Corporations will need to rethink their role in society as tough economic times persist, Starbucks chief executive Howard Schultz told a gathering at the University of Denver on Wednesday evening.
“Half the states are insolvent, and two-thirds have deficits,” Schultz said. “There is a lot of bad stuff coming.”
As governments cut back, corporations will be under pressure to fill the gap and show more concern regarding their workers and customers alike.
“Corporations will have to do more for the communities they serve,” he told an overflow crowd gathered for the Voices of Experience speaker series hosted by the university’s Daniels College of Business.
The message isn’t one based on altruism but represents good business practice, he said.
For one, the economy isn’t going to make a strong comeback, and consumer spending will remain constrained, he predicted.
Social and digital media also have become more important than most executives realize and can quickly shape consumers’ impressions of brands.
Better-informed consumers will look at the ethical stances and the integrity of organizations they do business with as they spend more limited dollars, he said.
“It is good business to do the right thing, and it will come back to you,” he said.
Starbucks has tried to embody that ethic by providing health-insurance benefits to its workers, both full and part time. It monitors the environmental impacts of its coffee suppliers and invests in their communities, he said.
Much of Schultz’s talk was based on his book, “Onward: How Starbucks Fought for Its Life Without Losing Its Soul” — a top seller.
The book details Schultz’s return to run the coffee chain in 2008 after an eight-year hiatus that saw a sharp deterioration in its prospects.
Schultz notes Starbucks became too convinced of its own success, and bureaucratic management, over time, focused more on stock price than on the experience provided to customers. The company paid the price when the recession hit.
To right the ship, Schultz closed stores for retraining at a cost of $6 million and brought 11,000 managers to New Orleans to chart the company’s future. He also had them volunteer to help the battered city.
Starbucks has since returned to record revenues and profits, with a successful expansion in China and the rollout of a popular instant coffee.
That isn’t to say there aren’t additional challenges beyond the sluggish recovery.
Record-high coffee prices could cost the company an additional $200 million next year, he said.
Aldo Svaldi: 303-954-1410 or asvaldi@denverpost.com
