REFERENCE CASE

Starbucks: Reaffirming Commitment to the Third Place Ideal On the morning of April 12, 2019, Kevin Johnson, CEO of Starbucks, the Seattlebased coffee Chain and packaged goods purveyor, entered one of the company's downtown stores to get his morning joe. As he waited for his coffee, he observed the store's diverse set of customers, who ranged from businesspeople in suits to college students working on laptops to tourists on their way to the Space Needle. Meanwhile, the halfdozen partnersawho also represented a range of ages, races, and backgrounds were busy taking orders, making custom drinks, restocking food items, and tidying up different areas of the store. The scene prompted Johnson to reflect. Exactly one year earlier, a store manager at a Philadelphia Starbucks called 911 on two young AfricanAmerican men in her store who were behaving neither violently nor disruptively. Police soon arrived on the scene and arrested the young men. Johnson later described the incident as \"a disheartening situation that led to a reprehensible outcome." Starbucks, which employed around 175,000 individuals nationwide and served more than 4 million customers daily in its approximately 8,000 US. stores,1/2 strived to abide by its mission statement: \"...To inspire and nurture the human spirit, one cup, one person, one neighborhood at a time.\" It also sought to be \"Third Place\" for its customers: somewhere other than home or work where anyone could go to feel welcome, safe, respected, comfortable, and connected. What transpired in Philadelphia had been, in the words of John Kelly, the company's Senior VP of Public Affairs and Social Impact, \"A profound failure to live up to our ideals and a violation of our values that jeopardized our entire sense of purpose.\" In the wake of the incident, Johnson and his leadership team attempted to understand what had occurred and why. Beyond defusing the immediate crisis, they also wanted to ensure that nothing similar would happen again. Within days, certain Starbucks policies were revised. A few weeks later, the company closed all of its US. stores for an afternoon to conduct racialbias training for all employees. Subsequently, the Starbucks Support Center (SSC)b began producing a variety of resources designed to help partners better handle situations they might face in the stores, and to empower them a Starbucks' term for its employees. b Starbucks' term for its Seattle headquarters. to more effectively grapple with complex societal questions and challenges. Efforts to repair other relationships strained by the incidentwith the neighborhood, the city of Philadelphia, and the city's police departmentwere also initiated. As the barista smiled and handed him his customized drink, Johnson recognized that while he was proud of the progress Starbucks had made in the past year, the company's journey had only begun. For Starbucks to truly fulfill its missionto live up to its Third Place aspirations and make the positive societal impact its leaders envisionedthe company would have to be vigilant. There were more lessons to learn, more partnerships to be formed, and adaptability would have to increase. It would be a challenging road, Johnson knew, requiring large amounts of both humility and optimism. Company History Starbucks Coffee, Tea, and Spice was founded in 1971 by Gordon Bowker, Jerry Baldwin, and Zev Siegl, who opened their store in the Pike Place Market on the Seattle waterfront. Initially the company sold only dry goods, not brewed beverages. In 1981, Howard Schultz joined Starbucks in a marketing and operations role. He departed in 1985 to start his own company, a coffee bar inspired by cafes he had visited in Italy where customers chatted, relaxed, and lingered. His new establishment also specialized in espresso beveragese.g., lattes and cappuccinos, which at the time were not widely available in the United States. Schultz's business took off, and in 1987 he purchased Starbucks' name and other assets (nine stores and a roasting plant, which together employed around 100 people) for $3.8 million. Following the acquisition, Schultz and his team pursued aggressive expansion in the Pacific Northwest and, later, nationwide. By 1992, there were approximately 150 Starbucks cafes in North America. That same year, Starbucks went public in an IPO that valued the company at more than $250 million. 4/ 5 Starbucks would grow into one of the largest and most recognizable brands in the world. Considered by many to be the exemplar of the \"Second Wave\" coffee movement, in which coffee became more than merely a commodity product for more consumers and something closer to a status product, the company was credited with introducing millions of Americans to higher-quality coffees, darker roasts, and espresso drinks, as well as the Italian coffee bar experience. Expansion into international markets also commenced. In 2000, Schultz stepped aside as CEO and assumed a global strategy role with the company. He returned to the chief executive position in 2008, amid a slump that was attributed to overly aggressive expansion, a decline in product quality and customer satisfaction, and customers seeking lessexpensive options in the face of a financial crisis. Schultz pulled Starbucks out of its tailspin by emphasizing the customer experience and strengthening the company's emotional connection with patrons. Schultz's second stint as CEO ended in April 2017. As his successor he chose Johnson, a veteran Starbucks board member and trusted friend who had held executive positions at Microsoft and Juniper Networks. \"At the time I was retired,\" said Johnson, \"and, having survived a health scare, I thought I'd stay that way. But when Howard presented the idea, and my wife pointed out how much I have always loved the company, I could not resist.\" By spring 2019, Starbucks was valued at approximately $100 billion6 (good for 121st on the Fortune 500 list) 7, with yearoveryear revenues near $25 billion.8 There were more than 30,000 Starbucks locations worldwide,9 including more than 8,500 company owned stores in the United States.1/ C Starbucks had been featured on Fortune magazine's \"World's C There were also approximately 6,000 licensed Starbucks locations in the United States, which could be found in places like airports, supermarkets, and hotels. Employees at licensed locations were not Starbucks employees. Most Admired Companies" list for 16 consecutive years, most recently coming in at number five, and was also a mainstay on lists of the best companies to work for and the most ethical companies.11 (See Exhibit 1 for additional company information including executive bios, financials, and timelines.) \"The kind of company that my father never got to work for...\" From Schultz's earliest days at CEO, he believed that Starbucks' most important organizational asset was its relationship with employees. He had long been interested in companies' obligations to their workforces, and as a young leader vowed to \"do something that would guarantee people wouldn't be left behind." Starbucks presented him with this opportunity. \"I always wanted to build the kind of company my father never got to work for,\" he said, referring to his father's career as a cab driver, truck driver, and factory laborer.12 Starbucks instituted a range of policies and programs designed to support and show appreciation for its partners. In 1988, the company began offering full health benefits to full and part-time employees (those working at least 20 hours per week) and their family members, including domestic partnersa gesture that was rare at the time. Three years later, Starbucks became the first privately owned US. company to offer a stock-option program to part-time employees. In 1998, Starbucks established an emergency financial assistance fund, called the CUP, to help partners facing illness, natural disaster, or some other crisis. In 2014, the company offered qualifying partners the opportunity to complete college degrees, with full tuition coverage, through Arizona State University's online programa \"first of its kind\" partnership. Starbucks expanded the College Achievement Program in 2017 when it added a Pathway to Admissions sequence for those who were academically ineligible.13 Schultz summarized the company's philosophy at the 2017 shareholder meeting, saying, \"Not every decision is an economic one. We recognize what our responsibility is in addition to making a profit.\" 14 That philosophy went beyond benevolence. Schultz believed that high levels of employee support were necessary for the continued success of the business. Happier and betterappreciated workers, he reasoned, would be higher performing and have longer tenures with the company, and they would also serve their customers better, making customers happier themselves. \"It's an ironic fact,\" he pointed out, That while retail and restaurant businesses live or die on customer service, their employees have among the lowest pay and worst benefits of any industry. These people are not only the heart and soul but also the public face of the company. Every dollar earned passes through their hands. In a store or restaurant, the customer experience is vital. One bad encounter, and you've lost a customer for life.15 Starbucks was also conscious of whom it was hiring. In 2013, the company committed to hiring 10,000 military or firstresponder veterans and spouses. Schultz saw the commitment as an opportunity to help veterans, many of whom were struggling with unemployment and other difficulties after leaving the armed services, and as a way to recruit individuals who shared the company's values of customer and community service. By 2018, it had exceeded its goal by more than double.16 Additionally, in 2013, Starbucks pledged to hire 10,000 atrisk, or \"opportunity,\" youth by 2018.17 To do so, it founded a non-profit organization called LeadersUp to identify and connect candidates, not just for Starbucks, but for a consortium of companiesAlaska Airlines, Cintas, CVS Health, Hilton Worldwide, HMSHost, JCPenney, JPMorgan Chase, Lyft, Macy's, Microsoft, Porch.com, Potbelly Sandwich Shop, Taco Bell, Target, Walgreens, and Walmart that had agreed to join the Starbucksled 100,000 Opportunities Initiative. By mid2019, more than 200,000 opportunity youth (individuals 16 to 24 who are neither employed nor in school, and who face systemic barriers to both) had been hired into entrylevel positions by more than 55 corporate partners and through the assistance of 300 community- based partner organizations.18 The goal was one million hires by 2021. In 2015, Schultz also issued a statement expressing his support for the \"Ban the box" campaign, which encouraged employers not to ask about a candidate's criminal history on job application forms. \"In America, opportunities take many forms,\" he wrote in a letter to Senator Cory Booker. \"Freedom. Education. The support of family and community. A job. Sometimes that opportunity is simply a second chance. Unfortunately, access to these and other advantages is not yet a reality for all Americans.\" 19 Roles and Training According to Johnson, because stores were the most important units of Starbucks, \"the most important job in the company\" was the Store Manager. Store Managers were salaried employees responsible for \" creating and maintaining the Starbucks Experience for customers and partners." More specifically, according to the official job description, they were expected to Regularly and customarily exercise discretion in managing the overall operation of the store. In particular, a majority of time is spent supervising and directing the workforce, making staffing decisions (i.e., hiring, training, evaluating, disciplining, discharging, staffing and scheduling), ensuring customer satisfaction and product quality, managing the store's financial performance, and managing safety and security within the store. The incumbent is responsible for modeling and acting in accordance with Starbucks guiding principles.20 The average age for Store Managers was close to 35. Top store managers were recruited to become trainers. For some, the training position was a stepping stone to a more senior district or regional role. Other roles in Starbucks stores were Shift Supervisors and Baristas, both of which were hourly positions. The former were responsible for store operations during their shifts. This often meant following the \"Playbook,\" a document produced by the SSC that prescribed how many partners should be performing various tasks (e.g., working the registers, making beverages) given the time of day and number of workers on the clock. Baristas performed a range of tasks in the store. Upon hiring, they underwent two weeks of training, which involved shadowing experienced employees to learn how to make drinks, interact with customers, and deliver the desired customer experiences. In addition to considering factors such as whether candidates were veterans or opportunity youth, Starbucks also sought to hire partners who lived locally to increase the stores' connections to their communities. The average age for Shift Supervisors and Baristas was approximately twentysix. Nearly all Store Managers and Shift Supervisors started out as baristas and were promoted from within. Newly appointed Store Managers attended Store Manager Training (SMT) at one of the two designated training stores per district. The 30day SMT consisted of extensive shadowing, as well as digital modules delivered through Apple iPads that Molly Hill, Starbucks' Vice President of Global Talent, characterized as \"fairly prescriptive.\" Once back in their stores and on the job, new Store Managers were still considered to be in training. At regular intervals, such as at days 90 and 180, formal checkups were conducted. At these stages, participants were encouraged to share experiences and best practices with members of their cohort, and to engage in deep reflection. Above the store level, Starbucks' structure primarily operated on factors of ten: 10 Store Managers typically reported to a District Manager; 10 District Managers then reported to a Regional Director; 10 Regional Directors then reported to a Regional Vice President. The geographic size of regions therefore varied widely, as did the types of stores within certain regions. \"You could have 10 stores on the Upper West Side in Manhattan that are fairly similar, or 10 stores spread across an area with lower density 4 that serve very different clientele," said Hill, adding, \"District Managers mostly coach Store Managers and help with facilities issues. At the regional level, directors and VPs are dealing with larger strategy and leadership issues.\" Anyone hired into one of these more senior positions from outside the company was required to attend the two-week Barista training to learn about operations and situations in stores in their region. The Third Place According to Kelly, successfully delivering on the Third Place promise was \"the great differentiator for Starbucks,\" adding that the company's stores \"had never posted 'No Trespassing' signs, signs that said 'only for customers,' or had any kind of 'No shirt, no shoes, no service' policies.\" Schultz believed that, during its rapid expansion of the early 20005, the company had shifted away from providing Italianstyle gathering places where people relaxed, lingered, and conversed. For example, he felt that fewer baristas remembered customers' names, that the company's new espresso machines too often prevented eye contact between partners and patrons, and, perhaps most importantly, that fewer store managers seemed invested in the company's values and were instead preoccupied with margins and bottom lines. Additional concerns included the comfort and aesthetics of new stores (which some customers felt weren't as welcoming), instore music, and even the smell of burned food overpowering the smell of coffee. To get the company back on track, Schultz solicited feedback from customers and partners, and implemented many of their suggestions. Said one store manager: We want to provide all the comforts of your home and office. You can sit in a nice chair, talk on your phone, look out the window, surf the web . . . oh, and drink coffee too. The idea behind customer service here is to make it one that isn't just good, we want to make it great. If people have a bad experience, they'll tell 7 people. If they have an average experience, they'll tell no one. If they have a great experience, they'll tell 23 [people]. Making it a great experience, though, isn't just about service. If they have a problem (bad drink, cracked lid, etc.), we want to do everything to make it right, then and there.21 Rossann Williams, Starbucks' Executive VP of US. Retail, who frequently visited stores nationwide, said that one experience she had in a Starbucks store in an affluent neighborhood north of New York City captured the essence of the Third Place ideal: The store is located in a train station, which means that many customers are in a hurry, on their way from one place to another, often to work in Manhattan. Due to the location and the clientele, it's more of a counter than a fully builtout store. Furthermore, partners who drive to work there have to pay to park. Whether or not to reimburse for employee parking is an issue we've grappled with for some time. We know from experience that it can have an impact on employee morale. In fact, the store has had one of our highest rates of partner turnover. When I arrived, I discovered a stool in the back storeroom and asked the store manager, a young woman called Annie, what it was doing there. It turned out that the stool belonged to a man who visited the store nearly every day. He would come in, sit near end of the bar, and chat with the customers and partners. The stool had been a solution to the store's limited seating, and Annie had offered to let him keep it in the back room so he wouldn't have to haul it back and forth every day. I met the man later that day and asked him what drew him to the store. He said that the people there felt like his family. The entire situation was a reflection of Annie and her approach, which she summed up for me. 'My responsibility is to spread joy,' she said. One result of this approach, which company leaders claimed intensified after Schultz's return, was that many customers used the phrase \"My Starbucks\" to refer to the store in their community, or the one they frequented the most. \"The storelevel is the essential Starbucks unit,\" said Williams. \"For partners, it's their Starbucks family. For customers, it's the partners and other regulars they see over and over, who they get to know." As an example of the type of deep connections that can form, a group of regulars at a Manhattan Starbucks was so upset to learn that their location was closing, despite there being several others within a few blocks, that they started a petition and gained national news coverage for their campaign.22 \"The complexity of life is increasing\" By the mid-20105, Starbucks was increasingly finding its stores on the front lines of significant societal challenges. \"We like to think of Starbucks stores as welcoming public spaces, similar to public libraries, offering handcrafted beverages and food," said Kelly. \"But the complexity of life in and around stores has been increasing.\" In many major cities, that meant more and more people facing housing insecurity and homelessness. The nationwide opioid crisis had also found its way into Starbucks stores. \"We have seen an increase in the misuse of our restrooms relating to drug usage,\" said Camille Hymes, Vice President of Operations for the Mid-Atlantic region. \"This corresponds with unsafe and unsanitary conditions for our partners and customersfor instance, with used needles ending up in the trash bags. In the Mid-Atlantic region alone, we are faced with dozens of instore overdoses annually. Unfortunately, many are fatal. Every experience can be very traumatic for our partners.\" (See Exhibit 2 for additional information on homelessness and the opioid crisis.) Meanwhile, race-related issues were also gaining increased national attention. Beginning in 2013, a series of high-profile killings of unarmed AfricanAmericans by police (few of whom received formal punishments) gave rise to the Black Lives Matter activist movement. In subsequent years, leaders of the movement used social media and mass demonstrations to shed light on examples of what they considered systemic racism, discrimination, and violence. Beginning in 2016, many saw the election of President Donald Trump, and many of his administration's policies, as further evidence that the United States had entered a period in which progress for people of color had stalled, if not reversed course. It was a time of racial tension and increased visibility of white nationalism. Co'ee with a Cop and #RaceTogether In 2011, to further its commitment to societal change and community impact, Starbucks began hosting events for Coffee With a Cop, \"a grassroots program that brings lawenforcement personnel together with the people they serve in a comfortable environment."23 The events gave citizens the opportunity to ask questions, and officers the chance to talk about the pride they took in their work. According to Kelly, \"The 'Third Place' that Starbucks has become is increasingly a place . . . to convene members of the community . . . to promote dialogue, empathy, and stronger neighborhoods.\" By 2016, Coffee With A Cop had held events in all 50 states, as well as Canada, Europe, Australia, and Africa.24 Not every attempt Starbucks made to have a positive impact on society went according to plan. In 2015, Schultz launched a campaign to promote conversations between partners and customers about race and race relations. Those conversations, the company hoped, would inspire a wider national dialogue. Conversations were to be initiated by baristas writing #RaceTogether on customers' coffee cups. As part of the campaign, the company produced a series of \"conversation starters\" that were displayed in stores and published in the USA Today newspaper. The campaign was widely ridiculed as superficial and Schultz was attacked by those who believed a white billionaire lacked the perspective to lead conversations on such a sensitive topic. Starbucks halted the campaign within several weeks, yet Schultz vowed to continue addressing the topic of race, both at forums with partners and via other Starbucks initiatives. Even his missteps, he argued, would provide opportunities for himself and others to learn which approaches were helpful and which were not. The Incident in Philadelphia At around one o'clock in the afternoon on April 12, 2018, a Thursday, two 22yearold African American men entered a Starbucks in Philadelphia's Rittenhouse Square neighborhood.d Aspiring entrepreneurs who had been friends since fourth grade, they were scheduled to meet a local businessman, who was white, to discuss a business opportunity. The two men arrived early, so they found an empty table and sat down to wait. One of the men had been a customer at this Starbucks since he was 15 years old. Yet when one of them asked to use the restroom, an employee denied the request, citing store policy that bathrooms were for customers only, and that only those making a purchase were considered customers. Moments later, the employee approached the men again and asked if they \"needed help.\" They said they did not, and noted that they were there for a meeting. When the employee told them that they needed to either make a purchase or leave, the men remained seated. Within a few minutes, two police officers entered the store, responding to a 911 call placed by the store manager. When the officers began to question them, the men again explained that they were waiting for a business associate and again declined to leave. The exchangewhich lasted approximately four minutes without escalating to raised voices or physical violence was punctuated by a warning from one of the officers that the men had only \"one more chance to leave.\" At this point, four additional officers had responded to a call for backup and the individual the men were scheduled to meet arrived on the scene and confirmed their appointment. He then suggested that the officers were treating the two men differently, and unjustly, because they were black. He also encouraged other customers to speak up and agree that the police's actions were \"ridiculous.\" Despite additional objections from the two men, their associate, and other customers, the police remained. When the business associate agreed to hold the meeting elsewhere, the police stated that the two men were no longer free to leave. They were handcuffed, led out of the store, taken to the local police station, and placed in a cell. For hours, they were given no information regarding how long they would be held or when they would be able to contact their families or their lawyers. It was not until late in the evening that they were released with no charges having been filed. '3 Responding to the Crisis Some Starbucks leaders, including regional and national directors and several executives, first learned about the Philadelphia incident on Thursday evening. \" Every night we receive an email update regarding issues that have arisen in our stores that day,\" said Kelly. \"That initial report merely said that two men had been arrested in a Philadelphia store. That alone wasn't unusual or a cause for alarm. With tens of thousands of stores worldwide, there is always something going on.\" d Starbucks executives who remained in contact with the two men in the months following the incident requested that the men's names not appear in the case, claiming that the individuals had expressed a desire to resume their private lives away from the media spotlight and public scrutiny. e This account of the events that occurred that day was founded on statements made by Starbucks leaders, and whenever possible was substantiated by media accounts and Video footage of the incident, which can be found online at https: / /WWW.youtube.com/watch?v=xWBVx'IEgon Friday, April 13 The following day, video of the episode taken by a customer, which had been posted online, began to go viral. \"For a lot of us,\" said Williams, \"the first reaction was disbelief. This couldn'tL happen in one of our stores. Someone doctored the videos. Those were the types of thoughts we were having.\" Added Kelly, \"Initially, the big question was, 'What really happened?' It didn't make sense. The video showed two well-behaved customers being handcuffed and arrested. Surely there was more to the story. Quickly Starbucks was becoming the target of intense criticism, and we found ourselves in a race for clarity and understanding." That evening, the following statement was posted on the company's Twitter feed: \"We're aware of the incident on Thursday in a Philadelphia store with 2 guests and law enforcement, resulting in their removal. We're reviewing the incident with our partners, law enforcement and customers to determine what took place and led to this unfortunate result.\"25 Information was still limited, however, and Friday ended with more questions than answers. Saturday, April 14 Johnson woke Saturday morning to more than 100 emails from people outside the company alerting him to the incident and the flurry of negative attention Starbucks had begun to receive in the press. \"I saw the video and was heartbroken,\" he said. \"I wanted to know how it had happened. I wanted to know exactly what policies we, the leadership, had in place that had allowed such a thing to transpire." Johnson huddled with several members of his leadership team, including Kelly and Williams as well as Vivek Varma, EVP of Public Affairs, Roz Brewer, Chief Operating Officer, and Zabrina Jenkins, VP Assistant General Counsel, to discuss the situation. As criticism grew, and as Johnson and his team found evidence that the video was indeed an accurate portrayal of the episode, they made several decisions. First, they decided to travel to Philadelphia the following morning to gain a better understanding of the situation and respond more effectively. Hymes, meanwhile, drove up from Washington DC. immediately. When she arrived, she found that demonstrators had already begun to organize protests at the store where the incident occurred. Partners at stores across Philadelphia had become targets of intense anger. \"It was traumatizing for them,\" said Hymes. \" Bus drivers were kicking them off for wearing their Starbucks caps. Partners of color were being berated by their family members for their affiliation with a company they now viewed as racist.\" On Saturday afternoon, Johnson issued the first of what would become a series of public apologies, this one published on the company's Twitter feed. \"We apologize to the two individuals and our customers for what took place at our Philadelphia store on Thursday,\" it read, \"and are disappointed this led to an arrest. We take these matters seriously and clearly we have more work to do when it comes to how we handle incidents in our stores. We are reviewing our policies and will continue to engage with the community and the police department to try to ensure these types of situations never happen in any of our stores.\"26 Sunday, April 15 Inclement weather prevented Johnson and his team from flying to Philadelphia until late in the day on Sunday. During the delay, on their cross-country flight, and again at the hotel in Philadelphia, Johnson conferred with his team, and with Schultz, who would join the team in Philadelphia the next day. Johnson also spoke for the first time with the city's mayor and chief of police. The former was calling on Starbucks to review its policies and conduct bias training. The latter was defending the conduct of the arresting officers, claiming that they peacefully responded to a trespassing complaint made by the store manager. Johnson also consulted with Eric Holder, the former US. attorney general. \"He told me there would be great pressure to give answers and make statements before I had all the facts. He advised me that it is okay to let people know that my job was to review everything about how this incident happened, and then take action to try and fix it.'\" Johnson also issued his second apology, this one via video. In his approximately two-minute statement, he apologized again to the men who were arrested and stated that \"what happened and the way that incident escalated and the outcome was nothing but reprehensible." He also apologized to Starbucks partners and to the Philadelphia community. \"This is not who we are, and who we are going to be,\" he said. \"We are going to learn from this, and we will be better for it.\" Johnson went on to say that while calls to the police may sometimes be justifiable, this was not one of those times, as there had been no violent acts, threats, or disruptions. \"The two men did not deserve what happened, and we are accountable," he said. \"I am accountable.\" He pledged to consider changing store policies and adding bias training for partners. He also expressed a reluctance to take action on the store manager. \"I own this,\" he said. \"This is a management issue, and I am accountable.\" Lastly, he said that in the coming two days, he would meet with as many people from the Philadelphia community as possible, including the two men who had been arrested, if they were willing. Monday, April 16 That morning, Johnson appeared on Good Morning America to issue another apology and answer questions about how Starbucks would respond to the incident. He repeated that what had happened was reprehensible and inexcusable, that discrimination and racial profiling were anathema to the company's values, and that Starbucks would explore ways to work with communities and partners to minimize the chances of similar incidents happening again. He continued to insist that blame and responsibility should fall on himself and on company leadership, not on store employees. Meanwhile, Williams and Hymes made their way to the Rittenhouse Square store, where another protest was scheduled. Williams reflected on her approach and on what transpired: Asset protection was a goal, and the safety of people was of paramount concern. We made the decision to welcome protestors into the store. Our responsibility was to listen, not to be defensive. We wanted to be present and available, and we knew we had to be held accountable. Philadelphia has a history of organized protestors taking on systemic racism. Learning about that spurred me to reflect on my life and on my privilege. Protestors inside and outside the store chanted (e. g. \"Starbucks is antiblack!\" 2%, waved signs, gave impassioned speeches, and taunted partners behind the counter. At times, the demonstration seemed to be veering out of control. When tensions were at their highest, Williams and three partners had to lock themselves in the basement for several hours. Said Williams: \"One of the partners, a young woman, was visibly distraught. 'I'm usually the one on the other side, protesting,' she told me. Later, someone intentionally doused a police officer with a beverage. Like so many people that day, the officer handled the situation with grace. There was a lot of brave humanity on display that day.\" Williams and Hymes also met with the store manager who had placed the 911 call. \"She believed she was doing the right thing, and enforcing the policy that company leadership had put in placewhich said that individuals who don't make purchases were not customers and if they refused to leave could be considered trespassers,\" said Williams. \"When I met her, she was shaking, she was so scared. The amount of hatred and threats she was subject to all of a sudden was staggering. Her family, too. She is a brave young lady. Along with learning what the two gentlemen had endured, meeting with her really hammered home the idea that decisions people make in offices and boardrooms have tremendous impacts on lives.\" Williams, Hymes, and Johnson also learned that the Rittenhouse Square store had recently experienced an armed robbery. However, they insisted that the prior incident not be part of the conversation about the arrest. The two incidents were separate, they agreed. There was no justification for what had happened on Thursday, and nothing should distract from that important fact.f Later that day, Johnson met face to face with the victims, having already established communication with their attorney. They had what both parties would later describe as a productive conversation. In addition to apologizing in person to the two men, Johnson agreed to enter into a mediation process overseen by a retired federal judge. He also agreed that the two men should have a voice in discussions regarding how the company could work to promote a more just environment where such incidents would be less likely to occur. Due to the confidential nature of the mediation proceedings, the outcomes of those proceedings, as well as other conversations between the two men and Starbucks, were not made public for several weeks. In addition to a confidential financial settlement, their agreement included \"a commitment to continued listening and dialogue between the two parties as a means towards developing specific actions and opportunities." 28 This included an invitation to participate in conversations with Eric Holder. Johnson also offered to serve as a mentor to the men as they attempted to launch careers as businessmen and entrepreneurs, and pledged to provide them the financial assistance needed to complete their bachelor's degrees, should they desire to pursue more education. Said Stewart Cohen, the men's attorney, \"Johnson and the two men were so impressed with each other, that not only do they have a seat at the table, and this settlement, they also have the beginning of a relationship.\"29, '5 Tuesday, April 1 7 By Tuesday, nearly a week after the arrests, the worst of the store protests had passed, and some of the media attention began to die down. Johnson and his team believed they had gathered as much information as possible, and had spent meaningful time with those involved and with stakeholders. They were also prepared to announce the initial steps Starbucks would take to prevent further incidents. These included a formal guarantee to review the policies that helped lead to the arrests (such as relying on partner discretion to determine who may or may not use restrooms) and a commitment by the company to \"embark on a journey to holistically examine all aspects of its operations to understand what more it could do to address implicit bias and to promote equity and inclusion.\"3'0 Part of that examination included a companywide external audit by Holder's law firm, Covington and Burling, whose findings Starbucks pledged to make public. Williams and Hymes also vowed to continue conversations with stakeholders in Philadelphia to better understand the complex issues facing the city and repair relationships. The aspect of Starbucks' response that generated the most buzz was an idea proposed by Schultz, embraced by leadership team, and announced to the public the Tuesday after the incident. On May 29, 2019, Starbucks would close all 8,000 of its US. stores, as well as its Seattle headquarters for half of a day. During this time, all 175,000 partners would participate in a racialbias education session \"geared toward preventing discrimination in our stores,\" and addressing topics such as implicit bias and conscious inclusion." To craft and implement the program, Starbucks would consult a number of experts, including Bryan Stevenson, Founder of the Equal Justice Initiative; Sherrilyn Ifill, President of the NAACP Legal Defense and Education Fund; Heather McGhee, President of Demos; and Jonathan f While Starbucks executives resisted calls to fire the store manager who placed the 911 call, and were adamant that their misguided policies were to blame for the incident, about a week later the store manager was \"separated" from the company upon mutual agreement. g For more information about the settlement, as well as the settlement the two men reached with the city of Philadelphia, please View their interview on Good Morning America from May 3, 2018, available at: https: / / www. goodmorningamerica.com / news / story/ starbucksceomentorblackmenarrestedphiladelphiashop54903633 10 Greenblatt, CEO of the AntiDefamation League. The curriculum would also be made available to other organizations. \"While this is not limited to Starbucks,\" Johnson remarked, \"we're committed to being a part of the solution.\" 31 May 29, 2018 Public and media reactions to Starbucks' decision to close its stores for bias training ran the gamut. Some praised the move, and viewed the costs involved in pursuing such an audacious undertaking (e.g. production expenses and lost revenue) as evidence of Starbucks' sincerity and strong desire to make a positive impact. Critics, meanwhile, claimed it was laughable for Starbucks to think it could even begin to solve entrenched problems such as bias and discrimination, especially in a single three or four hour session and after #RaceTogether had flopped. They viewed the shutdown nothing more than a public relations gimmick. Then there were those who just shrugged, believing the shutdown would have minimal impact and soon be forgotten. Within the company, the idea of a nationwide store closure for partner training held immense significance and symbolism. Starbucks had shut down all of its stores once before, in 2008, shortly after Schultz returned as CEO, to reconnect the then135,000 partners across 7,100 locations with the \"art of espresso.\" The threehour training was a key component of Schultz's campaign to reprioritize the customer experience. Many credited the 2008 session as crucial in the process of turning around the struggling company. Johnson and Kelly insisted that noise from outside the company had zero impact on the decision to close the stores. \"We chose to shut the stores for the training because it was the right thing to do, period,\" said Johnson. \"It was the right thing for our customers and for our partners and for the communities we serve.\" Added Kelly, Very quickly, there was consensus among company leadership that this was necessary and right. Of course, there were some people from finance who expressed concerns over how much the shutdown and training would cost, but they weren't part of the discussion. People like Kevin and Rossann recognized that this was so important, that if we couldn't start to fix this, then the company's existence would be called into question, and rightfully. Noted Williams, \"We've always been a company dedicated to having the hard conversations, but we needed to acknowledge that there's still so much more we have to tackle.\" With only six weeks until the scheduled shutdown, the company mobilized. Under Varma's direction, longtime company advisor SYPartners as well as the Perception Institute joined forces for the month leading up to the store closures to build an antibias curriculum and company roadmap to navigate the journey forward. In the development of this first and critical step, Varma convened leaders at Starbucks, including Johnson, Brewer and company Chief Partner Officer, Lucy Helm, as well as members of Starbucks Black Partner Network, the Global Talent team, and other representatives from across the company with the national experts offering their expertise. According to Varma, Starbucks had \"long prided itself on three things - people, coffee and the Third Place, a place where people feel like they belong.\" Philadelphia changed everything. \"This is really about the Third Place, what happened in Philadelphia,\" said Varma. \"This is a moment to go back to the core values of the company and galvanize the entire company in this teaching moment."32 Hill and the global talent team were instrumental in the effort. \"We're in the humanexperience business, but we are also operational experts,\" said Hill. \"We formed a task force with two to three 11 people from partner resources (HR), two to three ops partners, a tech partner, our partners from SYand multiple individuals from public affairs, and we went agile quickly. On top of doing our normal work, we met every day at 8 am. to provide updates and discuss that day's priorities.\" The team also brought in outside consultants, several of whom had helped Starbucks execute the 2008 store closure. Noted Kelly: \"The Starbucks 'secretsauce' is probably twothirds coffee culture and onethird operational excellence, meaning our ability to offer quality and consistency at scale and with high efficiency. Our idea was to tap into this and make 5/29 an uncommon experience.\" Content One of the primary questions facing the team was the focus and content of the training. \"One of the big goals was to give partners a way to learn about the long history of discrimination, especially against AfricanAmericans in public spaces, and the implications," said Kelly. \"It's important that all of us try to understand the black perspective.\" Leaders decided the training should be centered on addressing unconscious bias because, as Kelly said, the Philadelphia incident \"warranted more than allegations of racism.\" Added Williams, \"Bias is such a complex topic because we don't always know or feel that we have it. That was an idea we wanted to start with: We all have some biases.\" For inspiration, and guidance, Starbucks turned to the work of a number of experts, perhaps none more than board member Mellody Hobson. Hobson, a renowned businesswoman and public figure, had a long personal history with bias and discrimination as an African-American, and was a leader in the fight to improve inclusion and diversity in workplaces and elsewhere. She gained widespread attention for her 2014 Ted Talk, \"Color blind or color brave?\" In it, she advocated for frank discussions about race, even though they tended to be difficult and emotional. Ultimately, such conversations offered a more productive and achievable approach than aspiring to be color blind, she argued. The Starbucks leadership team also wanted the 5 / 29 session to be an opportunity for partners to share, listen to one another, and reflect. \"We wanted to encourage openness," said Williams. \"Engage, question, and seek help were messages we wanted to convey.\" Delivery and Execution Hill and her team faced the daunting challenge of orchestrating the 5 / 29 session. \"The first two weeks or so was devoted to the content,\" said Hill. \"Everything after that was execution. It was immediately clear we wouldn't be able to recruit, hire, and train 8,000 individuals to lead these sessions in every store. Nor could we realistically expect all of our partners to travel or gather in designated hubs.\" Therefore, Starbucks relied on technology. Ultimately, 25,000 Apple iPads were loaded with a series of videos that explored company and societal history, modeled conversations about race and bias, and guided partners through prompted discussions and reflections. The videos featured Johnson, Schultz, Hobson, a number of Starbucks partners, outside experts from the Perception Institute, and Common, the entertainer and activist. Along with the iPads, The team produced and distributed tens of thousands of guidebooks, which were divided into sections and printed as newspapers so that they could be spread out on tables and read by several individuals at once. The section titles were: \"Starbucks: Who we are. Who we aspire to be\"; \"The story of race, access, and the spaces we all share\"; \"Creating a more welcoming Starbucks\"; and \"Planning the journey ahead.\" Additionally, all partners were given notebooks that provided additional tips, facts, definitions, and things to think about, and where partners could record their impressions and reflections. Those notebooks would remain the property of the partners, and everything they wrote would remain private. (See Exhibit 3 for more on the materials.) 12 \"Two weeks prior to 5/ 29 we released a video preview of the bias training in order to give partners an idea of what they could expect and to lessen their anxiety,\" said Hill. \"For instance, we notified them that time spent in the training would be paid labor. After that, we mailed all of the iPads and materials in boxes labeled 'Do not open until 5 / 29,' both because we wanted that anticipation to build and because we wanted everyone nationwide to go through the process as concurrently as possible, as a real shared experience.\" In the days leading up to 5/29, stores began posting simple signs on their doors and windows announcing that they would be closing early that day. (See Exhibit 4.) \"We didn't make the sessions mandatory for partners,\" said Hill. \"We didn't want to force them. This topic is complex and intense. Also, we realize partners' schedules are often complex. We don't, therefore, have an exact tally of how many partners participated, but we do know that every store nationwide participated, and that we received endless comments from partners that the sessions were helpful and inspiring.\" The Journey Continues Although much of the press and social media attention died down after 5 / 29, Johnson and his team continued to focus on finding ways to improve customer and partner experiences. \"The shutdown was always just one elementa step on the journey," said Johnson. \"We knew innovation was necessary, but a lot of it was about returning to and reinforcing basics, not changing everything,\" added Zulima Espinel, VP of public policy. New 'Use of the Third Place' Policy One of the swiftest changes the company made was to store policies. Following the incident in Philadelphia and a thorough review, partners were no longer asked to distinguish between customers and noncustomers. According to the new policy (titled \"Use of the Third Place\"), \" Anyone who enters Starbucks is a customer, regardless of whether they make a purchase, and all customers may use Starbucks' restrooms, cafes, and patios.\" The new policy also, \"set forth Starbucks' expectations for customers, which include that all customers: (1) use Starbucks spaces as intended, (2) be considerate of others, (3) communicate with respect, and (4) act responsibly.\"33 Said Williams: \"We still consider certain behaviors inappropriate in our stores. Said Hymes \"It's about creating a welcoming environment.\" We believe that if we provide that level of customer service and engagement, more people will be inclined to use our space as it is intended\" These new rules were posted throughout store locations. (See Exhibit 5) As part of the rollout, a guide for \"Addressing Disruptive Behaviors\" was distributed. Furthermore, partners were coached (via online training to be completed within one month as paid labor) on how to follow a new response model known as the ACT Model. This approach called for employees who observe disruptive behavior in their Starbucks store to 1) Assess, 2) Consider, and 3) Take Action. For additional context, they were issued a reference guide for addressing disruptive behaviors. The guide reiterated that 911 should be avoided except in cases of \"immediate danger or threat to partner or customer safety.\" For other situations, partners were encouraged to consider calling a nonemergency number or a similar social-service resource (e.g., homeless shelters, mental health services, substance abuse services). Partners were also encouraged to come up with creative solutions. For example, one store manager noticed two individuals in her store acting suspiciously near the food case. She engaged them in conversation and learned that they were hungry but didn't have money to buy food. Rather than asking them to leave, she offered them a warm meal.34 In addition to creating these new policy guides, Brewer, Williams, Varma, Kelly, Helm, Hill, and others began revising the many other manuals, codes, guides, and standards that partners followed. \"Previously, our incident training focused too much on identifying people, not behaviors,\" said Hymes. (See Exhibit 6 for more on policies and references.) The Third Place Development Series In June 2018, Starbucks launched another learning program for its partners, titled \"The Third Place Development Series.\" The program was designed to be a \"personal development series for partners" in areas such as \"empathy, community, courage, and inclusion.\"35 The themes for the series included: 1) Mindful Decision Making (with Mel Robbins): Identifies tools and strategies to help partners make unbiased decisions; 2) Leaning into Discomfort (with LB Hannahs): Provides guidance on how to develop empathy toward people with different experiences and backgrounds, and highlights the challenges facing transgender individuals; 3) Courageous Leadership (with Brene Brown) :, Rumbling with vulnerability, understanding how to set boundries with dignity and respect, engage with empathy and lead courageously to main the third place. 4) Being a Community Builder (with Cleo Wade): Focuses on the importance of partner selfcare so that they can be effective builders in their communities. 5) Creating an inclusive environment (with Sinead Burke): Seeing other's perspectives and interacting with those that are different than you 6) Conversations on Mental Health (with Esme Wang): Discussing the importance of having open conversations about mental health 7) ...plus many more (to date, 11 topics have been explored) Each theme was addressed via two different modules. Pour Over Sessions targeted partners at the Store Manager level and higher, as well as nonretail partners. They consisted of TED Talk-style presentations from experts and influential figures) followed by moderated questionandanswer sessions. All Store Managers are also issued discussion guides to use in their stores. The other module, The Third Place Discussion, was structured as an ongoing series of group discussions on similar topics as the Pour Over Sessions; all partners could participateagain, as paid labor. Starbucks plans to release new training content and guides six times annually, an interval Hill believed would be optimal for partners to consume, digest, and reflect. Additional efforts were also underway. The company entered a partnership with Arizona State University to collaborate on a more extensive curriculum regarding biases and their impact on society. This curriculm is called \"#tobewelcoming\" and is available publicly via Starbucks Global Academy. Mending Relations in Philadelphia After spending several days in Philadelphia, Johnson, Kelly, and others returned to Seattle, while Williams and Hymes stayed behind. In the following weeks, they spent more time meeting with various groups affected by the incident. One objective was to continue learning. For example, conversations with several Opportunity Youth partners revealed that, despite finding employment 14 with Starbucks, many of these individuals continued to suffer from housing insecurity. \"It was eye opening, learning as we did in those weeks the extent of the systemic issues,\" said Williams. \"We have more work to do to figure out how we can do better.\" One of the relationships most imperiled by the incident in Rittenhouse Square was with the Philadelphia Police Department. In the wake of the incident, the chief of police blamed Starbucks and defended his officers. Yet after repeated conversations between the company and the police department, the city implemented new policies that gave officers greater discretion and more options for defusing situations. Starbucks partners, including Williams and Hymes, also appeared at a number of public events (including Coffee With a Cop sessions) alongside police officers and members of other organizations. \"We feel we were successful at creating a united front committed to working together, being better, and building trust," said Williams. \"A year ago, they were blasting us on CNN. Now we feel like a lot of them are our buddies, and we are highly responsive to each other.\" Communication and Messaging While company leadership and partners remained busy planning, implementing, and participating in increased efforts to fulfill Starbucks' Third Place pledge, the general public heard little in the months following the shutdown. \"Our priority has been on the work, not on the messaging,\" said Espinel. Internally, in addition to the events and trainings, we issue regular updates and hold regular forums. Our hope and belief is that the work we are doing will be felt by our customers in the form of improved experiences in our stores. Yet we are committed to transparency. A lot of what we are doing, even though we are not advertising it, can be viewed by the public on our website. You can also go online and read the entire Covington Report by Eric Holder and his associates, which we promised to make available long before we knew what it might contain. Added Kelly, \"We wanted to wait until we had something significant before we shared. We didn't want anything to come off as marketing. Authenticity can be stories, but it can also be metrics. A lot of the information we're interested in is hard to collect, and takes a long time." Starbucks' commitment to transparency extended to other organizations and corporations. \"Several companies have come to us and asked for our playbook,\" said Jenkins. We were happy to share, because these are society issues that affect us all. We have also been engaging in open and productive dialogue with other institutions that serve as Third Places. In particular, we have had conversations with public libraries that offer many of the same amenities that we do and that have recently had to deal with surges in incidents. Our best hope is to learn from each other. Licensed Stores and International Efforts In the year after the Philadelphia incident, Starbucks was primarily concerned with addressing operations at its company-owned stores in the United States. \"We have not done formal trainings at our 7,000 licensed stores because the workers at those locations are employees of other companies, not Starbucks partners,\" said Jenkins. \"But they were invited to participate in the 5/29 sessions, and we have made many of the resources available to those other organizations and employees because they are wearing the Starbucks green apron and are likely facing similar challenges.\" Added Espinel, \"We also haven't done a ton overseas yet. Some of the materials we have developed are being used in Canada, because the markets are so similar, but for the most part, we want to figure out the US. first.\" 15 Measuring Success By early 2019, Starbucks' new customer policies had been in place for around six months. While many lauded the company, others wondered if the \"open door policy" would backfire. Some concerns centered on guests abusing the policy to take advantage of free work space and wireless Internet, and suspicions that paying customers would find it increasingly difficult to find seating. Some partners worried that their jobs would become more unpleasant and hazardous. In one widely reported incident, a woman gave birth in a Starbucks restroom.3'6 Media outlets also reported increased complaints from Starbucks partners about having to dispose of needles, drugs, and other paraphernalia when cleaning the stores. \"Since the new rule stemming from the April 2018 incident went into place,\" said one, \"the number of needles in our trash can and on our floors has increased. Fortunately, no one at my location has been harmed in the years I've been there, but as the months pass since we became nationwide public facilities, the bathroom conditions have been getting worse and worse.\"37 Starbucks responded in January 2019 with an announcement that some locations would receive needle disposal boxes. Again, some have praised the decision, while others fear that it only provides more sanction for behavior most guests and employees wish to avoid. Metrics As their ambitious changes got underway, Johnson and his team began considering ways they could quantify their impact. \"We found that in the wake of the Philadelphia incident, partners were confused and sometimes scared," said Williams. \"For example, partners were terrified to call the police, even when it seemed clear the situation warranted, because they had seen what blowback could look like.\" Said Kelly, We also learned that the incident reporting process we had in place was discouraging partners from filing. This leads to an incomplete picture of what's going on in our stores. We, therefore, at the suggestion of Holder and his team, have begun to develop an alternative option. Previously, filing a report on the phone took twelve minutes. This new tool should bring that time down to two minutes. \"On the customer side, we have two main measures: occasions per day (year to year) and customer connection score,\" said Williams, who had increased the amount of time she spent in the field at Starbucks stores from 50% to over 70%. \"Both of those have risen in the past year. One of the most encouraging results, in fact, has been that the MidAtlantic region, which took a hit immediately following the Philadelphia incident, has experienced some of the highest increases in those scores. That suggests the work we are doing is having a real impact." Partner Satisfaction Through it all, Johnson and his team insisted that the most important part of their jobs was to ensure partners felt supported and empowered. \"We conduct regular Partner Engagement surveys,\" said Williams. \"Responses are generally highly positiveas indicated by the fact that we are regularly touted as a great place to work and we have strong retention. But there's still room to grow. For example, we've heard from our partners that they want to have even more conversations about race.\" Added Helm. We have begun the search for a VP of Inclusion and Diversity. We've always been proactive and a leader in this realm, but our efforts have always been rather dispersed. Having a single person, who will likely report to me, in charge of these areas, will be beneficial. Partners will know who to look to, and this new person will be responsible for being accessible and improving communications about these topics. 16 Looking Ahead When Johnson arrived at the SSC to begin his workday, he got himself another cup of coffee from one of the onsite cafes, which looked like typical Starbucks stores and operated as innovation labs for new products and processes. He continued to reflect on the company and its mission. \" It is not enough to understand the Starbucks Mission intellectually,\" he said. \"You also have to understand and connect to it emotionally. The only way that can happen is through shared experience. That's what Howard understood so well and was able to tap into. My job now is to get up every morning and work in service of each and partner who proudly wears the green apron for Starbucks around the world. The question that is always at the top of my mind is, 'What will make our partners proud?\" Exhibit la Starbucks Executive Leadership Team Bios Kevin Johnson, President and CEO joined Starbucks in 2009, serving on the company's board of di