Tina L Marrero

Essentials of Compensation
Assignment 3.2
October 4, 2014

Starbucks vs. McDonalds Compensation Analysis Case Study


This paper will focus on two separate companies and analyze their compensation
strategies and policies that impact the organizations competitiveness in an industry. First, we
will look at Starbucks Coffee Company, Howard Shultzs brainchild that grew from one store
location at the famous Pike Place Market in Seattle Washington selling spices, tea and coffee to
the thousands of stores that have evolved to an innovative food program while enhancing their
beverage offerings with recently acquired Evolution Juices and Teavana Tea stores. Next we
will visit McDonalds, the burger giant that has taken its little drive through in Oak Brook, Illinois
to the forefront in fast food internationally. McDonalds has spent the last few years working
on a healthier version of their menu while expanding upon their own beverage menu with
the addition of premium coffee drinks and smoothies. These two giants can have set the
tone for quick serve unit employees and their corporate staff alike.

What are Starbucks and McDonalds Compensation Objectives?

Starbucks Coffee Co has long been a Fortune 500, Best Company to Work For and has
recently amended many of their benefits to welcome and accommodate an ever changing work
force focusing on the needs of the business, customers and employees themselves. Starbucks
and this topic strongly correlate to a business that is constantly assessing the compensation
plans to retain employees as well as attract new employees. This model, in being identified,
can better help to create stronger compensation programs that can be a driving force in any
business looking to create more competitive programs for employees that do not only create
loyal, engaged employees, but more a profitable business as well.

Some of the total compensation includes discounts, vacation, medical and dental
benefits, and even more recently, a college partnership plan with various free college courses.
Starbucks does not stop on only the perks, but recently has also addressed their dress code,
tattoo and piercing policies to appeal to a more diverse workforce and customer base.
Starbucks focuses on keep employees engaged, increase tenure and a career track for their
nearly 135,000 employees. Starbucks acknowledges that compensation is more than an hourly
wage, paid time off and medical benefits (Education, baristas, and employee turnover).

Starbucks has several classifications for in-store workers including baristas,
shift supervisors, assistant store managers and store managers. According to an Indeed salary
search, Starbucks barista wages range from $8 per hour to $14 per hour, with the average wage
at $9.68 per hour. Shift supervisors earn an average of $11.77 an hour, with a range of $10 to
$16 per hour. Starbucks offers health insurance for both hourly and salaried workers. The
benefits includes medical, dental and vision. The medical insurance evens offers mental health
and chemical dependency treatment. Other benefits are various reimbursement accounts,
including healthcare and dependent care, are eligible for salaried and non-retail hourly worker
as well as life insurance and sick pay. Unlike most fast food or quick serve concepts,
Starbucks also offers both short term and long term disability up to twenty six week and an
employee assistance program (EAP) which covers stress-related issues, emotional
Furthermore, Starbucks offers 401K,stock options and a stock investment program for all hourly
and salaried store employees (Your Special Blend). These benefits have helped Starbucks to
regain momentum after closed hundreds of stores in 2009 after the downward economic spiral.
In 2011, Howard Shultz announced a new Starbucks in an announcement urging the U.S. to
create more jobs and as he was determined to hire at least 5000 employees in 2012 alone,
Starbucks has hired nearly 20,000 since (Howards Way).

McDonalds benefits page starts with: McDonald's benefits and compensation program
is designed to attract, retain and engage talented people who will deliver strong performance
and help McDonald's achieve our business goals and objectives.
(www.aboutmcdonalds.com/mcd/corporate_careers/benefits.html). At the store level,
McDonalds offers health benefits to include medical, dental, flexible spending accounts and
supplemental vision. Profit sharing which includes a 401(k), credit union and financial planning
invests in your future, while vacation, holidays, leave of absence and other benefits give you a
work/life balance. Compensation consists of base pay, incentive pay and other recognition
programs.
When conducting a jobs search for McDonalds, www.jobsonline.com opened with a
McDonalds job post that began with an About Us section stating, McDonald's has the
flexibility to work with you, too. Fact is, for countless employees McDonald's is the perfect way
to earn additional income. Whether you're a working mom, a student, or just somebody looking
for a part-time job to provide that something extra, McDonald's is used to accommodating a
variety of schedules and hours. Not to mention that they can often provide a workplace that's
close to where you need to be, whether it's home, school, or your community.

Incentive pay provides employees with the opportunity to earn competitive total
compensation when performance meets and exceeds goals. McDonald's encourages
employees through many effective ways. Except the base pay, McDonald's establish
competitive wage and promotion programs such as the 'Employee of the Month.
Recognition programs are designed to reward and recognize strong performers. Profit Sharing
and Savings Plan lets employees save from 1% to 50% of their pay on a tax-deferred basis in the
401(k) feature of the plan. McDonald's matches eligible employees' contributions with $3 for
each $1 of the first 1% of pay they contribute, and $1 for each $1 on the next 4% they
contribute. Eligible employees may also receive a discretionary profit sharing match of 0% to
4% based on the first1% of pay they contribute. Employees are always 100% vested in their
contributions and the company matches.

Identify Options and Make a Recommendation/Decision:

In comparing both organizations, it is clear that Starbucks and McDonalds understand
and role model a valued compensation program for their employees. Internally, both
organizations understand the importance of benefits beyond hourly wages and incentives to
overall compensation such as medical, dental and vacation benefits as well as other benefits for
a stable work-life balance. Personally, when walking into a McDonalds, I do not get a sense
that their employees feel the same. There is a completely different environment than the
welcoming environment of a Starbucks. One would ask if Starbucks as created the hominess
through aesthetics of perky music, comfy chairs and fireplaces versus McDonalds choice of
their signature yellow and red, hard, plastic chairs and tiled floors; or if it is the friendly baristas
that smile and get to know their regulars as opposed to the quick to get you out crew
members of McDonalds. If employees were happy at McDonalds and valued their benefits
would they be just as happy as a Starbucks partner considering that the benefits are similar?

Starbucks has a turnover of roughly 60 percent as opposed to the 120 percent that fast
food organizations face (Facts about our partners). Could it be that McDonalds employees
are not around long enough to receive and take advantage of the benefits? It leads me to
assume that McDonalds faces poor management and the initial hiring wage of minimum wage
is not enough to entice the working moms and college students that they are looking for.
With this comparison, I would recommend that McDonalds take a deeper look into where their
turnover originates so that their staff is allowed to take advantage of the benefits and so that
McDonalds as an organization can develop future leaders that will continue to grow and
succeed while increasing revenue. In my opinion, McDonalds continues to ride their brand and
do not worry about having unhappy or complacent employees as customers will continue to eat
the product despite the service because McDonalds does one thing right, consistent food.

Bibliography
Duane, Dike (September 8, 2014). Education, baristas and employee turnover. Retrieved from
http:www.management-issues.com.

Gonzalez, Angel (September 10, 2014). Starbucks may let baristas bare their tattoos. Retrieved
from http://seattletimes.com

"Starbucks Salaries." indeed.com. Indeed, 27 Sept 2014. Web. 27 Nov2014.
<http://www.glassdoor.com/Salary/Starbucks-Salaries-E2202.htm>.

"Facts About Starbucks and Our Partners." Starbucks Newsroom. Starbucks Corporation, 21
May 2009. Web. 15 Nov 2011.
<http://news.starbucks.com/article_display.cfm?article_id=225>.

"Your Special Blend." U.S. Total Pay. Starbucks Corporations, 06 Dec 2010. Web. 27 Sept 2014.
<http://assets.starbucks.com/assets/total-pay-guide-12-06-10.pdf>.

"Howard's Way." Economist 400.8754 (2011): 78. Academic Search Complete. Web. 27 Sept.
2014.

http://www.scribd.com/doc/33669347/22-McDonald-s-Deep. Web. 4 Oct 2014.