The Starbucks Incident: a crisis management

case study
The Starbucks incident: a crisis management case study
By Rick Kelly

Given the heightened sensitivity to racial bias issues these days, is it possible
for even a socially responsible organization to manage its way through a
racially charged crisis with its reputation intact? The Starbucks incident that
led to the unwarranted arrest of two black men in Philadelphia last month
provides an opportunity to examine that question.

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 anyone being mad at
Starbucks. 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, the public reaction was
loud and furious.
A cell phone video of the arrests went viral, and it instantly attracted worldwide
attention and accusations of racism. The video showed that the arrestees had
done nothing to merit such a fate. What’s a crisis manager to do?

The first consideration in managing any crisis is to avoid making the situation
worse. Starbucks accomplished that by immediately recognizing the threat to
its reputation, 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 succeeded in positioning the incident 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.” Their settlement this week
with the City of Philadelphia is a testament to their constructive intentions.

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 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.

Johnson was right to accept responsibility for the incident. 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. We’re
guessing that the company will spend some time thinking about that.

In any event, we offer the following recommendations to those who imagine

having to handle a crisis of their own:

 Pay attention to issues that become the subject of heightened public

sensitivity. Racial bias and sexual misconduct are leading the pack these
days.
 Assess (or hire someone to assess) the vulnerabilities of your
organization, and devise a plan for handling the most likely worst-case
crisis scenarios.
 Build reputational equity by being responsible as an organization to
customers, employees, other stakeholders and the public at large.
Starbucks’ record for walking the talk should earn it another chance with
most people.
 Assume that it’s not a question of if a crisis will occur, but when. And when
it does, act quickly and don’t equivocate or make excuses.
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.

How will this episode turn out? There’s no doubt that Starbucks was in the
wrong, but it acknowledged its failures quickly, accepted responsibility and
devised a remedy (or at least a first step). We’re betting that Starbucks will be
selling lattes for a long time, and that other organizations will use this episode
as a template the next time they find themselves in times of trouble.