How Starbucks Achieved 100% Pay Equity by Following These 6 Steps
September 5, 2019
A decade ago, Starbucks decided to tackle its gender pay gap, which was a large problem. No, make that a venti problem. In the United States, women are paid 80 cents for every dollar an equally experienced male counterpart makes. In retail, the space Starbucks plays in, women make 70 cents for every male dollar.
“I want to be very clear about one thing,” Sara Bowen, Starbucks’s former global leader of inclusion, diversity, equity, and accessibility, told a Talent Connect 2018 audience, “the pay gap exists because of the institutions and systems and structures that human beings have built over our entire history. The pay gap today, as it persists, is not the result of intentional bad action, right?"
The pay gap in the United States has remained mostly unchanged in the last 10 years. Though not at Starbucks. In late March of 2018, the company announced: “Starbucks has reached 100 percent pay equity for partners of all genders and races performing similar work across the United States.” Now the company wants to reach pay equity around the world.
Here are six steps that Sara, who is now at Boeing, and Dija Fraser, former vice president of Starbucks’s global talent acquisition, recommend for companies that are trying to address fair pay in their offices:
1. Understand what you’re currently paying men and women, and create a salary calculator
In 2008, when Starbucks launched its effort to make pay equitable for all of its partners, it began with a compensation analysis, Sara says, a “statistical multivariate regression analysis,” which is a frightening mouthful. But it allowed the company to see where the “system is set up to allow bias in,” Sara says.
To start leveling the “paying field,” Starbucks created a tool that it calls an offer standards calculator. The tool takes into account a candidate’s experience, skill, and (sometimes) education and then sets out a very narrow range of what starting pay should be.
The original tool targeted store managers and district managers because, beyond its baristas, those were the largest employee populations at Starbucks. If hiring managers feel they need to offer more than the calculator recommends, they have to go to a review committee. “It might be the right thing to do,” Sara says, “but you need to be able to explain it.”
2. Get recruiters and hiring managers aligned with the company pay structure — and with one another
Typically, Dija says, conversations about pay don’t happen until you already have someone you want to hire or promote. “Once you have that candidate you really want, you start chasing them and what they want,” she says, “and not necessarily what’s the fair rate of pay for the role you’re going after.”
At Starbucks, recruiters and hiring managers now have that conversation before the first candidate is brought in, rather than when a favorite has already been found. “What we’ve learned is that’s too late,” Dija says. “It really needs to be at the intake meeting.”
By talking about comp at the intake meeting, everyone has a better chance to look for candidates who are at the right level. “That might mean that you’re going to go after somebody who is earlier in their career,” Dija says, “or maybe who doesn’t have 20 years of experience.”
Getting aligned on pay gives you the best chance to recruit candidates who won’t blanch at your salary offers and will instead join your team with energy and excitement rather than disappointment and reservations.
3. Stop asking about previous compensation and ensure that new hires are paid equitably
Starting pay is the single most important factor in getting to pay equity. And getting starting pay right begins with not asking about previous compensation.
Why? Because you don’t want to “import” pay inequities. Dija used this example to demonstrate the insidious effects of basing starting pay on previous salary. “So we’re going to hire Mike and Stephanie at the same time as store managers,” she says. “They have pretty similar backgrounds.” But when the recruiting team asks about current salary, it learns that Mike is making $37,000 and Stephanie, $30,000. They give Mike a little bump and bring him in at $40,000. Stephanie gets a $6,000 raise and starts at $36,000.
“Does this feel familiar?” Dija asks. “Right from the start you have a $4,000 gap between Mike and Stephanie and it will only get worse over time. And it’s really hard to fix because very few business units have a budget to fix this later on. So you have to get it right from the beginning.”
4. Share your pay ranges — and explain how they work and what you’re trying to do
Starbucks has begun sharing the pay range with any candidate who asks for it. Dija notes that when you disclose a pay range, a candidate’s head immediately goes to the top of the scale. So Starbucks also says to candidates, “This is our range. This is where you fall.”
And then, before asking about expectations, Dija’s team gives candidates some context, which usually goes something like this: I want to ask you about your expectations for the role but, before you answer, I want you to know that Starbucks is committed to pay equity and we will not base your salary here on what you are making now. So with that in mind, please tell me your expectations.
“You want to be up front and transparent about pay,” says Sara, who adds that early salary range discussions are about both fairness and efficiency — much less time is wasted if an insurmountable gap between candidate expectation and company reality is uncovered early on.
5. Use promotion pay to reduce the gap, rather than increase it
Raises and bonuses at Starbucks are analyzed before they’re finalized to make sure they’re not reintroducing bias into the process. “We removed the promotion pay gap,” Dija says, explaining that the company generally shoots for about a 10% promotional bump.
Having some flexibility on promotion pay, however, can actually help remedy previous disparities. “Imagine,” Sara says, “you had Mike and Stephanie, and you had the opportunity to promote Stephanie. If you were limited by a 10% cap, you still wouldn’t be able to rightsize her pay. So lifting off that cap gives you the opportunity to really analyze and understand what would be the equity position to place her in.”
Fair pay requires constant work. “Every time you have an employment transaction,” Sara says, “whether it’s a promotion or a transfer, it’s an opportunity to make progress toward pay equity.”
6. Embrace transparency and accountability — publish your results and review them regularly
Transparency doesn’t stop with candidate conversations. “We are going to publish annually how we are doing against [pay equity in the United States],” Dija says. The company will also post updates about its ongoing efforts to reach and maintain pay equity globally. Adds Sara: “Sunshine is the best disinfectant.”
Starbucks uses analytics and continuing discussions to achieve accountability on this issue. “We really look at conducting regular analysis quarterly,” Dija says, “and hold discussions with our leaders and higher management.” Every year there are huge numbers of new people at a company like Starbucks, Dija points out, and constant analytics are a way to make sure you stay on course — and to educate new team members. “Otherwise,” she says, “it becomes a very emotional decision because pay typically is emotional.”
Final thoughts: Equitable pay will always be a challenge
Pay equity will help your company attract and retain talent. More broadly, it can strengthen families, the tax base, and the economy as a whole.
Starbucks is aiming to take the pay equity reached in the United States across both gender and race and achieve it all around the globe. Sara and Dija caution that the battle for equity can be joined but never completely won.
“Pay equity is an achievement that we share humbly because we know that it takes constant vigilance and constant work,” Dija says, “and we’ll never have arrived because of those systems and structures and the mental programming. This is ongoing work.”
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* Image by Starbucks