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How would you respond to a global PR crisis, sparked by accusations of racial profiling at one of your outlets and nationwide boycott campaign against your company on social media? A typical response would be to manage the fall out of the proposed calls for boycott by your own aggressive campaign to neutralize the negative press. And, closely monitor the impact on the earnings and stock price and devise strategies for a recovery, possibly increasing the store open hours to make up for the potential loss of revenue.

Starbucks did just the opposite and its stock went up in the aftermath of one of the biggest PR crisis in recent times.

Two African American men were arrested by police on April 12 while they were in the shop waiting to meet someone. An employee at the outlet called 911 to say the men were trespassing. According to media reports, police were told the men asked to use the store’s restroom, but they were denied because they hadn’t bought anything, and they refused to leave. The men were subsequently released for lack of evidence that a crime had been committed.

This incident sparked accusations of racial profiling at the chain and a nationwide boycott campaign against the company on social media. The controversy is the biggest public relations test yet for the new Starbucks Chief Executive Kevin Johnson.

Starbucks takes pride in the fact that “Inclusivity” is one of its core values. It is articulated as “Creating a culture of warmth and belonging, where everyone is welcome”. They claim that they are performance driven but through the lens of humanity. This core value of the company was severely violated during this incident. However, Johnson had no hesitation in taking the following actions.

  • Planned to close 8,000 company-owned U.S. cafes for the afternoon on May 29 so that 175,000 employees can undergo racial tolerance training.
  • Take out the employee responsible for the call to the police.
  • Met face to face with the two gentlemen and offered them a personal apology.

Starbucks shares rose 40 cents or 0.7 percent, to close at $59.83 on 17 April and are relatively unchanged in the week since.

Johnson knew fully well that shutting down 8000 outlets for an afternoon will have a negative impact on the revenue. There was also a threat of public boycott that too would have led to potential loss of revenue. On one hand there is a risk of losing revenue and on the other hand one of the core values of Starbucks has been violated publicly. He must decide between maximizing revenue and sending a strong message publicly on upholding of the corporate values.

It is a classic clash of two fundamental duties of a corporate leader – maximizing revenue vs preserving core values. It is a typical leadership dilemma, where as a leader, you must decide between one “right” and another “right”. It is further complicated by the fact that we live in an uber-connected and social-media saturated world, where everybody has the ability to express an opinion and weigh in on the debate. The impact of your decision is magnified multiple times with little recourse.

How does a 21st century leader deal with such a dilemma?

As a leader today, more than ever before, you need to have deep clarity about your values and purpose. Your core values should be derived through a great deal of reflection and internal deliberation. These are the values that you will constantly use as a compass and never compromise upon in your personal and professional life. Not only is it important to know what your top values are, but also the hierarchy of these values, i.e. which value takes precedence over the other, in case of conflict. For example, in the Starbucks scenario, what takes precedence – Inclusivity or Maximizing Revenue. And, by the way, this is not a unique situation. As a leader, we face similar dilemmas on a regular basis.

There are no right or wrong answers. You must decide what’s right for “you”, based on your values (and hierarchy of values). Are you ready to lead in the 21st century!

Lalit Gupta

Lalit Gupta, Chief Marketing Officer

Lalit has over 30 years of extensive business leadership experience and has led Strategy formulation, execution and change initiatives across countries in Asia Pacific and Japan. Lalit is also a mindfulness practitioner for over 8 years and believes that regular practice of mindfulness is imperative to lead a fulfilling and meaningful life and is more required today than ever before. Lalit brings real world experience to Leadership Development and Corporate Governance and is a well-respected thought leader.