Why Executives Shouldn't Put Positive Spin on Bad News

schultz-starbucks.jpgThe media metaphors were flying after Starbucks' latest quarterly announcement:
"Starbucks Cools Way Off"
"Starbucks Losing Its Buzz"
"Starbucks' Bitter Results"
And yet, in the obligatory press release, CEO Howard Schultz put a positive spin on what was unequivocally a horrendous quarter. The big question, of course, is should he have done that or not? Let's first take a look at his quotes from the release:
"With a re-architected cost structure at the close of fiscal 2008, we began the new fiscal year with a healthier store portfolio that will allow for operating margin expansion," commented Howard Schultz, chairman, president and ceo. "Despite a global economic environment which shows no immediate signs of improvement, the steps we took in FY08 position us to deliver EPS growth in FY09."

Schultz continued, "We appear to be more resilient than many other premium brands. And while we cannot call isolated signs of improving sales a trend, we are encouraged by our ability to drive increased traffic at a relatively low cost, as we did on Election Day. As we head into the holiday season and Calendar '09, consumers are looking for value and we've been pleased with the steady progress of our Starbucks Rewards program and the enthusiastic reception to the Starbucks Gold Card. I am optimistic we are well positioned to weather this challenging economic environment."

While I applaud most of Schultz's efforts, the last line of both paragraphs seems a bit over-the-top. I'm not sure any retail companies should be optimistic that they're well positioned to weather this economic environment, let alone one that's several quarters into an attempted turnaround.

In contrast, Fortune editor at large Patricia Sellers had this to say in her post "Starbucks' Schultz needs to get real:"

"Starbucks CEO Howard Schultz needs less optimism and a stronger dose of reality in his brew."

"The entrepreneurial optimism and clever marketing that Schultz used to create one of the world's best brands now seems to be interfering with Starbucks' turnaround."

Investors didn't seem to agree with Schultz's optimism, driving down Starbucks' already depressed shares another ten percent.

As a former marketing executive with more than his share of communications experience, I take a decidedly pragmatic view of positioning, messaging and spin. Of course, company and product positioning should be positive, but only if it meets these five criteria:

  • It must be true, omissions notwithstanding
  • It must be straightforward and crisp
  • It must be ethically unchallengeable
  • It must be credible, which means that big elephants in the room should be dealt with in a proactive manner or it won't pass the laugh test
  • It can't come back to haunt you later
Just to be clear, I don't hold morals and ethics above business success. Rather, I consider them necessary for business success. In my experience, if positioning doesn't meet these criteria, there is a high probability of it backfiring and actually harming the company's brand.

Most executives have a relatively straightforward time with the first three criteria, but it's the last two that trip them up.

In the case of Starbucks' announcement, I think Schultz could have dealt more effectively with the elephant in the room â€" namely a prolonged and challenging turnaround during a brutal market climate. And because he didn't, it might come back to haunt him later, depending on Starbucks' performance in subsequent quarters. My tone would have been more on the neutral side, but that's just me. What do you think?