Why was Starbucks CEO fired?

Why was Starbucks CEO fired? Laxman Narasimhan lost his job in August 2024 after just 17 months running the coffee giant. The board pushed him out because sales kept falling, stores couldn’t handle mobile orders, and the stock dropped 20% under his watch.

Starbucks didn’t officially say they fired him. Companies almost never say that. But executive tracking firm Exechange rated his departure a 9 out of 10 on their “forced out” scale. That means it was about as close to a firing as you can get without the company admitting it.

What went wrong with sales under Narasimhan?

Starbucks had two straight quarters of falling sales before the board made their move. Same store sales dropped 3% in the final quarter under Narasimhan. Traffic fell 7% in the US. In China, the second biggest market, sales dropped 18%.

The numbers told a story the board couldn’t ignore. Starbucks stock had fallen 20% since Narasimhan took over. That wiped out about $32 billion in company value during his 17 months as CEO.

Former CEO Howard Schultz, who picked Narasimhan as his replacement, wrote a public letter on LinkedIn saying US operations were the main reason for the company’s problems. He never mentioned Narasimhan by name, but the message was clear.

Why did customers stop coming to Starbucks?

The mobile app became the biggest problem. More than 30% of orders came through the app, and stores couldn’t keep up. Around 15% of mobile orders never got completed because customers gave up waiting or the store ran out of products.

Wait times stretched to 15 or 20 minutes at busy locations. Schultz called the mobile app “the biggest Achilles heel for Starbucks” in a podcast interview. He described visiting a Chicago store at 8am and finding a “mosh pit” of frustrated customers.

The company had over 170,000 possible drink combinations. Baristas felt overwhelmed. About 8% of customers waited between 15 and 30 minutes for their drinks in early 2024, compared to almost nobody waiting that long in 2019.

Narasimhan tried to fix things. He rolled out new processes called the Siren Craft System to speed up drink making. But new equipment that could cut drink times in half was only in about 10% of stores by the time he left.

Did the work life balance comments hurt Narasimhan?

In a Fortune magazine interview, Narasimhan said he almost never worked past 6pm. That comment got a lot of attention on social media.

Some business analysts said this showed he wasn’t committed enough during a crisis. Running a global brand with falling sales usually means long hours and constant focus. The timing of those comments looked bad when Starbucks was struggling.

The board chair Mellody Hobson thanked Narasimhan for his “dedication and laser focus” when he left. But that sounded like standard corporate politeness after an awkward departure.

What role did activist investors play?

Activist fund Elliott Investment Management bought a big stake in Starbucks and started pushing for changes. Another fund called Starboard Value also held shares and wanted better performance.

These investors pressure companies to boost their stock price. When sales keep falling and the stock keeps dropping, activist investors start demanding new leadership.

The board chair said Elliott wasn’t consulted about firing Narasimhan. But the pressure from activist investors had been building for months. The board likely felt they needed to act before these investors forced more drastic changes.

Who replaced Narasimhan and how much did it cost?

Starbucks hired Brian Niccol away from Chipotle. His pay package could reach over $100 million in the first year. That includes a $10 million cash signing bonus, $75 million in stock awards, and a $1.6 million annual salary.

Niccol doesn’t even have to move to Seattle. He lives in Newport Beach, California and commutes on the company jet when needed. Starbucks pays for his temporary housing and travel.

The company spent roughly $130 million total on the CEO switch when you add Narasimhan’s exit payments and Niccol’s hiring bonuses. Proxy advisory firm Glass Lewis called the transition cost “staggering.”

Why pay so much? Niccol turned Chipotle around after food safety scandals. During his time there, the stock rose 773%. The board believed he was the only person who could fix Starbucks fast enough.

What has changed since the new CEO took over?

Niccol started in September 2024 and made quick changes. Starbucks brought back condiment bars that disappeared during COVID. Baristas now write customer names on cups with markers again. Bathrooms are only for paying customers.

The company announced corporate layoffs affecting about 1,100 workers in early 2025, and another 900 later in 2025. The Chief Technology Officer resigned in late 2025 as part of a broader shakeup.

Stock performance has been mixed. Shares jumped 25% the day Niccol’s hiring was announced. But the price has bounced around since then and ended up slightly lower than his first day a year later.

What lessons does this firing teach about CEO jobs?

CEO firings hit a record pace in 2024. Of 191 CEOs who left Russell 3000 companies that year, 74 were forced out. That’s the most since tracking began in 2017.

Narasimhan came from outside the restaurant industry. He worked at McKinsey consulting for 19 years, then ran Reckitt, which makes Lysol and Mucinex. He spent six months training as a barista before taking over Starbucks.

None of that prepared him for running coffee shops at scale. The board replaced him with someone who spent his career running Taco Bell and Chipotle. Niccol knew restaurants. Narasimhan knew consulting.

As one professor put it, the big lesson is that in tough times, boards want operators who have “been there, done that” over strategists with impressive resumes.

FAQ

Was Laxman Narasimhan officially fired from Starbucks?

No. Starbucks said he was “stepping down” which is corporate speak for being pushed out. Executive tracking firm Exechange rated his departure 9 out of 10 on their “forced out” scale, meaning it was effectively a firing without the company admitting it.

How much money did Narasimhan get when he left?

His severance package was worth about $10.6 million in salary and bonuses, plus potentially $21 million in stock awards. He received $4.2 million as the first half of his severance, with the rest paid 18 months after leaving.

How long was Narasimhan CEO of Starbucks?

17 months. He became CEO in March 2023 and left in August 2024. He spent 6 months before that training at the company, including working as a barista.

Why did Starbucks stock jump when Narasimhan was replaced?

Investors loved Brian Niccol’s track record at Chipotle, where the stock rose 773% during his time as CEO. The stock jumped 25% on the news of his hiring, adding $15 billion to Starbucks’ value in one day.

What were the main problems at Starbucks under Narasimhan?

Sales fell for two straight quarters. Mobile orders overwhelmed stores. About 15% of app orders were abandoned due to long waits. Traffic dropped 7% in the US. Stock fell 20%. China sales declined 18%.

How much does new CEO Brian Niccol make?

His first year compensation was about $96 million, mostly in stock awards. His annual base salary is $1.6 million with potential bonuses up to $7.2 million. He can also earn up to $23 million in annual stock awards going forward.

Does Brian Niccol live in Seattle?

No. He lives in Newport Beach, California and commutes to Seattle on the company jet when needed. Starbucks set up a small office for him in California and pays for his temporary housing and travel.

Did Howard Schultz want Narasimhan fired?

Schultz publicly criticized Starbucks operations while Narasimhan was CEO, saying US stores were the main reason for problems. He never named Narasimhan directly but the criticism was hard to miss. Schultz had picked Narasimhan as his replacement.

What is Starbucks doing to fix wait times?

The company rolled out new processes called the Siren Craft System to speed up drink making. They’re testing a new algorithm to prioritize in store orders over mobile orders. The goal is 4 minute waits for in person orders and 12 to 15 minutes for mobile.

Are more Starbucks changes coming?

Yes. The company has made corporate layoffs, brought back in store perks like condiment bars and ceramic mugs, and is changing how mobile orders work. Niccol said the problems are “very fixable” but the turnaround will take time.

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