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Starbucks Compensation Strategy Essay

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Updated: Sep 13th, 2022

It is stated that common law has to do with practically all benefits given to employees, which is, in fact, the meaning of compensation strategy. The strategy is designed to lead a business to success through pay (Milkovich et al., 2014). Speaking about success, Starbucks has undoubtedly achieved it in quite a short period of time through its strategy that includes effective internal communication, numerous training opportunities, and payment amounting slightly higher than that of the competitors’. However, the Starbucks strategy has some serious flaws. First and foremost, the egalitarian pay structure is inconsistent with the human capital factor that allows for competition, and therefore, motivation of the staff members (Madhani, 2014). The company claims it makes the “partners” feel equally valued but, indeed, a top class barista being paid as much as a floor sweeper is rather humbling. In addition, the company provides the employees with health insurance and other benefits; however, the bonuses appear in the form of coffee, which is yet another motivation fail. As for the contributions, the company bases its payments on team performance only, completely disregarding the efforts of the individuals. What is more, they seem to overlook the fact that the costs of living do rise with the time. They give some of the employees a chance to go through some training in the US but they do not take into account their actual needs. The training is useful, but so are the good conditions, which the company apparently stays quite oblivious to.

As to other organizations, there is Microsoft with its individual-performance-based bonuses and the structure of organizational design that is grounded on technology. There is also Bristol – Myers Squibb that gives its employees a range of opportunities for personal growth and encourages them to develop leadership character to increase performance. There is Firepond that is always open for fresh ideas and new viewpoints and provides its employees with bonuses based on their individual output. However, to illustrate a stunning strategy that seems to work against all odds, it is worth referring to Google. The company is famed for its shareholder- and employee-friendly atmosphere, human rights support, and environmentalist inclinations. Nevertheless, the company deploys a strategy that consists in unequal payment for the seemingly same job. Indeed, the difference in payment can amount up to 200%, 300%, and 500% which is shocking. The company, however, has stated that it was only logical to pay top-level performers more than those whose job is practically the same but the performance is poor. The Google analysts have decided that the normal distribution scheme is inappropriate and opted for the power law distribution. The latter subsumes that the performance of the overwhelming majority of employees and a few top-level ones approximately equals in productivity. Since the company bases its pay on individual performance, the provocative strategy seems justified. Moreover, the strategy helps attract the most talented and keen employees and keep the already existing ones which makes Google a leader in the global struggle for talents (Feloni, 2015).


Feloni, R. (2015). Inside Google’s policy to ‘pay unfairly’ — why 2 people in the same role can earn dramatically different amounts. Business Insider. Web.

Madhani, P. M. (2014). Aligning Compensation Systems with Organization Culture. Compensation & Benefits Review, 46(2), 103-115. Web.

Milkovich, G., Gerhart, B., & Newman, J. (2014). Compensation (11th Ed.). New York, New York: McGraw-Hill.

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IvyPanda. 2022. "Starbucks Compensation Strategy." September 13, 2022. https://ivypanda.com/essays/starbucks-compensation-strategy/.


IvyPanda. (2022) 'Starbucks Compensation Strategy'. 13 September.

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