Starbucks: Diversity & Inclusion Case Proposal

Executive Summary

The situation is that Starbucks fell into public disapproval and disgrace due to the arrest of two black men on its coffeehouse’s territory in April 2018. The reason was the suspicion of the trespassing, which led the Starbuck manager to call the police. This situation was recorded on the video and raised many questions: for example, why men were arrested and whether race was the factor.

One of the consequences is the company’s financial losses due to public disappointment in its ideals and increased attention to them. For example, another video, where a black man was denied the bathroom in the Starbucks café after the white man was allowed, became viral, similar to the video of two black men arrested. All those factors led to decreased trust in the Starbucks brand and customers’ disappointment. To reassure them, the company should show that its ideals are still followed, the situation was a huge mistake, and it will never be repeated.

Another consequence is that Starbucks spends a lot of money on diversity training. In addition, it closed a great part of its coffeehouses temporally, largely limiting its profits. These spending should be reduced, as there are other possible ways to increase the personnel’s consciousness toward racial diversity and decrease their biases. For example, personnel may be taught directly in coffeehouses, during the work process, and without the closing.

Overall, the proposal is about improving Starbucks’ diversity management based on the recent research and findings in this field, which will improve the situation in both the public relations and finances. According to the actions of Starbucks’s CEO, the company’s leadership understands the severity of the situation, takes full responsibility for the error, apologizes, and offers full support to victims of inequality and injustice. Thus, the situation may be improved quickly, and Starbucks will recover its status and reputation.

Mission and Vision

Starbucks’ mission is to provide the best service possible, based on principles of mutual understanding and respect. It is realized in its coffeehouses, which are created by people and for people: a lot of attention is paid to their atmosphere, including the choice of interior colors and music. Together with the high quality of the Starbucks coffee, all of that led to the large trust in the company’s brand and made it luxury and expensive (Tikson, 2018). The company’s vision expresses its mission: the café where everybody may feel comfortable: both employees and customers. Realizing it, Starbucks provides equal opportunities for all its employees: they all are evaluated based only on their skills, have open access to the education provided by the company, and have full medical insurance (Snell & Lemley, 2017). Such a supportive, people-centered approach became the basis of the company’s success, and its high ideals are the reason for the high quality of everything under the Starbucks brand.

Thus, both mission and vision are the footholds of how the Starbucks administration should approach the management crisis caused by social anger on the case of unjustly accused two black men. The company should follow its basic principles of inclusion, diversity, mutual respect, and equal opportunities, which became part of its trademark, to ensure that situations like that will not repeat (Tikson, 2018). After the arrest of two black men, the company started to conduct diversity training actively, striving to teach its personnel to behave with people correctly (Dobbin & Kalev, 2018). In addition, Starbucks’ management and CEO provided full support to those two men, including the proposition to help them with their studying at the university.

Overall Strategy

The strategy to manage the organizational crisis in Starbucks should be built considering many factors: the Civilian Labor Force (CLF) statistics, employees’ own visions and desires, their actual skills, and diversity management. It aligns with Starbucks’ visions, including diversity and inclusion, as the company seeks to provide equal opportunities for all people regardless of their race, gender, or other backgrounds (McCluney et al., 2017). Two crucial parts of the strategy are costs and human resources management.

The first part of the strategy is the reduction of the expenses, as the company loses money due to locations closing and trust decreasing. It would be wise to find ways of cost saving: for example, locations may be opened again, continue generating profits, and diversity training may be substituted for the employees’ teaching during the work process. The destination of diversity training is the reduction the biases toward the other races and to increase the presence of various races. They have been studied since the 1930s, and study results show no actual improvement in the mentioned situation (Dobbin & Kalev, 2018). It means that other technics, such as direct teachings, may be more effective, as they involve the active work practice.

The second part of the strategy is about the CLF statistics, which is the general recommendation of which the racial composition of the employee should be. The current statistics are 45% white, 45% black, and 10% other employees, and Starbucks does not always follow the statistics. In the Philadelphia area, for example, 70% of the Starbucks personnel are white, and, in addition, the level of career promotions among the Hispanic minorities is much lower than among the whites. More attention should be paid to its employees’ human factors and socio-cultural backgrounds (Snell & Lemley, 2017). If the company may help them in education, for example, it will improve their lives and allow them to work for the company better, increasing the company’s profits.

To summarize, one may see the three points of the current Starbucks vulnerability and how the strategy needs to be deployed to close those vulnerabilities.

• The company lost its profits due to the loss of its prestige and popularity, which was the main reason for its success. As more and more people are disappointed in Starbucks’ ideals, the number of potential customers drops. To prevent it, the company should reassure the public that the ideals are still active and followed by all company members. As Starbucks’ management has already taken the responsibility and become involved in the situation with the two arrested men, one may conclude that this stage is already implemented.
• Another source of profit loss is the closing of more than 8000 Starbucks locations, each of which was a part of those profits. While the reason for their temporary closure is diversity training, losses may be cut by opening those locations again and providing direct diversity teaching during the work process (Manoharan et al., 2021). It may be more effective, as it includes more practice than typical training.
• While the company highlights the necessity of diversity and inclusion, and they are included in its mission and vision, the current situation has shown that it is still vulnerable to racial biases. Human factors should be considered in implementing Starbucks’ vision and mission. The management should understand the backgrounds and personalities of all employees, and if some of them need help, the company should provide it to them.

Plan and Analysis

Using the strategy on the company level needs to be put in a formalized action plan. One should analyze as many possible outcomes as possible: how much market share may be lost, how the crisis may be overcome, and when the company will recover. The action plan for Starbucks to recover after the crisis may be as follows:

1. Continue the support action toward those suffering from the racial inequality connected with Starbucks: communicate with them, compensate for damage, and offer help.
2. As diversity training is costly and its effects are limited, it may be better to teach employees directly how they may serve their customers with different backgrounds better. The experience of previous Starbucks campaigns against racial inequality, such as the RaceTogether campaign, may be used for that (McCluney et al., 2017). Employees who are unwilling to cooperate with other social groups and respect them should be fired based on this; such a harsh strategy will help the company recover quicker.
3. All Starbucks employees’ social backgrounds should be evaluated, as they all are different. Those employees who agree to respect others and continue to work, but have worse backgrounds, should be able to obtain support from the company: for example, it may help them with their education (Manoharan et al., 2021). Such decisions will reduce the inequality among Starbucks’ employees and make its racial composition more justful.

As for the outcomes, the market share of Starbucks may drop, but the initial drop will likely be small. The main problem is that if the reputation is not cleaned up, the market share will continue to reduce, the competitors may strengthen, and Starbucks will lose its leadership positions. Thus, reputation recovery is the main objective for the whole company, and all mentioned points are dedicated to that.

Risks, Problems, and Assumptions

While the proposed strategy may help Starbucks to recover quicker, possible risks should be considered:

1. While the human factor will be improved due to the strategy implementation, it still may lead to incidents devastating to Starbucks’ reputation. In that way, the company should be ready that the probability of similar incidents will be greater than zero.
2. Even if Starbucks is frank and follows the principles of social justice, there may be campaigns against the company: they should be overcome without being provoked. The company should be ready to maintain its reputation and defend it, even in case it will be perfect in everything planned.
3. While recovering the reputation is the most important in this situation, the company’s management should not forget about other responsibilities, such as the maintenance of the coffee and other products’ quality.

To overcome those risks, reputation management via transparency, openness, and a positive attitude toward everybody may help greatly. Such an approach was already adopted by Starbucks and used to develop its brand and implement its vision of mutual understanding and respect (Sisson & Bowen, 2017). The company should continue to use it to overcome mentioned risks: decrease the devastating effects of similar situations, repulse the possible provocations, and maintain the products quality and customers’ satisfaction.

Sustainability and Impact

These are the actual influence of the actions of Starbucks on the public via a communication plan. This plan is the consequence of the action plan and is used for communication with the public. For Starbucks, it should contain an open communication channel for everybody who feels abused by the company’s representatives, directly or not. In that way, the company will take responsibility for everything happening in its locations (Sisson & Bowen, 2017). While Starbucks, being a coffeehouse chain, has not had a significant impact on the environment, the impact on society is great, and the company should manage it (Tikson, 2018). The developed strategy may help in doing that, and the recommendations are developed based on it. In general, this approach not only will help solve the problems caused by the situation with the arrest but also strengthen its ideals and give Starbucks a competitive advantage over other, less conscious businesses.

Recommendation

Based on the mission, strategy, and risks, four recommendations are to be formulated.

1. Continue the line of communication with those who suffered from injustice connected with the company. It is the best way to take responsibility, help people to recover, and clean up the damaged reputation.
2. Review the decision of conducting the diversity training, as their proven efficiency are not high, and closed locations decrease the company’s profits even more.
3. Review the cultural background of its employees, and help those who want to grow up and be better but cannot afford it. For example, the company may pay for their education, improving their lives and simultaneously making them better employees.
4. Create a communication plan, which means opening the channel for communication for everyone who wants to say anything about Starbucks or know anything about the company.

The main advantage of those recommendations is that they all will increase the transparency and openness of the company, which is crucial for recovering its prestige and reputation and, thus, the whole company. Possible drawbacks, however, are their dependence on the opinion of other people, which is inevitable, as Starbucks’ success is built on its reputation and prestige, which are dependent on people’s opinions.

References

Dobbin, F., & Kalev, A. (2018). Why doesn’t diversity training work? The challenge for industry and academia. Anthropology Now, 10(2), 48–55.

Manoharan, A., Madera, J. M., & Singal, M. (2021). Walking the talk in diversity management: Exploring links between strategic statements, management practices, and external recognition. International Journal of Hospitality Management, 94, 102864.

McCluney, C. L., Roberts, L. M., & Wooten, L. P. (2017). It takes courage: Lessons learned from Starbucks’ #RaceTogether campaign case study. Developing Leaders for Positive Organizing, 95–108.

Sisson, D. C., & Bowen, S. A. (2017). Reputation management and authenticity. Journal of Communication Management, 21(3), 287–302.

Snell, S. A., & Lemley, A. (2017). Starbucks: Schultz back in the brew. Darden Business Publishing Cases, 1(1), 1–18.

Tikson, S. D. S. (2018). Human resource policies and work culture: A case of Starbucks. JBMI, 15(1), 1–12.