August 9th, 2016

Did Starbucks Go Far Enough with Raises for Retention?

Howard Schultz, chairman and CEO of Starbucks, emphasizes trust when revealing plans for the dominant coffee chain’s future. He envisions, in his words, “the kind of company … that not only cares for its people but gives them opportunities to be their best selves.”

Raises for #retention? Does it work? #Starbucks via @ajilon: http://ajilon.co/2anY6XU

In a July 11 message to all U.S. employees (known as “partners” in Starbucks vernacular), Schultz wrote of earning such confidence via new investments in partners’ total compensation:

  • across-the-board pay raises of at least 5% effective October 3;
  • doubling of annual stock awards for partners with two or more years continuous service;
  • enhancements allowing partners to personalize healthcare coverage options and potentially pocket premium savings; and
  • a commitment to help partners tally the necessary hours worked to ensure benefits eligibility.

“I [know] how hard you work, and I remain grateful for your continued trust in Starbucks to help you realize your individual aspirations as we work together to realize our shared goals,” Schultz concluded.

Workers’ viewpoint

Employees across industries often tend to think of “greener pastures” where wages and conditions appear more favorable than current positions. In that light, Starbucks could be applauded for planning ahead to retain its workers, particularly in a tight labor market.

Indeed, a recent Huffington Post report titled “Starbucks’ Pay Raise is a Good Thing — But is it Enough?” quoted a company spokesperson who termed the compensation hike as “better-than-expected” and “expedited” to October 2016 from January 2017.

All the same, Starbucks’ revenue hit a record high of more than $19 billion in fiscal 2015, with Schultz raking in $20 million in combined salary, stock awards and bonus. Could he and his management team be out of touch with the challenges of everyday workers? And are the monetary moves only masking more deeply rooted problems?

BuzzFeed reporter Venessa Wong acknowledged Starbucks’ history of offering workers better pay and benefits than most restaurant chains. However, she also highlighted barista Jaime Prater’s efforts to bring attention to cutbacks in staff hours. Prater launched an online staff petition in late June urging corporate officers to reconsider what he termed “some of the most extreme labor cuts in Starbucks history.” As of this posting, the petition had gathered more than 16,400 signatures.

“Morale is the lowest I’ve seen in my nearly nine years of service with Starbucks,” Prater explained in the document. “Customers feel this the most, of anyone. If this is going to change, the corporate side of the company is going to have to understand that under-employing people, while understaffing their stores, is a recipe for disaster.”

Prater further told Buzzfeed that it is a “near-impossible task” for baristas to work more than 25 hours per week, and that raises have been restructured from twice a year to once annually. Meanwhile, staffing levels are not adequate to support increasing new product launches, complicating timely operations and sacrificing store cleanliness, he continued.

For its part, Starbucks responded with a statement saying the company constantly evaluates workload and staffing “because it’s in our best interest to provide the right level of service to our customers in our stores.” The statement added that managers strive “to staff to store needs and to give our partners the hours they want, when they want them” and that the company encourages open dialogue between partners and leadership.

The broader perspective

Overcoming a crucial employee-management disconnect will be essential to Starbucks’ ongoing success.

What we can take away from the company’s high-profile case is that, in today’s job-seeker’s market, raising pay is just one avenue toward solving deep-rooted workplace issues. As noted in this Ajilon report, forward-thinking employers look to instill “a truly great culture where employees can grow their skills, move up the ranks and strike a work-life balance.”

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