The modern business world is a highly competitive environment characterized by fierce rivalry and opposition between major actors. Trying to acquire the increased number of loyal clients, companies employ strategies that can help to generate a competitive advantage and preserve the high level of audience’s interest in their activity. Personnel is one of the factors that might help organizations to improve their performance and achieve current goals. For this reason, corporations are interested in hiring good specialists, their training, and retention. The compensation method and pay model play an essential role in this process as they ensure employees are motivated to continue working with a company and contributing to its development. Thus, an improved understanding of these factors’ significance is acquired by analyzing the Starbucks company and its compensation model. The choice is justified by the successful work of the brand and its functioning in different areas across the globe.
Starbucks Corporation is an American company working in various countries. The global corporation is a chain of coffeehouses working in 80 states, with about 33,833 stores (Starbucks, 2020b). The company is viewed as a part of the pop culture as it is responsible for creating some latest coffee trends, such as the rise of the second wave coffee (Starbucks, 2020b). For this reason, the company remains stably attractive among clients globally. The corporation’s net revenue in 2021 comprised $24,61 billion, which means that the corporation remains a potent actor in the given industry (Starbucks, 2020b). Another critical showing is that the corporation is a big employer which gives jobs to 383.000 people globally (Starbucks, 2020b). Its annual report also shows a growth in job openings, meaning that the brand becomes more attractive for people globally. Its effective compensation strategy is one of the factors explaining the attractiveness of this employer.
Starbucks Current Compensation Model
The use of the pay model offers multiple benefits to companies. They acquire the chance to analyze existing pay systems and select the most applicable one. For Starbucks, it means that using an effective compensation system, the company manages to consider current goals and plan for future expansion. Thus, compensation traditionally includes the basic salary, rewards, and bonuses, overtime, insurance, company car, account, or other benefits that might be offered to employees to motivate them (Starbucks, 2020a). The offered package is linked to the business strategy and rests on the idea of the superior offering of privileged status (Starbucks, 2020a). It also helps to contain wages and bring new workers into the industry by offering the chance for a better career and new advantages (Starbucks, 2020b). At the same time, the compensation model employed by the corporation follows several objectives, such as offering identical salaries to all employees, increasing it for effective workers, following existing laws and regulations, and introducing competitive salaries that would attract individuals (Tarr, 2018). These central principles influence the existing system and its work.
In such a way, the current pay system is designed to be competitive and attractive for both loyal workers and new employees. Thus, it offers retirement and investment opportunities to all its workers to ensure they feel safe about their future (Starbucks, 2020a). One more part of compensation is that the brand offers tuition reimbursement for all workers to finish college and continue cooperation with the brand (Starbucks, 2020a). Another critical factor is Starbucks’ decision to introduce transparent pay discussion signals to attain a high level of salary equality (Tarr, 2018). It resulted in the absence of conflicts linked to discussing wages and motivated all employees to work with high devotion and motivation levels (Tarr, 2018). The given approach to compensating leads to competitive salaries supported by the specific package available to all workers.
The establishment of the given model was influenced by the necessity to struggle against rivals and survive in a highly competitive environment. At the same time, Starbucks, as one of the global leaders, has to consider the existing trends and diversified people’s demands to employers. Today, workers look for career opportunities and better packages that might help them to feel safer and expect personal and professional growth (Starbucks, 2020a). Under these conditions, instead of trying to offer the biggest proposal in the market, Starbucks focuses on adding value to their job proposals by emphasizing the privileged status of being the part of the company (Starbucks, 2020a). Opportunities for training and acquiring an education are viewed as attractive, especially by young people who look for some new starts (Starbucks, 2020a). Under these conditions, the existing pay system focusing on bonuses and benefits instead of the highest salaries meets the existing company’s demands and helps to create the basis for future evolution.
Advantages and Disadvantages
The factors mentioned above demonstrate that the major advantage of the given compensation approach is its focus on motivation and engagement. As a continuously developing company establishing new brands, Starbucks is interested in hiring people who are ready to cooperate for prolonged periods of time and offer their ideas and visions (Starbucks, 2020b). For this reason, the pay system supported with packages and career opportunities become more effective in preserving the stable level of employees’ interest and hiring new ones to support the development of the company. Moreover, another advantage is that the given approach helps to generate a competitive advantage over other companies. In general, the salary paid by the brand is not the highest one; however, it is at the appropriate level, allowing to save costs and use them for other projects or incentives.
At the same time, several disadvantages should be mentioned regarding the discussed system. First, although the company saves money due to the average level of payments, it still needs to invest in developing offered packages and incentives as they are viewed as the central factor attracting new workers. Under these conditions, the company needs significant investment to guarantee its offerings remain attractive for new employees and can also help to restring experienced ones (Tarr, 2018). Additionally, using the given system, Starbucks also depends on its image as it ensures that new individuals will consider their job opportunities and start cooperating with the company (Tarr, 2018). The given drawbacks come from the nature of the compensation system, which focuses on offering privileges and bonuses instead of spending big sums on salaries. It also means that Starbucks depends on the effective management of the established model and appropriate changes introduced when they are needed to preserve the relevance of job offerings.
The current approach employed by Starbucks can be compared to other brand’s pay methods. Dunkin’ Donuts is one of the companies working in the same industry. It is also an American multinational coffee and doughnut company working in different regions. It means that it has a significant demand for the workforce to meet clients’ demands. Thus, the company offers a fixed price for working hours, which are high and can be viewed as competitive. However, as against the model used by Starbucks, the given one does not presuppose often raises. It means that workers have to ask for additional salary growth, explaining their demand with specific factors (Starbucks, 2020a). Nevertheless, the company also offers insurance, tuition reimbursement, and specific benefits to its workers (Dunkin’ Donuts, 2019). However, Starbucks offers a more solid package with unique offerings that might help a person to make a career and become educated. Dunkin’ Donuts focuses on providing higher salaries and ensuring employees would be attracted by the friendly atmosphere and solid payment for working hours (Starbucks, 2020a). In such a way, companies have similar compensation methods, while revealed differences can be explained by various visions.
Altogether, the analysis shows that Starbucks has a specific compensation and pay system. Instead of providing extremely high salaries to its workers, the company focuses on creating packages that would be attractive to potential employees. These include opportunities for education, career growth, insurance programs, and privileged status. The brand is focused on long-term cooperation, meaning that it creates attractive conditions for all specialists and hopes they will continue cooperation with the company. It results in the increased loyalty of all managers and employees, higher motivation levels, and their readiness to continue working. Thus, the system also differs from Dunkin’ Donuts’ model, which offers fixed salaries and avoids extra raises. Starbucks’ system has both advantages and disadvantages; however, it helps to support the brand’s development and its leading positions in the market. Employees globally are ready to become the part of the company’s team and work for it.
Dunkin’ Donut. (2019). Annual report. Annual Reports. Web.
Starbucks. (2020a). Benefits and perks. Web.
Starbucks. (2020b). Fiscal 2020. Annual report. Annual Reports. Web.
Tarr, T. (2018). How Starbucks achieved 100% equal Pay in the United States. The Forbes. Web.