Starbucks: Diversity & Inclusion
The Starbucks incident that led to the unwarranted arrest of two black men in Philadelphia provides a look at how Starbucks handled the situation and where opportunities for socially responsible organizations can learn, improve, and grow.
Shortly after opening its first store in 1971, Starbucks began to distinguish itself as a do-the-right-thing kind of retailer. It offered full health care and stock options to employees, embraced diversity and inclusion, created a foundation to support its communities, located stores in underserved areas, promoted certified Fairtrade products, established ethical coffee-sourcing standards, and built farmer support centers in coffee-growing regions. Along the way, it also rewarded its investors. Following its initial public offering in 1992, Starbucks has had multiple two-for-one stock splits.
By nearly any measure, Starbucks has been ultra-successful, with now about 28,000 stores worldwide and unmatched influence in the supplier markets. Up until the Philadelphia incident, it’s hard to imagine Starbucks not being a socially responsible organization. Clearly it has walked the social responsibility talk. But when a request to use a restroom in the Philadelphia store escalated into the arrests of the two men who had come there to meet a friend, why did that end up calling the authorities?
A cell phone video of the arrests went viral, and it instantly attracted worldwide attention. The video showed that the arrestees had done nothing to merit such a fate. What should leadership do?
The first consideration in managing any crisis is to avoid making the situation worse. Starbucks accomplished that by immediately recognizing the issue, responding quickly, issuing an unequivocal apology (as opposed to “We’re sorry if we offended anyone”) and by flying across the country to deliver apologies in person to the men who were arrested.
The company also saw the situation as a “teachable moment.” Starbucks CEO Kevin Johnson, in an ABC interview on the Monday following the incident, repeated the apology, took responsibility, and said he wanted to apologize in person to the men and “invite them to join me in finding a way to solve this issue.” The men who had been arrested agreed they “want to make sure this situation doesn’t happen again.”
https://youtu.be/1Cz6MF46_yA – CEO Interview
https://youtu.be/NWOz3OZ6J9M – First interview with Nelson and Robinson
In the face of an organized protest at the site of the arrests and calls for a national boycott of the company, Johnson announced plans to close 8,000 U.S. stores on May 29, 2018 to provide employees with bias sensitivity training. In multiple interviews, he continued to apologize and pledged to identify and address the factors that led to such a dire result. He also insisted that a half-day of sensitivity training was only a first step.
The company’s policies, procedures, training and culture fell short of preventing an outcome that should not have occurred and ran counter to one of the organization’s stated values of “creating a culture of warmth and belonging, where everyone is welcome.”
Whether a place where everyone is welcome should include restroom access for non-customers may be debatable but insisting that visitors buy something upon arrival or face forcible removal is not a welcoming gesture. Depending on the nature of the crisis, some stakeholders may turn away for good. At the same time, handling a crisis well can strengthen an organization’s relationships and strength.
Timeline of Events:
Two black men are arrested by Philadelphia police after a Starbucks manager called 911, claiming they were trespassing. A video of the incident quickly goes viral, leading critics to question why the men were arrested and whether race played a factor.
The Philadelphia mayor’s office and police department launch separate investigations. Andrew Yaffe, a friend of the arrested men, says he was meeting them at Starbucks for a business meeting. Yaffe is a real estate investor. Starbucks apologizes to the arrested customers, promising action to shore up in-store practices.
Protesters demonstrate outside the Starbucks location in Philadelphia. The café manager behind the call eventually leaves the company. A video of a black man being denied access to a bathroom in a California Starbucks after a white man was given access goes viral.
Starbucks says it will close its 8,000-plus locations on the afternoon of May 29 to hold training for its almost 175,000 employees. The curriculum will be developed with a range of experts in countering racial bias. The company goes into damage control, releasing a video statement from CEO Kevin Johnson and lining up interviews with media.
The Philadelphia store manager that called 911 is identified as Holly Hylton. Her past Facebook posts on Spanish-speaking customers and treatment of employees attract the media’s attention. Audio of the 911 call is released. Hylton reportedly didn’t warn the two black men she would call the police. Starbucks executive chairman Howard Schultz is interviewed by CBS’ Gayle King. He says he’s “ashamed” by the incident.
The men arrested are identified as Rashon Nelson and Donte Robinson.
Nelson and Robinson say they feared for their lives. They add they met with CEO Johnson.
More than 100 members of Omega Psi Phi protest outside the Starbucks where former member Nelson was arrested.
Johnson says the incident hasn’t hurt sales.
Starbucks drops the Anti-Defamation League from its racial bias training, saying it will serve in an advisory capacity.
Nelson and Robinson settle with Philadelphia for $1 each. City officials promise to set up a $200,000 program for young entrepreneurs.
Starbucks also offers to cover full tuition for Nelson and Robinson’s studies at Arizona State University.
Starbucks closes nationwide for a four-hour training session featuring a film by Stanley Nelson. It costs $16.7 million in lost sales.
Did Starbucks grasp the severity of the action? The store closure follow-up was a grand gesture started to heal the wounds, but was it enough?
Now it’s your turn, you are a regional VP for Starbucks and over the Philadelphia area. In 2018, the Equal Employment Opportunity Commission (EEOC) made it mandatory for all public and private companies to report on its Affirmative Employment Program efforts. In addition, the employment make up would need to be aligned with the Civilian Labor Force (CLF) statistics for like and related organizations. Starbuck’s target goal, per the CLF, was 45% Caucasian, 45% African American, and 10% other minorities, this was to be across every level of the organization, not collectively. For example, within your region you have the following job categories to report on:
1. Coffee House Staff: Baristas
2. Coffee House Management: Shift Supervisors and Store Managers
While preparing the report you uncover an issue that you cannot ignore, 70% of all employees assigned to management are Caucasian, 20% African American and 5% are Asian, and the remaining 5% were Hispanic/Latino, tenured for no more than two years. The staff breakdown is 50% Caucasian, 40% African American and 3% were Asian, and the remaining 7% were Hispanic/Latino. To add insult to injury, regardless of their collegiate matriculation, only 2 Hispanic were promoted after graduation into the management program.
Throughout this few weeks we will develop a plan to address this with the President, Executive Board, General Counsel and at some point, the public at large. Your decision must be well researched – providing short term and long-term goals and quick-wins. Due to the arrests in 2018 and Starbucks’s perceived reputation of fairness and equity, there is intense scrutiny on your response. Plus, you have just received word the African American employees have filed a class action lawsuit alleging, disparate treatment, lack of promotional opportunities and discrimination based on race.