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Earlier this year, Seattle-based Gravity Payments CEO Dan Price announced he was setting the minimum wage for his workers at $70k. About 70 of the company's 120 employees would be receiving the raises over a 3 year period and Price cut his salary from $1m to $70k to make the change happen. His reasoning: He read an article that more money for people who make less than $70k leads to increased happiness.
His plan may have backfired:
What few outsiders realised, however, was how much turmoil all the hoopla was causing at the company itself. To begin with, Gravity was simply unprepared for the onslaught of emails, Facebook posts and phone calls. The attention was thrilling, but it was also exhausting and distracting. And with so many eyes focused on the firm, some hoping to witness failure, the pressure has been intense.
More troubling, a few customers, dismayed by what they viewed as a political statement, withdrew their business. Others, anticipating a fee increase - despite repeated assurances to the contrary - also left. While dozens of new clients, inspired by Price's announcement, were signing up, those accounts will not start paying off for at least another year. To handle the flood, he has had to hire a dozen additional employees - now at a significantly higher cost - and is struggling to figure out whether more are needed without knowing for certain how long the bonanza will last.
Two of Price's most valued employees quit, spurred in part by their view that it was unfair to double the pay of some new hires while the longest-serving staff members got small or no raises. Some friends and associates in Seattle's close-knit entrepreneurial network were also piqued that Price's action made them look stingy in front of their own employees.
To make matters worse, Price's brother and company co-founder Lucas filed a lawsuit less than 2 weeks after the raise increase announcement, accusing his brother of violating his rights as a minority shareholder.
(Score: 4, Insightful) by Runaway1956 on Tuesday August 04 2015, @02:28PM
Good advice. If this guy had just quietly passed out a little praise, and some modest raises, he would have done a whole hell of a lot more good. If, over the course of five years, he had brought all of his people up to $70k quietly, few would have noticed. Sure, the people he gave raises to would have noticed - but outsiders wouldn't have had much to talk about.
Ehhh - drawing attention is fine for entertainers. Not so much for the rest of us.
(Score: 0) by Anonymous Coward on Tuesday August 04 2015, @02:40PM
I can see he is having some rough spots.
Mostly like others pointed out he announced it because he wanted some sort of fame for it apparently.
I say lets see in a year how it turned out. At the moment it looks like it is not working. But that could change. He had some customers leave because they do not want to be associated to anything even slightly controversial (most businesses are like that).
My guess is this is possible to do. But he did it too quickly and at a rate the business can not sustain. If you can not sustain then all of your workers will be out of a job. Then what?
Not sure he can undo the damage either. As at this point if you lower the pay the people who were getting it will now leave feeling they are being ripped off.
It is an interesting experiment. But one that is possible to ruin the whole business over. I can see why the brother sued.
(Score: 2) by Phoenix666 on Tuesday August 04 2015, @07:24PM
Was that his motivation, or did he want to set a good example? We can't know. But would that more people would try to gain attention by doing things that are good, instead of doing things that make their existential penis look larger.
Washington DC delenda est.
(Score: 5, Insightful) by ikanreed on Tuesday August 04 2015, @03:06PM
Getting noticed is usually a good thing for companies.
In this case, he went against the good old American value that poor deserve to be poor.
(Score: 5, Informative) by DeathMonkey on Tuesday August 04 2015, @05:44PM
Getting noticed is usually a good thing for companies.
It's been a good thing for Gravity Payments as well:
And the publicity surrounding it has generated tangible benefits. Three months before the announcement, the firm had been adding 200 clients a month. In June, 350 signed up.
Hmm, I wonder why they would bury such a germane fact at the end of the article...
(Score: 2) by krishnoid on Tuesday August 04 2015, @06:44PM
And the publicity surrounding it has generated tangible benefits. Three months before the announcement, the firm had been adding 200 clients a month. In June, 350 signed up.
...
Two of Price's most valued employees quit, spurred in part by their view that it was unfair to double the pay of some new hires ...
Those employees don't sound like the brightest in the bunch.
(Score: -1, Flamebait) by Anonymous Coward on Tuesday August 04 2015, @10:25PM
moron progressives no doubt think it's unfair, but some people aren't actually 'worth' minimum wage either. some people are worse than useless employees; they literally cost money and get in the way. if those people want to improve, there are plenty of ways if they're willing to put in the effort, such as training courses or even volunteering to develop some skills while they are on welfare or after school (yes i know... liberals find it shocking that some people might actually benefit from doing something for nothing, but believe it or not you can actually gain valuable skills and experience and volunteering looks pretty good on a resume).
(Score: 0) by Anonymous Coward on Wednesday August 05 2015, @10:16AM
If a company has an employee who is not only not worth the minimum wage but also worse than useless, and keeps him, who's the moron, after all?
(Score: 2, Disagree) by jmorris on Wednesday August 05 2015, @12:52AM
Probably were the bright ones, i.e. they were the ones who knew they were already earning close to their fair market value, thus didn't get the big raise everyone else got because of that and figured they could earn that same market value at a less doomed company where they would not have to a) deal with the idiot boss, b) deal with sudden unemployment at some random but likely near future date and c) invest the intervening time working their way up the ladder at a less doomed company.
At root this company is doomed. They are paying far above market prices for the biggest line item in their expenses, labor. This jackwagon of a boss is far more interested in moral preening by throwing around other people's money to buy praise for himself from people who aren't in a position to benefit either himself or the company he is responsible for managing. Nobody would be praising him if he made the equally idiotic decision that the rent on the company's HQ was 'too low' and therefore he was going to start paying the landlord double. Wages are just another supply/demand market based consensus, if you offer wages that are too low you only attract substandard talent, somewhat higher means you can be more selective from a larger pool of resumes, but too high is just wasting money, when you reach a point where paying more isn't getting enough better people or performance from the existing ones to justify the expense.