BLACKROCK SAVINGS SUMMIT

A silver lining: Out of crisis comes innovation

Nov 12, 2020

Starbucks Chief Operating Officer Roz Brewer and American Airlines Executive Vice President of People and Global Engagement Elise Eberwein joined BlackRock's Chief Client Officer Mark McCombe to discuss how leaders can create stability and opportunity for those they serve, even in the face of disruption.

  • Mark McCombe: Thank you, Deb and Roz, Elise, great to see you today and thank you again for joining this virtual conference. I'm really excited about the conversation we're gonna have. Obviously, 2020 has just been such an incredibly tumultuous year, err, balancing the health crisis with the economic dislocation and then, of course, right in the middle all the issues around racial equity and social upheaval in our-, in our country and your two represent iconic brands, err, and iconic business in this country and globally and, so, I'm just so excited and, and interested to hear your perspectives on how you've managed through such a complicated time. So, Roz, I'd like to start with you and, obviously, again, err, the numbers are just, err, mind-boggling in terms of your footprint globally, err, and what Starbucks represented as, err, err, as a company and a success story from the United States, but can you tell us a little bit about how, in those early days and working through the pandemic period, you really thought about weighing up all of these different challenges that we were facing and how did you really pivot the company, um, to position it so that it could be resilient through this period? 

    Roz Brewer: So, thank you for that question Mark. You know, we viewed this period, that we're hopefully venturing away at this moment, as almost a double pandemic, err, between the coronavirus and the social unrest in the country. Err, but as Starbucks goes, we always put our partners in the centre of everything we do and we try to understand, what is this like for the people who do the hardest work for us? And with that in mind, we decided that it was important to create a safe workplace for them, either safe from, err, the pandemic or safe from the physical hazards that were happening in some of the areas where our stores are located and, err, we really began with our learnings from our partners in China, and, so, our China business began to see this in late December. Err, we went into war room-, war room status early January for our US business and began to create our plan and we decided that we were gonna listen to health officials and let them lead us through this from the science-based thinking. Secondly, we were gonna take care of our partners in any way they needed and then, thirdly, we were gonna create a safe place for our customers as well and we really worked hard on those principles.

    Those guiding principles led us through what we wanted to do. We actually closed our offices in Seattle very early on. The first Thursday in March, we closed the offices and began remote learning and, err, for our, err, partners in the field to teach them how to keep the stores safe and clean and then, err, we went to total drive-through status and, err, the customers, I will tell you, were so happy that we did keep some of our stores open because, as you can imagine, the isolation that people felt and, err, being pulled away from their morning coffee, err, was probably, err, really critical to some of our customers. So, they were thanking us as they came through the drive-through and really happy to see just how healthy, um, our baristas were and that they could connect. So, we really went, err, all in for our partners. Err, we created a catastrophic pay programme for them, um, a way for them to, err, to leave the store when they needed to and create flexibility so that they could take care of their families, err, their children who were, err, learning from home and, err, we really decided that that was our most important, err, work that we could do, was to keep our, our partners safe and, as you well know, we call our employees partners.

    Mark McCombe: Mmhmm. Well, Roz, I can tell you that, when I had my first Starbucks coffee after that initial lockdown, it was like discovering an old friend again. I really didn't realise quite how much I had missed that old friend, so, err, I can only echo your, your sentiments today. Elise, I, I can't think of, err, an, err, an industry that has been more impacted than, than the travel industry and, um, you know, we've all, obviously, watched and learned through the, the, the news, um, what's had to happen to the airline industry. You faces-, faced mountainous challenges. Um, I guess the question for you, in putting it through the lens of, of, of, of your employees is really to think about, kind of, how have you maintained, kind of, resilience through this? Because clearly, err, it's been longer in duration than anyone would've cared for, but as people look forward, you know, the travel industry has probably got the longest way to go in terms of, sort of, recovering back to a new normal or whatever a pre-COVID world might look like. How have you felt-, thought, thought about those issues and tackled them within American Airlines?

    Elise Eberwin: Yeah, for sure, and, and before I start and set the stage, I'll just add my thank you to Roz because I'm one of those too that was so elated, err, to get my Starbucks, um, my red eyes and all, all the above. Um, so, just, you know, the airlines, I would say a couple things, Mark. Err, you know, we are, unfortunately, very used to macro economic, um, gyrations, maybe not to the extent that the pandemic's brought, but you know, we've had certainly the Gulf War, we've had 9/11, we had the financial crisis. So, airlines seem to be on the, the front end of many of these things and the pandemic wasn't any different. To set the stage, you know, we operate, um, 1,500 airplanes and, you know, really had a-, almost a light- switch shutdown of the airline. So, we grounded close to 500 airplanes. Our revenues went, you know, almost black overnight, so on a typical day, you might have $95 to $100 million in revenue, we went to $2 million a day. Um, even customers, I'd typically say, you know, half a million customers every day on American pre-pandemic and, at our low point, we carried 20,000 passengers a day. So, it was, you know, it, it was so stark and so fast for us, um, that we really had to, you know, kind of, adjust to the shell shock reality of what we were seeing and do so in a way that, that maintained some sense of normalcy for our team members that work the front line.

    So, if you're, you know, a flight attendant or a pilot or mechanic, you still had to come to work and you still had to, you know, serve what, what few customers were out there travelling. So, for us, we did things like put, you know, immediately into place, a two-week paid pandemic leave. We're largely unionised, so much of our, you know, benefits work is typically negotiated with the union, but we did some very early quick things, you know, without, you know, thinking about negotiation just, you know, the things that were right to do to make sure that the airline, the little part of the airline that was flying, could, could maintain that. The other thing we did, um, that you all probably heard of, um, extensively was we went to the government for assistance and, you know, this is necessary because airline infrastructure is really costly to get set up and maintain. You, you don't just shut-, you know, take 500 airplanes out of schedule, you know, for even a month or two or three or six months and then bring them back up. Those airplanes have to be maintained throughout their downtime, um, pilots, flight attendants, mechanics, others that work and drive around airplanes have to maintain their credentials and all of that requires infrastructure to remain in place to make sure that, as demand returns, the airline can be ready to, um, you know, transport and fly. So, you know, it is popular for people to look at the airlines and say, 'Oh, they're just looking for another handout,' but really it's about keeping the infrastructure in place so that, as we get through the pandemic, um, and I know we'll talk about the vaccine here in a minute, that the airline can be ready to transport not only people, but goods, um, when that demand returns.

    Mark McCombe: Well, um, I-, before we move a little bit to, sort of, the future and, and how you guys are thinking about um, err, 2021 and beyond, I do-, I just wanna dwell a little bit because both of you have given, err, incredible insight into, um, you know, two industries that were very impacted, err, by the early stages of the pandemic and, clearly, you've had to make some very difficult decisions along the way. The government programmes, we've been a big believer that the government moved quickly and decisively and, whilst it's not always perfect, the fact of getting money transmitted into the pockets of people who were directly impacted we felt was very effective. Err, it underpinned the ability for the markets to look at, at this pandemic as, as something transitional that could be worked through, but I'd love to just hear from both of you. With such large workforces, how did you communicate effectively through, err, the pandemic? What were the tools or, you know, some of the, the, the, the, um, you know, the approaches you took in terms of actually, um, err, communicating? Maybe, Roz, I could start with you and, and Starbucks.

    Roz Brewer: Sure, sure, I think, err, the communication plans were probably the strength of the work that we had done. Err, we immediately went through every bit of technology that we could possibly use to reach our, err, teams in the field and we were pretty much 24/7 and, err, we constructed, first of all, um, understanding that we have 5,000 people based in our home office in Seattle and then, um, a very large amount covering 8,000 stores, um, of baristas out in the field. One thing we said that we were gonna do, we committed to full transparency, err, with our partners to let them know, 'We will-, what we learn, we will share with you.' So, we actually took our, our quality and safety team and put them right in front of our partners and they reported out directly from what they were hearing in the science and then they were relating that in layman's terms to all of our employees, not only (TC 00:10:00) here in the US, but around the world and that was critical. Um, it took a great amount of work because, as you imagine, we were all remote. Um, we used, um, every bit of audio-visual technology that we had. The tech team reports into my structure. They went into full gear, um, in terms of how we wanted to communicate, but what was interesting out of this were what I would call the micro-conversations. We were really sensitive to the anxiety that people were feeling, so each one of us, as leaders, took it upon ourselves to have, um, what we would call quick connects with small, err, err, bodies of our, um, our employment, err, community and, you know, if it were ten people we could get on a call and just connect with to see how they were doing, how their families were doing, what they were dealing with, so that we understood, what tools did they really need? Not just the tools to get the work done, the tools to function as a family and to function as a whole person and, many times, we found just reaching out, either by text, by phone, by video and just connecting eye-to-eye was a tremendous help to many people who were facing so many different aspects of the pandemic.

    So, we went into full bore from a technology standpoint, but also too some constant communications in terms of, um, how we wanted to touch and feel people. Err, we also set up regular communications with, you know, our community and our customers as well and then also, too, err, talking to, um, probably the mayors. As things went from pandemic to social unrest, we had to really reach out to communities and so, um, actually Kevin Johnson, our CEO, took on every, um, almost every political state from a governor standpoint and myself, as COO, I probably touched, um, many of the mayors across the United States just to touch base and see, 'Here's what Starbucks is doing.' Err, we created a database, um, similar to the one, um, that you might have referenced in New York Times, but we had updates based on our stores and what was happening. So, it informed us when we needed to shut down a store and when we needed to open it back up in terms of the rise of the pandemic, the rise of the social unrest and, so, we shared that with local mayors and governors so that we could do this work together and they could understand what we needed in the community and, um, you know, it is-, it was very helpful for us. Err, we had, err, great relationships already in a lot of our communities because of how many stores we have. Partners could also feel like, 'We're connecting on your behalf, we've got you from a local standpoint,' um, even though we're in Seattle and I think it was a great comfort, um, to, um, our local baristas so that they knew that we were making every connection we possibly could and relaying every bit of information that we knew down to the micro level.

    Mark McCombe: Thanks for that, Roz and I, I think we've all speculated a little bit about, you know, if this pandemic had hit ten years ago or even five years ago, how much harder that communication would be. We've got so many tools that have been, err, you know, our best friends during this, err, during this difficult period. Elise, similar question for you, but obviously through the lens of just the criticality of what your, err, employees and partners, err, had to do and just picking up a little bit on, on, on Roz's point. I mean, clearly, you know, anxiety was very high, err, and people were questioning the future and where this, err, pandemic might go and when your responsibility is for such a critical, err, service, as transportation, you know, how did you communicate? What was the tools that you used to really ensure that the airline, um, was able to keep the critical, err, err, components going?

    Elise Eberwin: Sure, so, I would echo many of the things that Roz talked about on the technology side. Probably the biggest change, though, in the pandemic was our partnership with our union, um, leaders. So, we always, you know, have a-, an interesting dynamic with our union leadership, um, but in the pandemic, you know, what's interesting is everybody gets a common-, sort of, a common enemy, if you will, and so we upped our, err, meeting time with our union leaders. So, they'd come in every other week. For a while, it was every week and we partnered together so that our front-line team members and our management and support staff were getting one consistent message. You know, Roz mentioned transparency too. This was interesting for us early on because everyone wanted to know, you know, how many cases? And if you're out in the operation, even though technology is a tremendous tool to use, you do still get a lot of your, um, information, true or not true, through the grapevine. So, there were wild rumours ranging from, you know, crews that had gone, you know, to this region or that region and had gotten ill or this or that and the other and we agreed with our unions early on that we would be fully transparent with our cases. We stood up a contact tracing, um, unit without our, um, benefits team so that we could contact trace very aggressively, err, and really just, you know, Full Monty if you will so that people understood there, there's nothing to be gained by not being fully transparent, um, with a common enemy and an enemy that we don't know a lot about. So, there's gonna be a lot of rumours, but let's try to be as consistent as we can and especially as transparent as we can.

    Mark McCombe: Thank you for that, Elise. I, I wanna turn to the future because I think we're having a lot of conversations, um, err, err, in all large and small companies around the world about, you know, what does the future look like? Look-, what does the future look like? For sure the news out of-, on the vaccine front seems to be encouraging, um, and we've obviously been working very closely, err, with many of our partners on how they're thinking about, kind of, the future of work, if we want to call it. Um, now, my next question really is a, sort of, two-parter for both of you. So, um, there are two subjects I wanna-, I wanna tackle. One is, tell us a little bit about how you see, err, the future of work post this pandemic and assuming that we get some sort of, you know, um, err, anti, err, virals, err, or treatments, a vaccine that will actually, err, allow us to move forward. So, I, I, I wanna see, hear, a little bit about how you're thinking about the future of works, but then partnered with that, this is obviously, err, um, a conference about retirement and the future of retirement. We do believe that, unfortunately, one of the things that has been, sort of, foisted onto, um, you know, the workforce globally is, is more uncertainty and more reticence about the future and, so, I'd love to hear your perspectives a little bit about and how you're thinking about the future for your own workforce and how to give them that, sort of, reassurance about, err, their retirements and an ability to retire in, um, err, with dignity after many years of working. So, um, maybe we'll flip the order this time, so, Elise, I'll come to you first on that question. I know it's a two-parter, but, um, err, it'd be great to hear your views. 

    Elise Eberwin: Sure, there's a lot there, but I'll-, so, I'll skip around a little bit. I think, you know, emerging opportunities for us, you know, one of the things we think about is a work-from-anywhere world. You know, many people are, you know, trying to predict whether every-, you know, the, the, the days of the office, you know, in-office worker are behind us. Um, while we don't think it's completely behind us, we can all acknowledge that a work-from-anywhere mindset is-, there are certainly people more open to it. We think, as an airline in that world, there's probably more opportunity for us as an airline to think about, you know, if you've got employees living in, you know, Montana or even in another country, you know, in a work-from-anywhere model that those individuals may have more need for travel. So, they have more need to come back to the mother-ship, if you will, um, quarterly or even monthly to check in or more need for, you know, corporate, err, travel and sales travel, things like that. So, that's one of the, sort of, emerging opportunities that we think about. I think, from the perspective of the employee, you know, in the airline industry, our people come in and they hire on for life and they're multi-generational, so you typically come in.

    You know, you'll see pilots, flight attendants, mechanics, come in in their early twenties and they stay all the way, you know, cradle to grave, if you will. So, it's 40, 50 years' seniority. You know, making sure those individuals are set up, you know, for retirement and, you know, setting aside, err, money to plan for that retirement. You know, we do all the, you know, normal things like auto-enrol when people come into the company and auto-escalate, um, each year so that people are, are putting money away. I would say to you, in this, um-, in this crisis, we saw some 14,000 employees, team members, you know, take on, um, additional, um, loans and, err, money out of their 401(k), close to $400 million. So, we use that data point just to remind ourselves internally there is a such a need for financial education and, you know, starting early and even before you're employed in the-, you know, in the marketplace, go back to even grade school and think about how educating, um, future employees on the importance of diversification and saving and, you know, taking out a little bit every time for your future self, if you will. So, we see that need, um, broadly and especially acutely, err, in this pandemic.

    Mark McCombe: Thank you for that, Elise, and we could not agree with you more on the question of, err, education early. I would say that, you know, one of the things we've been relatively, kind of, reassured by is that, actually, 401(k) balances in the US have stayed relatively stable and obviously the market rally has helped with that and we think that that's given a degree of confidence, but I think you hit on a very important point, which is, actually, people recognise that they should not be touching their 401(k) if they can at, at all avoid it, but that there's a lot of pain out there and that's forced, um, err, folks to really have to think about where, err, (TC 00:20:00) they're getting the money necessary to keep their, their lives going. So, we, we definitely feel that pain point as well. Um, Roz, similar question to you, the future of Starbucks. Um, what's changed permanently in your mind and, and what reverts and then just thinking about, um, you know, your own, err, partner base and, and colleagues and how you're thinking about that question of the future and retirement and security.

    Roz Brewer: Sure, so, you know, first of all, let me admit that I'm, I'm not a specialist in retirement, but I can tell you what the sentiment is in our-, in our workforce. Um, you know, when we look at the, err, most recent issues we've all been facing, we really look at this as an accelerant. We had already began some work on the future of work, err, the future of retail and the future of cities just trying to understand, you know, things as simple as our store development and our real estate positions and, and what should our workforce look like in the future? And it was interesting that it had already began to reveal some changes that were coming even pre-pandemic and, um, so this just accelerated the work in terms of, you know, the need-state of convenience, you know, people wanting more convenience, um, at their fingertips and I think it's been accelerated now because of the pandemic and people actually, you know, wanting to, err, come into a public facility, but maybe pick up at curbside and maybe, um, have, err, food delivered.

    So, we are seeing that food delivery has been accelerated and pick-up-at-store has been, um, accelerated. We've seen it in both grocery and beverage and, um-, but when I think about the workforce too, we also realise now that, likely, 25% of our workforce is probably gonna work from home, in our home office, in office settings and understanding that we're trying to reconstruct our-, err, the spaces that we do have, um, at Starbucks. In addition to that, we're watching very carefully mobility data to understand, how are people moving around their communities these days? And, so, is it more drive-through? Um, you know, so, what are some of their habit and how are they changing? So, that's one piece. I'll put that in one bucket in terms of mobility and then let's talk about people personally, how we're seeing the shifts in people and what kind of work they want to do.

    Um, it's interesting that, right now, I'm at the-, um, just finished the close of our year, um, October one starts our new fiscal year. I'm having a lot of development conversations with my teams and it's really interesting to hear people talk about what they want to do next and they're asking questions about the work that they want to do to create a new environment, a new community, a new sense of self and we're talking more about, how do we create leaders that can not only develop, you know, great companies, um, but also create great communities and what should our relationships be, um, with our, our government and with our, err, local, err, municipalities? And, you know, I had not see that in my career before, so much discussion at very high levels about the emotional connection that people want to have post- pandemic that's bigger than doing, um, a 9:00 to 5:00 job or some of these 60 to 70, you know, hour jobs. They're asking, what more can I do to make me a broader leader? Um, as they've seen what it takes to come through these, these issues. Um, you're likely aware that we've always had opportunities for our teams to go to school. Um, if you've been an employee of Starbucks, err, longer than six months, err, free tuition to, um, the Arizona State University and, um, 45 different degrees that you can apply for. So, we're actually seeing, um, an up-tick in, in the interest level of, um, upskilling and rebuilding themselves and, and broadening their skill-set. So, we're, um, actually looking deeply into those initiatives and looking at, what more can we do in terms of meeting our partners where they wanna be in the future? And I think that there's a lot of work that we can all do as publicly traded companies or privately held entities to look at upskilling and I think that's the next shift that we're seeing and, and trying to decide, what is our role in that?

    I think it's an incredible programme you've developed. Um, Elise, Roz, this has been such a thoughtful conversation. I, I just wanna extend, um, my own thanks and, err, and the thanks, I'm sure, of the participants who are, um, err, tuning into this. You know, you both represent such important companies in the, the, the culture of this, err, country and beyond, err, and I think, obviously, have had to face some pretty challenging months, um, but I feel a great sense of optimism having spoken to both of you that, actually, companies can be resilient, that can be flexible and, most importantly, the folks that work in those companies have a real sense of, of mission and purpose and, and driving through this pandemic. So, I, for one, remain extremely optimistic about 2021 and beyond, err, and would just like, again, to thank you for taking the time today to, to speak with us and wish you a very, err, very happy end of the day.

    Roz Brewer:  Thank you.

    Elise Eberwin:  And you.

Elise Eberwein
Executive Vice President of People and Global Engagement, American Airlines
Mark McCombe
Chief Client Officer, BlackRock
Roz Brewer
Chief Operating Officer, Starbucks
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