December 10, 2014: Two months after the shooting of an unarmed black teenager in Ferguson, Mo., and after a series of similarly troubling incidents sparked protests throughout the US, Starbucks chief executive Howard Schultz called an impromptu “open forum” for employees at the company’s support center (which is Starbuck-speak for the headquarters in Seattle) to talk about what was going on. Afterwards, employees shared their gratitude to Schultz for giving them the opportunity to talk openly about such a difficult topic.
February 5, 2015: Time magazine featured Schultz on its cover, above the headline “What Starbucks Knows About America.” The lengthy article lauded Starbucks for both its financial turnaround under Schultz’s leadership and its commitment to addressing broader societal issues. It described a CEO “eager to do bold things both for his business and for the country at large,” going so far as to suggest that Schultz might make a run for president.
February 18, 2015: Starbucks’ head of global communications Corey DuBrowa appeared at The Holmes Report’s In2 Summit in San Francisco to discuss the company’s focus on race—and a host of other issues facing America—and received high marks from the senior public relations executives attending the event. For many of those in attendance, Starbucks was a role model, a company with the courage to engage its stakeholders on the issues that impact their lives.
March 15, 2015: Starbucks took its #racetogether initiative public, running full-page ads in The New York Times and USA Today, and announced that baristas in Starbucks stores across the country would “engage customers in conversation” on the topic. And suddenly, the plaudits ceased, and the company found itself at the center of a firestorm of criticism, with DuBrowa “personally attacked in a cascade of negativity” so vituperative he felt compelled to temporarily suspend his Twitter account.
To understand why Starbucks elected to wade into a debate that is among the most heated in America, and how it went so quickly from media hero to villain to victim, a little context is helpful.
Schultz’s decision to address the ultra-sensitive political issues of race did not happen in isolation. It was, rather, the natural extension of Starbucks’ commitment to getting involved in the issues that affect the lives of its employees, customers and communities—a commitment that can be traced back at least four years.
Says DuBrowa, “Over the last few years, we've been asking what we think is an important question: What is the role and responsibility of a public company in today’s society? We are building a different kind of company—performance-driven through the lens of humanity…. We also believe that the world needs leadership, not only from government, but from businesses and citizens. We challenge ourselves often: How can Starbucks be a catalyst and use our scale for good? How can we do more for the people and communities we serve each day?”
In 2011, the company partners with the non-profit Opportunity Finance Network to launch the Create Jobs for USA program, which funded loans to small businesses who faced challenges getting credit. The effort raised $15 million in donations, delivered $105 million in loans, and created more than 5,000 jobs at a time when the national unemployment rate was nearly 10 percent.
A couple of years later, Schultz and Starbucks waded into more dangerous political waters, launching a petition in its 7,000 stores across America after the federal government shutdown. The effort delivered 2 million signatures to Congress and the president, “providing a platform for the frustration of our customers and galvanizing our people/making them proud,” says DuBrowa.
But Schultz also directed customers to learn more from Fix the Debt, a business-backed group that emphasizes cuts to social programs that benefit the poorest Americans as the best way to address long-term debt. The company’s association with Fix the Debt angered liberals, who saw Schultz as “coercing low-paid workers into joining a phony austerity campaign.”
The company also managed to irritate those on the other end of the political spectrum with its support of gay marriage. Challenged at the company’s shareholder meeting, Schultz told one critic: “If you feel, respectfully, that you can get a higher return than the 38 percent you got last year, it’s a free country. You can sell your shares of Starbucks and buy shares in another company.”
In the same year, the company launched a less controversial campaign, pledging to hire 10,000 veterans and military spouses by the end of 2018 (it has already hired around 2,000).
Additional initiatives followed in 2014: the company sought a “middle way” to address the proliferation of “open-carry” rules, which say gun rights advocates wearing firearms in stores and restaurants, with Schultz writing an open letter “respectfully requesting that customers no longer bring firearms into our stores or outdoor seating areas.”
Less controversially, Solutions City saw mayors in five US cities (Sacramento, Baltimore, Columbus, Orlando and Phoenix) hosting town hall meetings in their neighborhood Starbucks to identify and address issues around access to education, supporting veterans and empowering youth; and the Starbucks College Achievement Plan forged a partnership with Arizona State University that gives employees the opportunity to finish their bachelor’s degree with full tuition coverage (more than 1,500 partners are enrolled and taking advantage of the more than 40 degree programs offered).
The latter effort probably generated the most favorable response of any of these efforts, says DuBrowa, “not just externally—resulting in the loudest two-day media cycle in the company’s history, more than 2 billion earned media impressions—but internally among our people. It’s the modern equivalent of healthcare or employee stock ownership, a benefit created with the needs of our partners, and society, in mind. We believe that at some point fairly soon, thousands of Starbucks partners will have earned their four year degrees and will be on to the next chapter in their lives. That is something to be proud of.”
Culture Drives Mission
According to DuBrowa, this is not corporate social responsibility or cause-related marketing, “it’s culture. It’s authentically who Starbucks is. Our mission is to inspire and nurture the human spirit one person, one cup and one neighborhood at a time. That means we cannot be bystanders when our country is in turmoil over race relations or when Americans don’t have access to opportunity—whether finishing college or being given the chance to get a job and have a career. We don’t have all the answers, but staying silent is not who we are.”
Almost all of Starbucks’ efforts to address social issues have been grounded in concern for and about its employees. At the In2 Summit in San Francisco, DuBrowa cited research showing that more than two-thirds of the company’s customers say their connection with the “people in the store” drives loyalty to the brand.
As a result, the company is committed to “sharing its success” with partners. It spends more per year on employee healthcare—something similar business go out of their way to avoid and has attracted the ire of shareholders in tough times—as it does on purchasing coffee for its stores worldwide.
“We often start ‘inside-out,’” says DuBrowa, “creating positioning and messages that are first and foremost intended to make our partners proud. Everything else stems from that ambition.”
And all of this was happening at a time when American companies were struggling to find ways to engage in more meaningful ways with their stakeholders, to build relationships on something more significant than a cup of coffee. Research from New York-based public affairs firm Global Strategy Group, for example, found that almost three-quarters (72 percent) of Americans agree that it is important for businesses to take action on important social issues.
“Today’s consumers are more savvy and social conscious than ever before,” says David Johnson of Georgia-based public relations firm Strategic Vision. “When they select a brand they sending a signal that the brand reflects not only what they want in terms of quality and service but the brand shares the consumers’ values. People expect a brand to tell a story and reflect the person’s values and beliefs.”
In the case of Starbucks, the overall impact of its social initiatives has been good for the business.
The various initiatives “allowed us to attract and retain a purpose-driven workforce,” says DuBrowa, who also points out that since Schultz returned as CEO in 2008, Starbucks shares “that were once valued in the single-digits are now worth more than $90… so clearly the marketplace agrees with our assessment that care for our partners and investment in community just makes good business sense for Starbucks.”
Schultz too has a business rationale for this commitment—making Starbucks a preferred employer reduces staff turnover and increases quality—but it is clear that he sees the issue more broadly: “I think the private sector simply has to take a larger role than they have in the past,” he told Time. “Our responsibility goes beyond the P&L and our stock price. We have to take care of people in the communities that we serve. If half the country or at least a third of the country doesn’t have the same opportunities as the rest going forward, then the country won’t survive.”
The issue of race appeared to fit the paradigm of previous efforts. More than 40 percent of Starbucks’ baristas are minorities and they clearly cared passionately about the issues raised by Ferguson and similar incidents.
Inviting employees to talk about race with the CEO in the room might run the risk of imposing a phony “political correctness” on the discussion, but challenged on this, DuBrowa pushed back, pointing out that the company has a 30-year history of “open forums” on important topics, and citing the videos of various meetings: “You saw the video! That was just a fraction of the kind of ‘heart on sleeves’ responses these forums have generated.
“Based on the words our partners used and the passion and grit behind their words, it seemed like many were sharing their story for the first time because, for whatever reason, in the past they did not feel they were in a safe environment that lent itself to sharing. You could feel a sense of relief and a beginning to healing as each forum wrapped with many partners indicating a genuine interest in continuing the conversation in their stores.”
The response to the internal initiative on race clearly convinced Schultz and DuBrowa that stakeholders expected a certain level of engagement on societal issues.
“As we continue to build a performance-driven company led through the lens of humanity, our partners, customers and shareholders expect Starbucks to do the right thing get involved in the right way and use our scale for good<” DuBrowa told The Holmes Report. “And we’re very open about our approach with employees, customers and shareholders when it comes to the value this work will help create for our people. Being engaged in key issues of concern to the communities in which they live and work is one of the biggest attractors for Starbucks in the employment marketplace.”
The Racial Divide
But while few Americans object to providing jobs for veterans or educational assistance to employees (and most agree that the debt needs to be fixed, even if there is disagreement about the most appropriate methods), race remains incredible divisive.
There is evidence that on purely factual issues, white Americans are unaware of or detached from the reality of their country: while two-thirds of blacks believe that African Americans earn make less money than whites—a view confirmed by official statistics—only 37 percent of whites believe the same, while a narrow majority think black and white incomes are about the same. And while objective measures suggest blacks are in worse overall health than whites, a majority of whites think blacks and whites are equally healthy.
Against that backdrop, just 16 percent of whites believe that there is “a lot” of discrimination in America, compared to 56 percent of blacks. In fact, more whites consider “reverse discrimination”—discrimination against white people—to be a bigger problem than discrimination against blacks and other minorities.
So it should come as no surprise that the incidents in Ferguson and elsewhere were perceived very differently by black Americans and whites: nearly two-thirds of blacks felt that the shooting in Ferguson and the choking of a black man in Staten Island suggested that the police had gone too far; just a third of whites said so. And 80 percent of blacks felt that the incidents raised important issues about race, while just 37 percent of whites agreed; 47 percent believed that racial issues were getting more attention than they deserved.
In other words, race is a uniquely divisive issue: on one side, ethnic minorities see a country in which both everyday racism and major flashpoints are ignored or dismissed, while on the other side, many white Americans seem to believe the biggest problem is over-sensitivity and a tendency to either blow problems out of proportion or to see racism in every petty incident.
Against that backdrop, the eventual backlash against Starbucks is perhaps less surprising than the fact that its efforts to start a dialogue were greeted so positively by employees.
It’s clear that Schultz understood the risks. “People have told me we shouldn’t touch this issue, that we might stir things up, upset the shareholders,” he told an audience of employees in New York. “I don’t agree with that. Conversations are being ignored because people are afraid to touch the issue. But if I ignore this and just keep ringing the register, then I become part of the problem…. There’s a lack of leadership in Washington, in government, and so it has to come from us.”
But Schultz is not one to shy away from risk. In his book Pour Your Heart Into It he wrote: "Whatever you do, don't play it safe. Don't do things the way they've always been done. Don't try to fit the system.”
And so the company took its internal initiative public.
In a memo to employees, Schutz explained: “The dialogue [sparked by the open forums] did not end once we returned to our work…. Most significantly, you expressed gratitude for having the opportunity to share, to listen and to learn. That sentiment alone made it clear to me that Starbucks could continue to do something we’ve always done: foster community and conversation….
“So today, we choose to act in a way that is authentic to us, by nurturing a sense of community and bringing people together through the lens of humanity.”
The social media reaction was both swift and harsh. DuBrowa received so many hostile tweets that he temporarily shut down his Twitter account—a move that probably sent the wrong signal from a company that was trying to start a dialogue, and one he acknowledges as a mistake. “In hindsight, I would have left my Twitter account up despite the negativity.”
The social media scorn—rather than the merits of the discussion itself—became the story for more mainstream media, becoming part of the popular culture to the point that the initiative become the subject of a Saturday Night Live sketch. (We discussed the backlash in our weekly podcast here.)
Calling the idea “cringe-inducing,” the website Salon compiled some of the “best” tweets from among the social media criticism directed at the initiative, and opined: “Half-assed efforts at creating the appearance of a corporate social conscience are suspect at best. It’s even worse when the corporation, which is often a harbinger of gentrification, is so clearly seizing upon a moment of national tension, violence and anger to promote itself.”
Vox offered a slightly more reasoned critique of the campaign, acknowledging that “it appears to be a reflection of Schultz's sincere distress over the pain and hostility that often underlies national headlines and controversies related to race and racism,” but adding: “The initiative's undefined goals (encouraging people to talk generally about race without any measurable objective) and misguided tactics (setting people up to have complicated conversations without any direction or guidance) mean it's very unlikely to fix the racial bias that sparked it—and could even cause harm by distracting from substantive attempts to remedy racial inequality.”
People were concerned that Starbucks had not “earned permission” through actions of its own to lead the discussion; that coffee shops were not an appropriate venue for a debate about such a sensitive topic; that young baristas were being put in an untenable position.
This article, at The Atlantic, offered a rare even-handed look at the initiative and the reaction to it, with Conor Friedersdorf at least injecting a little proportionality into the debate: “This unorthodox, long-shot effort strikes me as a bizarre focus for ire, especially given how many examples of egregious racial injustice there are in America.”
But it was too late. In the eyes of the media—social and mainstream—the conventional wisdom that the campaign was misguided at best, damaging at worst, had been established.
A few days after it was announced, Schultz sent a memo to employees telling them that “this phase of the effort—writing "Race Together" (or placing stickers) on cups, which was always just the catalyst for a much broader and longer term conversation—will be completed as originally planned today, March 22.”
It is fair to say that not everyone believed the abrupt end of the initiative was part of the original strategy.
From the PR industry perspective, most criticism of the campaign found similar faults.
Tai Tran, who teaches a social media marketing course at UC Berkeley, offered up a thoughtful blogpost in which she suggested that “Starbucks as a brand has never been associated with racial diversity; instead, it has been known for premium pricing and even gentrification in some cities,” and claimed that a “lack of authenticity caused many customers to feel that Starbucks was misinformed while attempting to cash in on a recent trend.”
“While the campaign was not inconsistent with the beliefs that consumers expect of the company, it gave the appearance that it was attempting to force its beliefs on consumers and employees,” adds Strategic Vision’s Johnson. “The premise that Starbucks could help resolve one of the most polarizing issues in America by writing on its containers ‘Race Together’ and perhaps having baristas discuss race relations with customers is ridiculous.”
Nick Gourevitch, managing director and head of the research division at GSG (which produced the study confirming that Americans want companies to be more involved in political issues), says that while the “research we conducted last year showed that while Americans are increasingly comfortable with companies taking stances on political issues, it can be dangerous when the issue in question isn't directly related to that company's industry or business. Much of the criticism against Starbucks reinforces this sentiment, questioning whether a morning coffee line is the place to start a conversation on race.”
Staying the Course
“An issue as tough as racial and ethnic inequality requires risk-taking and tough-minded action,” said Schultz in another letter to employees. “Let me reassure you that our conviction and commitment to the notion of equality and opportunity for all has never been stronger.”
“We knew this wouldn't be easy, but we feel it is well worth the discomfort,” says DuBrowa, who believes the majority of employees remain supportive of the company’s involvement in the big issues of the day, and of the race initiative. “One of our key takeaways from the partner open forums we held on race earlier this year was an understanding of the different perspectives and how people come to the table to talk about this emotional topic. What we also clearly heard from partners at these forums was that they wanted Starbucks to move beyond discussion and take action.”
Even after the backlash, he says, “The response from our partners was unreservedly positive. The one question that kept arising was ‘what else can WE do?’”
At the company’s annual shareholder meeting, which took place as digital and social media criticism of the Race Together initiative peaked, Schultz announced an initiative to hire 10,000 “opportunity youth” by 2018, out of 6 million young people in the US who are age 16 to 24 and who are not working and not in school, 50 percent of whom are minorities.
It seems clear that a few days of social media hostility—which may be the price of doing anything interesting in the digital age—are not going to discourage Starbucks from its social mission. It is to be hoped that it won’t discourage other companies from getting involved—while being cognizant of the risks.
“We hope that more companies will be inspired to get involved and not be bystanders when their workers or fellow Americans are facing challenges,” says DuBrowa. “The important thing is to stay true to your mission and values and do what makes sense for what your company represents.”