Stories
Slash Boxes
Comments

SoylentNews is people

posted by janrinok on Tuesday August 04 2015, @02:12PM   Printer-friendly
from the unintended-consequences dept.

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.


Original Submission

 
This discussion has been archived. No new comments can be posted.
Display Options Threshold/Breakthrough Mark All as Read Mark All as Unread
The Fine Print: The following comments are owned by whoever posted them. We are not responsible for them in any way.
  • (Score: 0) by Anonymous Coward on Tuesday August 04 2015, @04:05PM

    by Anonymous Coward on Tuesday August 04 2015, @04:05PM (#217960)

    Yeah what a POS for trusting his brother not to piss away his money. What a LOOOOOSER!

    Yes, the poor, starving brother is now suffering because of this. What? He's not poor, starving and suffering and is in fact quite well off? He probably is a greedy POS.

  • (Score: 0) by Anonymous Coward on Tuesday August 04 2015, @04:54PM

    by Anonymous Coward on Tuesday August 04 2015, @04:54PM (#217979)

    "hey loan me 100 bucks"
    "sure here you go"
    "I spent the money on blow and a hooker"
    "can I have my money back?"
    "No you greed fuck you have a million dollars"

    • (Score: 0) by Anonymous Coward on Tuesday August 04 2015, @05:34PM

      by Anonymous Coward on Tuesday August 04 2015, @05:34PM (#217991)

      More like hey I spent that $100 trying to retain our employee workforce reducing employee churn, increasing productivity, and raising the company profile. In terms of marking it was a huge success, though there were some unexpected downsides in doing something new and risky, but as a start up investor you stated you were willing to take risks for the possibility of a 10x return. Differentiation and growth is the name of the game. Now site down.

      • (Score: 0) by Anonymous Coward on Tuesday August 04 2015, @06:12PM

        by Anonymous Coward on Tuesday August 04 2015, @06:12PM (#218005)

        And in the process I cost us our 3 top customers. But maybe these other 10 might pay off in 6 months to a year. So in the mean time can you give us a loan to float for 6 months?

        In business terms he turned a 'sure win' into a 'maybe'. With about maybe an even on prospects in return on investment due to higher costs and more churn from turnover of employees who do not feel properly compensated. With the risk of taking down the whole business.

        There is no 10x growth here. That is hockey stick talk. It never really happens in 99.999% of the businesses out there. Most businesses are built on gradual growth over the long term. Anyone telling you otherwise is selling you something. Usually for their benefit. Short term bumps like this would make other investors turn tail and run. Also making your shares in the business worth less.

        This is pretty much 101 on how to turn a million dollar business into a bankrupt one.

        He also has had 6 months to prove out his theory. In that six months he cost them a good chunk of the business. Plus put the CEO into a position where he is now dealing with renters and other monetary issues instead of running the business.

        Dont get me wrong. It is quiet the gamble. But you want them to succeed because it is 'better' somehow. But it is not a 'better' built on solid financial strength. But a "lets bet the business and everyone's job here" gamble. If I was a major investor I would be suing as well. Wouldnt expect much as the CEO has pissed away the money.

        • (Score: 4, Informative) by skullz on Tuesday August 04 2015, @07:05PM

          by skullz (2532) on Tuesday August 04 2015, @07:05PM (#218036)

          It looks like the brother is suing because he says the CEO paid himself a lot of money but didn't pass out high enough dividends and the complaint was signed a month before the wage increase. It doesn't look like the lawsuit and minimum wage issues are related.

          Where did you get lost business and renters?

          • (Score: 0) by Anonymous Coward on Tuesday August 04 2015, @07:39PM

            by Anonymous Coward on Tuesday August 04 2015, @07:39PM (#218058)

            The lawsuit may be the cause of the CEO reducing his salary and paying it out to workers instead. A subtle FU to the brother who filed perhaps