Starbucks: What’s a CEO to Do During an Emotionally Charged Crisis?

[Editorial Note: As of today, Starbucks sits on an average reputation. Stay tuned for the development of this story as we track Starbucks’ reputation and leadership performance over the coming months.]

On April 3rd, 2017, Kevin Johnson stepped in as the new CEO of Starbucks, succeeding one of the pivotal figures in Starbucks’ history – Howard Schultz.

Reputation Institute’s data shows that with the transition, Starbucks’ leadership scores experienced an overall decline (Figure 1). This is especially true for the “clear vision for the future” attribute where Starbucks’ score had a significant decline of 7.3 points.  

Figure 1: Starbucks Leadership Dimension and Attributes Scores             in the US (2017-2018)

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Clearly, Johnson had some work to do to earn and establish continuing trust among the public. With an already rocky reputation start, Johnson must rise to his first major leadership test within the first year of his tenure as Starbucks’ CEO.

Starbucks has been making headlines over the past weeks after two black men were arrested for trespassing in one of Starbucks’ Philadelphia, Pennsylvania retail locations. The story went viral once a witness posted a video of the arrest. The store manager called the police after the men sat in the store without ordering anything. Ultimately, no charges were filed against them.  

What’s especially interesting are the actions taken by Starbucks and their CEO Johnson following the event.

It would have been a seemingly easy way out for Johnson to dismiss the incident and shift the blame to the employees responsible for it. However, for a company whose mission is to “inspire and nurture the human spirit” and whose values include “creating a culture of warmth and belonging where everyone is welcome” and “acting with courage, challenging the status,” a lack of taking direct responsibility would not suffice.  

Straight away Johnson took steps to understand what happened and ultimately how to fix the situation moving forward. He flew to Philadelphia and organized to meet with the two men in question and announced – less than a week after the incident took place – that on May 29th, 8,000 company-owned stores in the US will close for an afternoon of racial bias training for over 175,000 employees.

During the past few weeks Johnson has taken a firm stand by not shying away from  the scrutinizing eye of the media spotlight.

In an interview with CNN’s Don Lemon, Johnson showed a very vulnerable side and through tears expressed that this has “been an emotional experience” and he was trying to understand “how this could have happened in today’s society, in a Starbucks…where [their] mission is around the human experience.”

Through his actions and words Johnson is showcasing that companies have a bigger purpose than to deliver good products or meet financial goals; to retain their license to operate organizations must  stand for something more and deliver on those promises.

Corporate reputation is directly aligned with the delivery of a brand’s promise (Figure 2). And to successfully deliver on brand promise, a company’s actions must be perceived as consistent and authentic.

Figure 2: Corporate Brand Correlates with a Stronger Reputation

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How could Johnson’s actions impact Starbucks’ reputation?

In these political and socially charged times, CEOs have moved out from behind their desks and financial reports into the social spotlight. We call this key macrotrend in reputation the emergence of CEO activism. Today’s CEOs are expected to act with a conscience, balancing profits with moral behavior and to do what’s right by society. CEOs are required to take a public position on social and values-based issues that matter to everyone, especially if those issues and values are aligned with their company’s mission.

Last week, Kevin Johnson joined the ranks of many prominent US CEOs who have been spokespeople for a multitude of social topics from Satya Nadella (Microsoft) lobbying for DACA to Edward Stack (Dick’s Sporting Goods) setting consumer gun regulations. Through their actions these vocal CEO activists are shaping and driving the reputation of their companies.

Reputation Institute’s CEO data shows that in the US CEOs can have a positive impact on reputation of up to a 9.1-point lift (Figure 3). Among the dimensions of reputation, the lift is highest in citizenship and governance – the key drivers of corporate reputation – as well as a significant 7.3-point lift in leadership.  

Figure 3: CEO Reputation Impact on Company Reputation in the US

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Figure 3 shows that leadership is becoming more aligned with ethical behavior and societal contribution, and by unleashing his activist voice, Johnson might ultimately help Starbucks deliver on these key drivers (Figure 4) and protect the company’s reputation.

Figure 4: 2018 Key Drivers of Reputation in the US – Products, Governance and Citizenship

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Johnson’s actions follow an example of a CEO with a conscience. In a time of an emotionally-charged crisis, when events impact a company’s mission and values, it is up to a CEO to stand up, apologize and do what is right. If the company wishes to retain its license to operate, leadership must have a loud and clear voice.

Featured image source: flickr Creative Commons, kasiQ Jungwoo

ana

Ana Angelovska
Research Director
Reputation Institute
aangelovska@reputationinstitute.com

 

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