Starbucks announces raises (but no salary increase for CEO Schultz and his leadership team)

From: Partner Communications
Sent: Monday, August 25, 2008 3:59 PM
To: DL - GC - All Partner non CW and PSP - US; DL - 2008-08-25 US directors and above
Subject: A Message from Chet Kuchinad, evp, Partner Resources: Compensation Update

Partners,

As we approach fiscal 2009, we are encouraged by customer response to the steps we have taken to elevate the Starbucks Experience, which gives us increased confidence about our future. At the same time, the global economic environment remains extremely uncertain. This year, we have made a number of difficult, but prudent, business decisions in order to improve the health of Starbucks and transform the company for the future.

As we continued to apply great discipline in evaluating our operating expenses, including total compensation for U.S. partners, we determined that a number of adjustments were necessary for FY09. We considered several options, with the goal of balancing the significant challenges of the current operating environment with our desire to recognize and reward our partners for their contributions and commitment to transforming Starbucks

The following decisions have been made for this year:

We will maintain a competitive 3.5% salary increase budget for eligible U.S. assistant store managers, store managers, retail management trainees, district managers and most hourly roasting plant partners.

U.S. hourly retail partners will continue to follow the current guidelines for merit increases. 

A 2% flat salary increase will be implemented for all other eligible U.S. partners below vice president level with a ME/CE performance rating (primarily support partners).

All U.S. vice presidents and above, including Howard Schultz and the senior leadership team, will receive no salary increases this year.

Based on Starbucks year-to-date performance, we are not currently on track to reach the requisite financial targets for the General Management Incentive Plan (GMIP). When we announce FY08 results in November, GMIP participants will learn more about the status of bonus payouts

While faced with a tough environment, we are energized and remain focused on our efforts to strengthen the business and build long-term value. This year, more than ever, we must come together to provide the Starbucks Experience to our customers in order to ensure the long-term health of the business – so that all partners can share in our future success. To do that, we need the support and commitment of all our valued partners, at every level.

You have my personal commitment. Thank you for all that you do every day.

Regards,

Chet Kuchinad

evp, Partner Resources

Comments

That's fun... yay for managers, DMs, and those already making lots. Of course they're not going to give a real raise to the bulk of the company who are, in fact, the people in the trenches every day and the people who are the face of the company to most customers, the baristas.

[former manager]

I suppose it's very easy to afford a 3.5% increase when very few SMs have been receiving their 15% bonuses or ASMs their 10% bonuses for the last three quarters. And since so many of the longer term, higher wage and benefit partners have been let go, there should be relatively more cash to divvy up amongst those that remain.

[Whatever]

Ya know I love the bux, love being a partner and making coffee for our guests, but seriously.... could they not offer a cost of living raise to baristas? 5 cents, 10 cents, 15 cents or something like that per hour? Oh well, maybe next time.

[former manager]

In fact, this is really a non-news item. Senior management likely wants to show what a sacrifice they are making by foregoing a pay increase. They must be shedding crocodile tears at their own hardship even as they devour so many partners lower on the food chain.

[Mr. Insider]

2% raise for non-retail partners? What a f'n joke? With inflation at +5%, you are losing money staying at the SSC. Let the 2nd exodus begin....

[onethreethree]

i've had 2 interviews this week so far... starting pay is a $7 per hr raise for me if they offer and i accept...

[jabanga]

it really is a non-story. they are basically saying that for most partners it is business as usual. the higher-ups who make good money anyway, will forgo raises this year.

[James Johnson]

I'm wondering when will this 2% raise go into effect for retail employees.

[lolcat]

3.5% on top of my normal raise plus scale increase? Sounds good to me. I'll be expecting an 8-10% raise! W00t!!!!!! Thanks Howie!

[James Johnson]

Oh, you're telling me that retail partners are going to get the shaft? That makes sense.

[Tim]

We just got a raise a couple of years ago, folks. I understand some people have a difficult situation but I am a full-time student and I pay for my own car, groceries and gas and regular travelling excursions, working less than 30 hrs a week, and I am still left with some mad money at the end.

If we get those Customer Voice results up across the company I think we might see a raise for shifts and baristas! It was definitely time for the SMs and ASMs to get a raise.

[onethreethree]

where do you live tim? im guessing you dont live in NYC, miami, LA, etc....

[SD partner]

Who needs more money anyway? We make a great living as regular partners right? Seriously , this is a fast food coffee shop, I don't expect much. Thank God for that, or I would be so disappointed now! I can't wait to finish school and get a good job! God Bless & keep the faith!

[barista lane]

hey fellow "hourly retail partners" - i'll bet that we get a raise around the time the results of the partner view survey are compiled and released. :D

Can someone confirm the existance of this email? I just called my store and had them check e-mail, they said there isn't any e-mail like this in their inbox as of 6:30pm

[Lilith]

That's because you always hear the news here first, not directly from the company.

A raise for managers is long overdue. Now we just need a valid incentive system.

[bucked]

Jim,
I respectfully request that you change the name to this thread. It's deeply misleading. Over 100,000 of the companies 170,000 or so partners are baristas, not to mention hourly shift supervisors. Your title says "most" of the company's empoyees will receive a raise. IN fact only salaried support staff and managers will get a raise to make up for the fact that no one is bonusing( because they're not hitting financial targets). Managers used to consider routine quarterly bonuses an expected part of their income. The company effectively gave them pay cuts when poor results made it impossible to hit unrealistic targets. Guess what's happening? Managers are leaving and the company is trying to compensate. Hourly employees never received this sort of de facto pay cut so they're getting nothing. Hardly "most" employees getting a raise. Thanks Jim!

Oh, the reason is because this was sent on Monday to non-retail partners, not to the stores directly.

[waltie]

This is a smart move. Sure, it sucks from a barista perspective, but all in all, they are the least effected by store closures and layoffs. It's the managers and DMs who are trying to carve out careers within the company. Finally we have a reason to stick around with the company... at least for a little longer.

[espressoblend]

this is a huge waste of money, and once again, this company needs to funnel those funds to the bottom line. investors are still not happy with the performance or profitability of this company, and pending the economic outlook going into next year, the company's profitability will either remain flat or possibly go negative. this cash needs to pad the bottom line... rainy day money, if you will.

and if they were going to pay anyone a raise, it needs to be those locked in contractually. paying $8/ hour employees who are fickle and just there for the benefits and easy job would not be considered a prudent investment. pay the people at the top who are locked in for multiple years. these guys are the ones running the show that need to see the incentive in doing a good job. plus, with that, they can advertise the lucrative pay and hire in some decent execs with decent ideas on increasing profitability, sbux's position in the their market and how best to handle operational issues. hire in some decent folks with a great head on their shoulders, pay them well and the company will succeed top to bottom. that success will translate into happier investors and customers, the two groups of folks that need to be made happy. by paying the employees more, it just shows to customers that sbux is forcing higher prices so that the bad customer service can be paid more. it shows investors that sbux has, once again, missed the mark on increasing profitability, especially in this current market environment and economy.

the folks in the stores are just there to interface with the customers, take the cash in and make coffee. not a huge thing to commit a lot of cash to. the people at the top (vp and up) are the ones that the company needs to keep as they are truly invaluable and possibly even irreplaceable. bad move.

[ex-sbuxmanager]

Well espressoblend, your bottom line will improve when the other shoe drops...namely when company contributions to benefits go down significantly and minimum hours to qualify go up.

Congratulations.

The company did the same thing 2 years ago...gave everybody a raise and then cut hours.

[spence]

On a lighter note, Pumpkin Spice lattes will be back.

[truth]

I wonder how much that fake store cost in NYC for the PPR launch.

Straight out of your pockets...'partners'.

I'll make the drinks 2% faster.

[WaShift]

Hey EspressoBlend.

You ever going to let us all know what it is you do for work than makes you so wise and all us Starbucks employees beneath you?

[Pat Nerr]

I love it...

[njbarista]

You're right SD Barista and espressoblend. I understand that many of you have tough situtations, but I'm still in High School and I've already been a partner for over a year. No company in their right mind is going to give major raises to people whose jobs can be done by high school kids, especially one that is doing as badly as Starbucks is right now. If you want to get paid more that badly, kick ass on your reviews and earn a promotion to shift.

[CorporatePartner]

well, well, well, the email makes it to starbucksgossip.com- i can just imagine Chet's face tomorrow morning when he hears about this. the 2% is what I was referring to in an earlier post- this is just giving SSC and field partners confidence that they are doing the right thing in interviewing elsewhere.

Now, I'm not necessarily complaining about the 2%, it's the across the board application of the raises. We used to pay for performance- if you were a CE, you got a higher % than those who are an ME. It motivated me to work really hard, despite the ongoing challenges throughout this year. I guess my CE means nothing now. This reminds me of government step-class compensation philosophy. It will weed out the top performers (who, like myself, are getting offers and $$$ thrown at them) and will retain lazy performers who wouldn't even make it past a phone interview with other companies.

Way to go Chet- yet again, I have to say that you WILL be the downfall of the partner focused culture here at Starbucks. Too bad all of us are on our way out, who would have called you out on it. Howard, I hope you're reading this. I had faith in Martin, but when I realized the bigger picture re: Martin and Chet's relationship and what that means for partners, I started to see the writing on the wall.

[LookingOverMyShoulder]

This is not news.... this is the same thing that happened last year from an SM/ASM/DM perspective.... it's 3.5% budget, which means the district raises must average 3.5% - some will get less some more, but the district has to come in at 3.5%. Anyone who thinks this is some "bonus" on top of your scheduled raise doesn't understand what is being said here. Why this is even posted as a news item is beyond me, the only thing that is newsworthy is: #1) VPs and above are not getting a raise ( fat cats anyhow - when they leave they get golden handshakes, so who cares ) and #2) that raises aren't going to be even less than last year due to the health of the company. THIS IS NOT NEWS.....NEXT.

[Pat Nerr]

CorporatePartner... Of course, I could publish the e-mails that Chet sent to "Pat Nerr" while Pace was transitioning out... Not that anyone would believe that a budding EVP would e-mail public enemy #1 boasting about dirt on Pace...

Chet is Teh Awesome!

[Melody]

Some interesting posts here - One more round of alphabet soup though:

if you were a CE, you got a higher % than those who are an ME.

what's CE and ME?

Also, truth, what's your profession?

Caffenated_PWM come post here at S.G.! :-D ;-)

[Pat Nerr]

ME = Meets Expectations and CE = Consistently Exceeds Expectations

Without alignment of company goals though who gives a crap if you can get the same raise... It's another broken and ignored system that means nothing to partners

[anonbarista]

I hate to speak ill of another partner, but this just has to be said. I listened to the entire webcast of the shareholder's meeting and I attended an open forum in my region earlier this year. Every time I've heard Chet field a question, he has completely fumbled. He has not shown any inclination that he understands the jobs/needs/frustrations/concerns of partners. He seems like the archetypal empty suit. Whenever he tried to answer something at the open forum, he rambled about nothing and Howard had to step in and clarify. In fact I specifically remember Howard stepping in to promise that compensation would improve, but only based on this e-mail, that's going to be a big fat NO. Frankly I'm embarrassed that this man is supposedly my lead advocate as a partner, because he just doesn't get it.

[New Catch Phrase]

I am so tired of reading/hearing "Thanks for everything you do every day..."

This is the most over-used, disingenuous saying at SBUX.

From all of us "partners" to all of you "leaders"--YOU'RE WELCOME....now move on!

[CorporatePartner]

Pat- I would agree that it NOW means nothing to partners...but for almost 11 months now we have been led to believe that it will make a difference during APR...what a crock. Just another example of the lack of transparency in a feeble attempt to see short term reduction of cost.

Anonbarista: i was at that same open forum you were. You are definitely right. Chet was so disconnected from the partners. He just seemed like a fat cat. I remember when someone brought up total pay/compensation, Howard did step in, but only because Chet was trying to keep their plans under wraps and didnt know if Howard would approve of him publicly announcing them yet. I remember Chet saying though that "benefits were going to be reinvented in Fall" Howard added that Starbucks used to be the company that everyone wanted to work for because we were the industry leader at the time when it came to total pay. Now, that has changed as others in the retail sector are offering benefits better, or at par as Starbucks. Howard was vague, but he mentioned something in the works as far as "profit sharing, but not quite literally" at the store level. Basically, if the store does well, there is a bonus for everyone, not just the management.

[Tim]

onethreethree, I live in Vancouver, BC, one of the most expensive cities in the world to live. Don't worry, my cost of living is quite high.

[Evil Murdock]

Here's the big thing that sucks. Annual raises are merrit raises. No matter how good a job you do, you're going to get the same raise as someone who does enough to get by. There is no reward for doing a good job, for being a part of the team, for caring about your company. And 2% is sad. For all you Starbucks employees out there, just look at any promotion for new drinks or offers and know that that was your raise. When the Pumpkin Spice Latte comes back and you see those signs in the window announcing it... That was money that could be rewarding you for doing a good job and loving what you do.

[lattegal]

If a partner is given a flat 2% salary increase regardless of whether they meet a ME or CE why bother to try to Consistently Exceeds Expectations? What ever happened to raised based on individual performances? This is very frustrating and concerning. It's not very motivating...now is it?

[harmaa]

Sigh.

[Bladerunner]

After getting my Black Apron,I was given a flat 2% raise. Same as every time for 7 years. Wow! I really need to work for someone else. So now I do. And I don't feel as if I have to fight for hours week to week anymore. Or get up at 3am to open the store. Sleeping in is a joy!

[KurvaAnyad]

This is retarded. The exec who signed off on this one is a real genius. Giving partners with ME and CE ratings all 2% raises is highly insulting and unfair to the superstars that truly performed well this year especially in this environment. It will be a very easy decision for talented partners to continue to leave the company. This is like playing Oregon Trail without feeding the family and they slowly die of cholera and dysentery. It's not a strategy that works.

[former manager]

lolcat:

Don't plan that trip to Europe yet - what the memo is saying is that increases for SMs and ASMs during their annual review will average 3.5%. This is not an additional, across the board raise.

Pace personally helped me out when I had a life crisis yesterday. He had never met me in person but knew I was a partner I'm trouble I got me in contact with the right people.

[Drive, He Said]

I am confused.

The memo says: "U.S. hourly retail partners will continue to follow the current guidelines for merit increases."

In my area, barista raises are either 0%, 1.5% or 3% every six months, depending on how you do on your six-month evaluation. That's maybe nothing, maybe a dime, maybe a quarter.

Is this in effect nationwide? And will it remain the same, as the memo says?

[jabanga]

many of you are misreading this email. they are "maintaining" the normal raises, not adding to them.

[Darleen]

We will maintain a competitive 3.5% salary increase budget for eligible U.S. assistant store managers, store managers, retail management trainees, district managers and most hourly roasting plant partners.

Don't get too excited yet ASM, SM, DM. This is nothing new, they are not changing anything in the pay raise sector. The only ones who will receive anything will be
"A 2% flat salary increase will be implemented for all other eligible U.S. partners below vice president level with a ME/CE performance rating (primarily support partners)"

I'm assuming some of you read this wrong from some of the posts from SM's.Jabanga you are exactly right, they are just keeping the same raise structure for ASM, SM, Dm. I totally agree that there is no incentive to be a CE anymore, if ME merits the same wage increase. BTW, since I have been looking into other employment opportunities, I have to say that the offering pay is BETTER than starbucks was. Also, benefits are either matched or better in some cases. Where is the incentive to keep the partners? Also, I'm sorry espressoblend but the BARISTAS are in fact the FACE of starbucks. Customers have no idea who is sitting behind the desks what they see everyday are the hard working BARISTAS, why not take care of them??? Are you listening HOWARD?

[Coffee Solider]

The title of this article is misleading...."Starbucks announces raises"...this is not true and is nothing new except our regular raises...2 times a year for baristas and shifts who could get either a 2% or 3.5% increase and for SM once a year who could get either a 2% or 3.5% increase...the SSC partners now have no incentive except to do their job to a Meets Expectations if the reward is the smae as Consistantly Meeting Expectations.
I REALLY hope that with some of these announcements we end up getting a substantial amount of Bean Stock this year because with the stock in the toilet many shares at 15$ a share can be handed out....but will anyone hold out for 4 years to cash them back in...

[Pins and Needles]

There are two deeply, DEEPLY disconcerting things about this email.

1, flat raises regardless of performance for support partners are absolutely ludicrous. I've busted my back for this company over the last year, going above and beyond with the expectation that I would be rewarded accordingly for my hard work over my peers who just "mail it in". Now I'm being told it doesn't matter how hard I've worked, I get the same reward they do.

2, with the Seattle area's cost of living rising at over 5%annually, all partners in that area are taking an effective pay cut to stay with the BUX. In the same breath that was announced, it's being said this decision was made to "recognize and reward" our partners? There is no reward in a pay cut, and all it recognizes is how little senior management actually thinks of its employees. Partners are called valued by the same email that tells us how little we actually are. Hypocrisy at its finest, folks.

And has anyone else noticed how in the SSC newly vacant positions (deemed "business critical" in the July layoffs) still aren't being backfilled? The writing is on the wall, folks: the layoffs aren't done yet. Don't worry though, there won't be anyone left to fire... Tell your troops their hard work (which you're continuing to beg for at every turn) won't be rewarded, and we're going to remove ourselves from the picture.

[Pins and Needles]

Re: Barista raises (anon), yes, that will be the same. You're in a better position than almost anyone else in the company, though: Because baristas and shifts are rewarded with a raise every 6 months (vs. every year like support and management staff), even at ME you'll receive a combined raise of over 3% this year. If you're going above and beyond (I thought it was Exceeds Expectations - EE - not CE), you have the opportunity to make an over-6% raise.