I will take a triple venti soy milk vanilla latte please, hot not iced. I know what I want my coffee to be, to taste like, and from where (Starbucks is my choice of coffee establishment). After paying, the critical juncture hits for all patrons of such an establishment – would you prefer your coffee delivered quickly, correctly, or both? Well, quickness is based on one’s perception: how quick is quick? Delivered correctly however: that’s pretty objective – Triple. Venti. Soy Milk. Vanilla. Latte. Literally I am saying each and every characteristic of the coffee I want. How can they mess it up? Well, they have, many times, and most of time the contributing factors of how they messed it up are two-fold:

  1. Speed (trying to get the coffee in my hands “quickly”) and
  2. Being slammed (multiple orders being executed within the same short time period (minutes).

Based on my history, my choice would be to have my coffee delivered correctly, each and every time, please; I will wait, don’t rush, just give it to me right the first time (the old quality mantra).

So, why am I ruminating on my coffee ordering and waiting habits? A recent Forbes article written by Mr. Panos Mourdoukoutas declares, “Starbucks should pay its baristas not by the hour, but by the number of drinks served to customers.” A few points from his article are worth noting before I go on to my personal viewpoint on this topic.

Mourdoukoutas claims baristas are working more “intensely” due to the use of mobile apps giving customers the ability to pre-order their drinks; a move made by corporate to decrease long lines during peak hours. He makes a valid point from a financial standpoint that, even though Starbucks provides employees with benefits, he notes employees salaries are between $9-10/hour and Starbucks operating margins are far higher even with quarterly revenue growth lower than compared to Dunkin Donuts (a competitor you may have heard of before). He also offers an alternative to the “pay per drink” model which is hiring more baristas for the peak times; however, he notes that this would negatively affect operating margins as well.

If Starbucks considers Mourdoukoutas proposal seriously, which respectfully is a pay for performance model, Starbucks (more than likely) will fall victim to the various traps organizations have faced when attempting to implement such a model based on one measure – in this case, “pay per drink.” Mourdoukoutas doesn’t go into detail about his recommendation; only describing how Baristas should be making more due to the high intensity of their jobs, and in one short sentence puts it out there: “perhaps, by the number of drinks they serve rather by the hour.”

 

Leave my barista alone, until you get the ingredients right

Each and every Starbucks I go to, I, as do other customers, provide a $1-2 tip in the tip bucket for the baristas, say hello, and we have a pleasant interaction. They are typically very cheery individuals, singing, dancing, and always working hard. I would say they demonstrate living up to Starbucks value of, “creating a culture of warmth and belonging, where everyone is welcome” (visit Starbucks website for a full list of their values).

I agree with Mourdoukoutas that baristas could stand to make more money given the intensity of the job and the profits of the company. However, if baristas are paid based on performance, a look into the science of Organizational Behavior Management (OBM) would serve Starbucks wisely, and to leave the baristas pay alone until they get the ingredients of a Pay for Performance system planned right.

 

Common Pitfalls of Pay for Performance (that Starbucks would face)

Focused on one measure – When you reward only one performance measure (pay per drink), it is easy to lose sight on other important variables (quality, customer service). The key for pay for performance to work is to have a balanced system (revenue generating + speed + quality + customer focused).

Misaligned with customer demand – In the case of Starbucks, it should come as no surprise that they have a high focus on quality coffee. Customers have come to appreciate the speed of Starbucks baristas; however, not in lieu of quality. A pay for performance structure should account for customer demand, in this case speed + quality.

Unrealistic or inconsistent “payout” – If a barista is to get paid by the drink, what happens in between peak hours? In some cases, Starbucks locations are not all in high traffic locations like major cities or intersections. In addition, Starbucks may face the challenge of employees wanting to work only the Peak hours, this way they get the biggest payout opportunities available. The ability to perform is required in a pay for performance process; thus the payout should be linked to the individual’s ability to perform, which necessitates opportunity to do so.

Money as the only payout – Pay for performance is typically associated with more money. However as many have learned, organizations can use non-monetary incentives as “pay”, such as time off, preferred work activities, promotions, or professional development

From an OBM perspective, careful consideration should be taken by any organization when implementing pay for performance. Balanced measures, alignment with customer demand, realistic and consistent payout opportunities, and “pay” being both monetary and non-monetary are a few of the many elements that go into a pay for performance system.

Have you ever implemented a system like this? Can you think of any other pitfalls? We’d love to hear it in the comments!

Reference:
Mourdoukoutas, P. (2018). Starbucks Should Pay Baristas By The Drink, Not By The Hour. Forbes.com, published Jul 12, 2018, 07:53pm.
https://www.forbes.com/sites/panosmourdoukoutas/2018/07/12/starbucks-should-pay-baristas-by-the-drink-not-by-the-hour/#6debcd9844be

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