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Starbucks Moves On to Next Cause

Justin Fox is a Bloomberg View columnist. He was the editorial director of Harvard Business Review and wrote for Time, Fortune and American Banker. He is the author of “The Myth of the Rational Market.”
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After his remarkable success in uniting Americans of all racial backgrounds and political beliefs last week, Starbucks Chief Executive Offer Howard Schultz has declared that it’s time to move on to the next challenge. Wonder what it will be? He’s already taken on gay rights (for) guns (against, in Starbucks stores at least), military veterans (for) and political gridlock (against). I vote for a full-on assault on pointless airport security rules. Americans with hard-to-remove shoes need a champion!

Of course, despite the brave face that Schultz put on it in the letter to employees (called “partners” in Starbucks lingo) in which he announced that they should no longer feel obliged to write “Race Together” on coffee cups before handing them to customers, this latest foray into making the world a better place was universally perceived as a disaster. The idea, Schultz said in a video shared with employees last week, had been:

If a customer asks you what this is, try to engage in a discussion that we have problems in this country in regards to race.

There were a lot of different potential objections to this plan, and every single one has already been discussed at excruciating length on media both traditional and social, so I won’t elaborate other than to say that for me rereading the passage “try to engage in a discussion that we have problems in this country in regards to race” is like hearing fingernails scrape on a blackboard. It is just so awkward and clueless and empty -- managementspeak transferred to a new domain and found even more wanting than in its native territory. 

Then again, we do “have problems in this country in regards to race,” and Howard Schultz is a manager, so what should we expect from him? More of the same, I would think. And maybe that isn't such a bad thing. Here’s why.

1. He’s made a bargain with his shareholders. Near the beginning of Starbucks’ long, long annual shareholder meeting in Seattle last week, Schultz declared that the company has an “overriding responsibility not just to make a profit, not just to build shareholder value, but to in fact have social impact and to demonstrate the conscience of the company.” He then immediately switched over to showing what a great job Starbucks has done of making a profit and building shareholder value since January 2008, when he took back full control after an eight-year hiatus of the company he had more or less created. When Schultz announced that the company was doing a 2-for-1 stock split, a big cheer erupted -- the loudest of the day, as best I could tell from the replay. As long as Starbucks keeps delivering for shareholders, Schultz figures he has permission to pursue extracurricular activities. He can be quite explicit about this. When somebody complained at the March 2013 annual meeting about Starbucks’ open support for gay marriage, Schultz replied:

If you feel, respectfully, that you can get a higher return than the 38 percent you got last year, it’s a free country. You can sell your shares of Starbucks and buy shares in another company. Thank you very much.

2. Oversimplification usually works. Schultz clearly likes to take complex, difficult issues and boil them down to simple catchphrases. Many thoughtful people find this maddening, as evidenced in the reaction to “Race Together.” Schultz’s “Boycott Politics” campaign was similarly irritating to some, as it ignored most of the reasons why Americans politics is messed up in favor of simplistic, pox-on-all-their-houses sloganeering. In general, though, this is an effective strategy. Find the essence of a message, and hammer it home -- and if your message isn’t working, find a new one. Schultz used this approach in building a remarkably focused, cohesive global corporation. He isn't going to give it up now.

3. It’s not all show. Apart from the ill-fated writing-on-cups thing, Schultz discussed two other Starbucks initiatives related to race relations at last week’s annual meeting. One seemed innocuous -- a factoid-filled eight-page insert on race in Friday’s USA Today. The other was bold and possibly important -- a commitment to hire 10,000 “opportunity youth,” young people who aren’t in school and don’t have a job, in the next three years. Schultz also described how the whole “Race Together” idea had grown out of a series of employee gatherings around the country that he led in the wake of the unrest in Ferguson, Missouri. From the evidence of the videos shown at the annual meeting, there were some genuinely cathartic discussions at those meetings. Watching them made me almost understand why Schultz thought it would be a good idea to continue the discussions in Starbucks stores. The man may on occasion be tone deaf, but I don’t think he’s insincere.

Last week I wrote approvingly of the argument that corporations should have a purpose beyond maximizing return to shareholders. Starbucks’ official mission statement says it does have such a purpose:

To inspire and nurture the human spirit -- one person, one cup and one neighborhood at a time.

It isn't the world’s most convincing mission statement. It is easy to see how it could become an empty platitude. It’s also clear that Howard Schultz has, however clumsily, been trying to give it meaning.

  1. The backstory: Starbucks was a small Seattle chain of coffee stores (as in coffee beans, not beverages) when Schultz joined up in 1982 as head of operations and marketing. After hanging out in bustling espresso bars in Milan on a business trip, Schultz tried to persuade Starbucks' owners to start selling lattes and such. They resisted and he quit to start his own espresso-bar chainlet, called Il Giornale. Then the founder of Peet's Coffee & Tea in California, which had been the inspiration for Starbucks, put his business up for sale. The Starbucks owners bought Peet's and moved south, and sold their company to Schultz. This was in 1987, which is when the Starbucks we know today got its start. Schultz was CEO from then until 2000, stayed on as chairman after that, and reclaimed the CEO job in 2008.

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To contact the author on this story:
Justin Fox at justinfox@bloomberg.net

To contact the editor on this story:
James Greiff at jgreiff@bloomberg.net