Amid changes at Starbucks stores as part of the company’s “Back to Starbucks” strategy, it has also announced 2% raises for all non-hourly employees in North America. These raises used to be up to manager discretion.
Bloomberg first reported about the new policy. According to the outlet, it impacts corporate workers and salaried store managers.
“[Customers] can see and feel the differences these investments are making,” a Starbucks spokesperson told Bloomberg. “As we make these significant investments, we need to carefully manage all our other costs.”
Last October, Audacy reported on Starbucks CEO Brian Niccol’s new approach with the well-known coffee shop brand, citing a need to win back customers. During a third quarter earnings call held last month, the company revealed that global comparable sales dropped 2%. Audacy reported this month that Starbucks planned to shut down its mobile and pick-up only locations amid a sales slump that has lasted six straight quarters. Marketplace also noted that the company laid off more than 1,000 workers earlier this year.
With economic concerns impacting Americans’ spending, Starbucks is under more pressure. It is often the butt of jokes due to how expensive some of Starbucks’ beverages can be, especially customized drinks. This May, Audacy reported on the most expensive drink the company can whip up, a refreshment that costs about $45. At the same time, loyal fans still flock to the stores for seasonal specialty drinks like the Pumpkin Spice Latte (returning next week).
“Our stores have always been more than a place to get a drink,” Niccol explained last September about his plan to improve service at Starbucks locations. “They’ve been a gathering space, a community center where conversations are sparked, friendships form, and everyone is greeted by a welcoming barista. A visit to Starbucks is about connection and joy, and of course great coffee.”
In its report, Bloomberg noted that the Starbucks with Niccol at the helm is aiming for “better service, shorter wait times and more inviting stores,” and that, “in tandem, the company has asked executives to keep costs under control to help pay for these upgrades.”
Per the recent earnings call report, Niccol said “we’ve fixed a lot and done the hard work on the hard things to build a strong operating foundation,” and added that he thinks plans for a better in-store experience are “ahead of schedule.” Starbucks CFO Cathy Smith also said the company is making “tangible progress” on the “Back to Starbucks” front.
Diane Burton, director of the Institute for Compensation Studies at Cornell University, told Marketplace that the move to raise salaries is “strategic HR.”
According to the HR Digest, “while a guaranteed hike in pay is typically a good thing, the flat 2% pay raise leaves much to be desired,” and unionized Starbucks employees previously rejected a proposal that included guaranteed annual raises of 2%. For some perspective, the outlet said a Korn Ferry survey indicated a 3.6% salary increase was expected this year.
HR Digest also said that, without merit increases, employees “might be lulled into a false sense of complacency, where they don’t have to push themselves to perform to the best of their abilities in order to keep their jobs.”