When it comes to compensating employees, business owners generally embrace one of the following two philosophies: Pay your employees as little as possible in order to reduce costs, or provide your employees with compensation that can’t be matched elsewhere so that you will attract and retain the best talent that’s available.
You might think that, in 2014, tuition reimbursement, stock options, a 401(k) plan and comprehensive health insurance plans, are reserved for white collar jobs. And you might also think that everyone who works in the fast-food industry might be poorly compensated.
In both cases, you’d be wrong.
There’s Starbucks, and Then There’s McDonald’s
Starbucks – the company that strives to be the premier purveyor of the finest coffee beverages in the world – pays its employees well. At 20 hours, employees are eligible for impressive benefits, including stellar health care.
If that wasn’t enough, the coffee retailer recently announced a tuition reimbursement program. Striking a deal with Arizona State University, Starbucks will help foot at least part of the bill for its employees’ college educations. Under the plan, the coffee company will subsidize some of the bills for freshman and sophomore students, and pay for the entire tuition of juniors and seniors who complete a four-year program.
And that’s on top of the roughly $10 Starbucks baristas make.
On the other side of the coin, there’s McDonald’s.
Make no mistake: the company can certainly serve as a great way for a teenager to enter the work force. But it’s no secret that today’s economy is uncertain at best, jobs are scarce, and as such, sometimes people need to find roles that are below their capabilities just to be able to put food on the table.
At McDonald’s, a company that pays its lowest-ranking workers $7.25 an hour, taking care of a family is hard to do at best. More likely, it’s literally impossible.
Obviously, both Starbucks and McDonald’s are successful companies. But you can’t help but realize that Starbucks, the realist in the equation, seems to understand the 21st Century workforce better than McDonald’s, the minimalist, which still appears to be stuck somewhere in the 1970’s.
Business Compensation: The Minimalist
Companies that embrace the first philosophy – let’s pay our employees as little as we can – figure that the work pool is filled with an endless number of workers, and those workers will be happy to keep a job. But they often don’t consider the associated costs – some of which are hidden – that result from paying low wages.
It’s practically impossible to live on a $7.25-an-hour salary, so companies that offer those wages are likely to see a lot of employee turnover as workers look for new jobs. And along with the costs associated with searching for new candidates, interviewing them, and ultimately hiring and training them, businesses that have high turnover rates are likely to spend more money than they budget for on costs relating to new hires.
On top of that, a high turnover rate means newer employees will be serving customers. Those employees are simply unable to provide the caliber of service customers have grown to expect. New brands that consistently provide poor customer service will certainly fail, and established brands might very well find themselves in similar waters sooner than they might think.
Business Compensation: The Realist
In today’s digital age, it’s easier than ever before for prospective employees to log on to the Internet, search a site like glassdoor.com, and find out exactly what it’s like to work for a company.
Maybe a few decades ago, businesses could get away with having sub-par compensation plans because prospective employees simply wouldn’t be able to see what other kinds of benefits were out there.
Understanding this, companies like Starbucks – the realists – are attracting the best talent in the workforce – and retaining it – by offering compensation that can’t be matched by competitors in the workforce.
After all, if you’re going to be doing relatively the same job, why wouldn’t you look toward finding the company that will compensate you the best for your time?
By offering benefits that are not available elsewhere, companies are able to attract and retain the best talent available. And when employees benefit, so do customers. Who makes the better latte – the rookie or the seasoned pro? When you’re charging $5 a drink, you’ve got to ensure that each drink comes out as tasty as possible.
Where Do We Go From Here?
While you can certainly understand the notion that in order to make money you’ve got to keep your expenses down as much as you can, it’s important to realize that such a mindset will only result in success for so long.
There’s a reason Starbucks has grown to its current size. By being consistently ahead of the curve and providing robust benefits packages to its employees, the company is building a strong foundation of the best and brightest – and, now, the most dedicated as well.
McDonald’s is a true stalwart of Americana, but it’s worth considering whether the fast food giant will be around forever – especially if it doesn’t realize in time just how valuable their workers are.
Image Credit: Flickr (via Creative Commons)
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