Did his work-life balance POV cost Starbucks' Indian-origin head Laxman Narasimhan the job?

Laxman Narasimhan had assumed the post just a year ago on March 20, 2023. Niccol will begin in his new role on September 9 and the company’s CFO Rachel Ruggeri will be the interim CEO until then.

Narasimhan is stepping down from his role as CEO and board member with immediate effect, according to media reports.

Interestingly his removal followed an interview with Fortune magazine last month, where Narasimhan spoke about the importance of work-life balance and declared that he "almost never" worked past 6 pm.

“I am very disciplined about balance. If there’s anything after 6 pm, and if I am in town, it’s got to be a pretty high bar to keep me away from the family. Anybody who gets a minute of time after that better be sure that it’s important. Because if not, it’ll just wait for another day," Narasimhan said during the interview.

Laxman Narasimhan has stepped down as chairman and CEO of Starbucks. Photo Courtesy: X/Laxman Narasimhan

According to media reports, the ouster of Laxman Narasimhan by Starbucks Corp. is also in line with a record number of CEO ousters at US companies. 

"Of the 191 chief executive officers who have left companies in the Russell 3000 Index this year, 74 were considered to be fired or forced out, according to data compiled by exechange.com, a research provider that analyses public sources to track executive changes. That’s the most at this time of year since the firm began tracking CEO departures in 2017," reported Bloomberg .

“CEOs who do not perform well in the rapidly changing market environment are now apparently being replaced very rigorously,” said Daniel Schauber, founder of exechange.com, in an interview with Bloomberg on Tuesday.

Starbucks said in an online statement on the decision to bring Brian Niccol: “Our board believes he will be a transformative leader for our company, our people, and everyone we serve around the world."

The newly-appointed CEO said: “I am excited to join Starbucks and grateful for the opportunity to help steward this incredible company, alongside hundreds of thousands of devoted partners,”

Chipotle Mexican Grill's head Brian Niccol will be the new CEO. Photo courtesy: Brian Niccol/LinkedIn

Following the news, Starbucks shares surged 12 percent in premarket trading, while Chipotle shares dropped 10 percent.

In May 2024, Starbucks had to cut its guidance for the third consecutive quarter and reported its first sales decline since late 2020.

Narasimhan had taken over from longtime Starbucks leader Howard Schultz, who served as interim CEO after coming out of retirement while the company searched for a new chief executive.

Starbucks had announced Narasimhan's appointment as CEO in September 2022.

Before joining Starbucks, Narasimhan was the CEO of UK-based consumer health and nutrition company Reckitt and had previously held a long tenure as an executive at PepsiCo.

The sudden leadership change follows reports that activist investors Elliott Investment Management and Starboard Value had acquired stakes in Starbucks.

Starbucks and Elliott were reportedly in discussions to add Jesse Cohn, a managing partner at the activist investor, to its board of directors.

According to The Guardian, Elliott has been pressuring the company to improve its performance and stock price, proposing the company expand its board and improve its governance. Elliott’s offer was reported to be part of an effort to allow Narasimhan to keep his job as CEO, the report said.

The coffee chain was also considering setting up committees to review capital allocation and operational improvements.

Meanwhile, Chipotle has appointed Chief Operating Officer Scott Boatwright as interim CEO.

Mellody Hobson, Starbucks board chair, will become the lead independent director, and Narasimhan will also resign from his board seat.

Chipotle’s CEO since 2018, Brian Niccol, who became chair of its board in 2020, earlier served as CEO of Taco Bell.