Starbucks: Ethical Leadership Case Study

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Western University *

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3840

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Management

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Jun 11, 2024

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docx

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6

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Ethics Case Studies
Part A - Starbucks and Ethical Leadership   Ethical leadership is necessary to create a workplace environment where the organization's mission statement and values are aligned with those of the people that are working for them. Leaders set examples for the people around them for how to behave and excel, setting the tone for business success. If the company's heads lack morals and ethics, the people below them would not respect the management team (Nelson, 2023). Milgram’s experiment showed that leaders and authority figures can convince anyone to do anything. Hence it is crucial today more than ever to understand how necessary ethical leadership is and to make sure the leaders we choose to manage and lead companies will have strong morals and sense of ethics (Nelson, 2023).   Starbucks opened its first store in 1971 in Seattle. Ten years later, Howard Schultz, from New York, joined the company. In 1983, Howard took a trip to Milan. While he was there, he frequented many coffee shops and found that he enjoyed the atmosphere and culture he experienced in them. He decided to “bring the warmth and artistry of its coffee culture to Starbucks”. Today, Starbucks has become a multinational company with branches in Europe, China, and Japan. Combined, its stores welcome millions of customers each week. The company and its employees are proud of their mission statement “With every cup, with every conversation, with every community – we nurture the limitless possibilities of human connection” (Starbucks, 2023). Over the course of several years, the company built a robust and reliable reputation of inclusive and safe work places for everyone to come to. They did it by shaping the way all of the stakeholders perceived it and by building policies and procedures to enforce them (Schultz & Werner, 2005).  “The human mind knows few limits when it comes to the capacity to find loopholes, ignore rules and codes, and harm others for personal gratification” (El- adaway & Jennings, 2022). In the presented case, two black men entered the store and asked to use the washroom. They were informed by the manager on duty that the washrooms were for paying customers only. As they were waiting for another colleague to arrive, they did not want to order anything yet so they sat and waited. After a while, the manager asked them to leave. They disputed the manager's request as they were still waiting for their colleague to arrive. The manager called the police, claiming that the two men were trespassing. The police arrived a brief time later and arrested them. It was up to the manager’s discretion whether to ask the two men to leave or to let them continue sitting in the store. Starbucks had no policy about limiting the time one can spend in their stores regardless of whether they were paying customers or not. The manager was experiencing an ethical conflict between their own values, the company's values, and the law. In the end, their own values took precedent over the company’s values and the law. They acted according to their personal judgement. Unfortunately, they show bias and prejudice in their decision making about the two men. Johnson’s
decision to fire them made it clear that they were not following the spirit of Starbucks’ values and mission statement.   Johnson used the EDM model as a guide for dealing with the situation. He evaluated the situation and recognized the issue openly by firing the manager and giving a statement of apology. He announced that the company will begin an investigation as one of the additional steps the company will take. This investigation will help the company to check if there was anyone else involved other than the manager and identify other internal and external factors. After going over the optional routes of action, Johnson released a new policy which, he said, “intended to help maintain the third-place environment in alignment with our mission ‘to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.’” He recognized that issuing statements alone in this situation was not enough. He took responsibility for the incident and by doing that, reflected the blame and anger from the store to himself. In the video statement he says “...I own it (the blame). This is a management issue, and I am accountable...Starbucks works to create an environment that is safe and welcoming for everyone.” In addition, he identified the issues, and openly declared the steps that Starbucks will take to prevent something like this from happening in the future. One of the most important steps he took was closing all the stores across the US (8,000) for one day “to conduct unconscious bias training”. It was a costly action for the company, but it conveyed how seriously they took this issue and how dedicated Starbucks is to show they care about their society, communities, customers, and employees.  Johnson’s actions defused a highly volatile situation. The community was outraged by the manager’s behavior and their decision to call the police and get the two men arrested. People performed sit-ins and protests and started to call Starbucks “anti-black” and racist. They felt betrayed by the broken promise (McLaughlin, 2018) and demanded action. If Johnson would not have reacted quickly, these demonstrations could have spread all over the US and throughout Noth America. That would have affected Starbucks image as an ethical and inclusive company, which in result will affect the stakeholders. Customers would be less inclined to shop there, revenue would decrease affecting the company’s worth and share price and dividends and could have caused Starbucks demise.   In conclusion, the outcomes were in line with the Mission, Vision, and Values of Starbucks. Johnson met with the men that were arrested and apologized to them about the manager’s actions and proceed to fire the manager. Starbucks leadership met with the community and customers to learn from them what they could do better, they took steps to train their employees about unconscious bias and released a new policy that addressed these issues. The actions that were taken were able to restore faith in the Starbucks brand and reputation as an ethical, inclusive, and diverse company.   
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