Starbucks CEO Is Too Cheap

Starbucks Corp. (NASDAQ: SBUX | SBUX Price Prediction) CEO Brian Niccol must want to undermine the morale among some of his most critical workers. The coffee store company will give salaried workers a pay raise of 2%. That is below the rise in the Consumer Price Index and, thus, an insult.

“As we make these significant investments, we need to carefully manage all our other costs,” Starbucks’ management said after The Wall Street Journal reported on the plan. Merit, it would seem, is no longer an issue. Mediocre managers get the same raise as those who perform well. For those who perform well, the reward does not equal the effort.

Niccol has made a long list of mistakes, some of which are unforced errors. The most widely covered of these is a deal with Starbucks to travel from his home in Southern California to Starbucks headquarters in a private jet. It is in the media so often, it is like a broken record. However, he also told many corporate workers that if they did not return to their offices for four days a week, they could leave.

Another widely covered decision was to get baristas to wear “uniforms.” The barista dress code in North America requires solid black tops under the green apron and khaki, black, or blue denim bottoms. Management said, “We’re evolving our dress code in all stores to focus on simplified color options that allow our iconic green apron to shine and create a sense of familiarity for our customers, no matter which store they visit across North America.” There is no evidence that this will yield any results.

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Niccol did make some smart decisions. First of these was to reduce the number of Starbucks menu items. This should speed up how quickly baristas can deliver food and drinks.

Niccol still has not solved a problem that has disappointed customers. Some of its stores run out of menu items early in the day.

Niccol has not been rewarded for his turnaround plan. Starbucks stock is down 2% in the past year while the S&P 500 is 16% higher.