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Crisis management expert lays out what Starbucks needs to do

Melody Hahm
Senior Writer

Starbucks (SBUX) is closing all of its U.S. stores on the afternoon of May 29 to educate its 175,000 employees about racial bias. This change affects more than 8,000 locations (or about 29% of its global store count).

The announcement came a few days after a video of two African-American men getting arrested at a Starbucks went viral (it has been viewed nearly 11 million times). One or both of the men asked to use the restroom, but neither had ordered anything. The manager at the downtown Philadelphia location said company policy prohibited non-customers to use the restroom and asked the men to leave and subsequently called 911. The employee who called the police has since been fired.

CEO Kevin Johnson published a letter and recorded a follow-up video apologizing for the “reprehensible” outcome. Eric Dezenhall, a leading crisis management expert and CEO of Dezenhall Resources who has been helping companies with damage control for 35 years, said Starbucks “has done the best they could do under terrible circumstances.”

‘The game is damage control — not that damage never happened’

“Going into this, no matter what Starbucks did, it would be deemed to have been a misfire, not only because of the emotions involved, but also because of the utter impossibility of controlling social media and because you have legitimately aggrieved parties,” Dezenhall said.

He said Starbucks took effective hard actions such as firing the employee and soft actions including Johnson’s apology letter and video. In his video, Johnson appears both somber and direct and takes full responsibility for the incident.

“This is not who we are, and it’s not who we’re going to be. We’re going to learn from this and we will be better for it. … Now there’s been some calls to take action on the store manager. I believe that blame is misplaced,” Johnson said in the video. “In fact, I own it. This is a management issue, and I am accountable to ensure we address the policy and practice and the training that led to this outcome.”

I think that they have done everything right that you can do right in these situations, with the understanding that the game is damage control — not that damage never happened. There’s a tendency to mistake damage control efforts with damage erasing. It’s not the same thing,” said Dezenhall.

Crisis management expert lays out what Starbucks needs to do

Regarding the store closings, it won’t solve the underlying issue of racism, but it was a bold, smart move for Starbucks to make, according to Dezenhall. Jeff Sonnenfeld, a dean at Yale’s School of Management, estimates that Starbucks will lose $12 million for closing on May 29. This will be the second time that Starbucks has closed up shop for an afternoon. In 2008, baristas were re-trained on how to make espresso properly, that closure cost the company $6 million.

“You can’t excuse them now of doing nothing. No matter what you do — you’ll be accused, so you may as well do something big,” said Dezenhall.

Andrew D. Gilman, the president of CommCore Consulting Group, shared this sentiment. “This move goes far beyond the playbook of what a normal crisis response would be,” he told The New York Times.

‘A problem that is fundamentally irresolvable’

“You have to separate the societal problem from the crisis management. One of the challenges when you’re dealing with a huge issue like this is people want the company to solve an issue that is hundreds, if not thousands, years old. Think of it like a trauma surgeon — If someone is wheeled in with chest pains, you can’t begin giving them a lecture on history of health. You have to solve the problem at hand,” said Dezenhall, the author of books including “Glass Jaw: A Manifesto for Defending Fragile Reputations in an Age of Instant Scandal” and “Damage Control: The Essential Lessons of Crisis Management.”

Companies like Starbucks have to be cognizant of the “combustibility” factor when it comes to issues like race, a particularly personal and heated topic, he said.

“When you’re dealing with racial issues, nobody wants to hear, ‘Yes, but…’ Nobody wants to hear, ‘Well, technically… the people at the store weren’t buying anything.’ The minute you get into that, you’re in trouble. When race is the issue, nobody wants to be devil’s advocate. You’re going to have very intense emotions that are not going to be resolved by anything you do. You have a problem that is fundamentally irresolvable,” Dezenhall pointed out.

The need for a uniform, consistent policy

Beyond the questions surrounding conscious or unconscious biases and discrimination, there are legitimate policy questions that Starbucks must address with its employees, said Dezenhall. “Employees need guidance. These questions transcend the PR problem.”

Starbucks does not have a company-wide bathroom policy, and store managers use their own discretion to implement rules. Of course, this becomes a problem when employees pick and choose whom they want to ban from using the restroom. On Monday, just days after the Philly arrests, a video recorded in a Torrance Starbucks shows an employee giving a white man the bathroom access code, and denying a black man. Neither had bought anything.

In previous years, individual locations have taken it upon themselves to make their bathrooms accessible only to paying customers with self-made “Employees Only” signs. Take New York City, for example. After such incidents were reported, Starbucks management visited several stores and forced employees to open their restrooms to the public again.

Johnson addressed this variability in his apology video.

“Now certainly as I’ve been reviewing the situation, understanding that with 28,000 stores around the world, that in certain circumstances, local practices are implemented. In this particular case, the local practice of asking someone who is not a customer to leave the store [was] unfortunately then followed by a call to the police. Now certainly, in some situations, the call to police is justified, situations where there’s violence or threats or disruption. In this case, none of that existed. These two gentlemen did not deserve what happened and we are accountable.”

Dezenhall noted that there’s natural volatility that comes with managing human beings. “It’s one of those situations where this company has nearly a quarter million employees. How do you control them? How do you prevent some sort of adverse event where you are dealing with literally millions of human beings involved?”

The disappearance of a traditional news cycle

The May 29 training is more than a month away, and that begs the question — Will consumers forget about #BoycottStarbucks?

Dezenhall believes the pressure may continue, with more stories coming out of other locations, as “incidents beget other incidents.”

“When these things happen, there’s never one. There’s such heightened sensitivity that people are hyper on all sides. When everybody is understandably jumpy, it leads to other incidents that aren’t great. Protests beget other protests.”

“Damage control used to mean if there’s a chemical spill, you cleaned up the mess, you compensated the community, and put safeguards in place. Now damage control means you have to pull a series of stunts to make people believe that the incident never happened. It never occured to chemical companies that they would make a spill look good.”

Many of Dezenhall’s clients are now concerned about their own businesses. After all, the incident was certainly not Starbucks-specific, and could potentially happen at any establishment.

“They are all worried about it. How do you account for the actions of millions of people and their beliefs and also how do you account for the volatility of human interactions? Companies are scrambling.”

A silver lining for Starbucks is that consumers have short attention spans, especially because social media drives so much momentum.

“The crisis today might not be a crisis tomorrow. We move on to the next thing,” said Dezenhall. We talk about Starbucks today, but somebody might get punched on an airline. There is no news cycle anymore.”

Melody Hahm is a senior writer at Yahoo Finance, covering entrepreneurship, technology and real estate. Follow her on Twitter @melodyhahm.

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