paid workers and radio employees are -- never mind.

Here's the point: Starbucks actually wants to turn it around and knows firing people is the coward’s way out.

A week doesn't go by that I don't receive emails from readers wondering how the radio industry we know and love could be allowing its demise to happen without even a response.

I may be poking fun this morning but I am dead serious.

It's too late for a wake-up call.

Radio was late for work again.

Not one radio group has a turnaround plan. Not one. I'm not talking about some PR b.s. but a real plan.

One that involves the digital future.

One that involves investing significant budget in the Internet, mobile content and podcasting.

Starbucks is at least trying.

Radio is presiding over its own self-destruction.

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