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posted by martyb on Tuesday October 27 2015, @10:25PM   Printer-friendly [Skip to comment(s)]
from the sydney-morning-herald-wrong-again dept.

The Center for American Progress reports

In April, Dan Price, CEO of the credit card payment processor Gravity Payments, announced that he will eventually raise minimum pay for all employees to at least $70,000 a year.

[...]Six months later, the financial results are starting to come in: Price told Inc. Magazine that revenue is now growing at double the rate before the raises began and profits have also doubled since then.

On top of that, while it lost a few customers in the kerfuffle, the company's customer retention rate rose from 91 to 95 percent, and only two employees quit. Two weeks after he made the initial announcement, the company was flooded with 4,500 resumes and new customer inquiries jumped from 30 a month to 2,000 a month.

Previous: Gravity Payments: CEO Takes Cut and Makes $70k/year New Minimum Salary
All Staff Pay Raise Backfires on Credit Card Processing Firm


Original Submission

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Gravity Payments: CEO Takes Cut and Makes $70k/year New Minimum Salary 23 comments

"Is anyone else freaking out right now? I'm kind of freaking out." said Dan Price, the CEO of Seattle-based Gravity Payments, as he announced that the new minimum salary for current employees will be raised to $70,000 a year. Price is taking a pay cut from $1 million to $70,000 and spending an appreciable amount of the company's profit to raise annual salaries from the current average of $48,000.

From the article:

The United States has one of the world's largest pay gaps, with chief executives earning nearly 300 times what the average worker makes, according to some economists' estimates. That is much higher than the 20-to-1 ratio recommended by Gilded Age magnates like J. Pierpont Morgan and the 20th century management visionary Peter Drucker.

[...] Under a financial overhaul passed by Congress in 2010, the Securities and Exchange Commission was supposed to require all publicly held companies to disclose the ratio of C.E.O. pay to the median pay of all other employees, but it has so far failed to put it in effect. Corporate executives have vigorously opposed the idea, complaining it would be cumbersome and costly to implement.

[...] The happiness research behind Mr. Price's announcement on Monday came from Angus Deaton and Daniel Kahneman, a Nobel Prize-winning psychologist. They found that what they called emotional well-being — defined as "the emotional quality of an individual's everyday experience, the frequency and intensity of experiences of joy, stress, sadness, anger, and affection that make one's life pleasant or unpleasant" — rises with income, but only to a point. And that point turns out to be about $75,000 a year.

All Staff Pay Raise Backfires on Credit Card Processing Firm 93 comments

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

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  • (Score: 2, Interesting) by pinchy on Tuesday October 27 2015, @10:40PM

    by pinchy (777) on Tuesday October 27 2015, @10:40PM (#255312) Journal
    Its good to see this worked out. Its commendable just to have a company stay profitable at a steady state, they dont have to grow like some cancer for it to be a success IMO.

    Anyone here work in this industry or have dealt with this company before? I work on the POS side and currently trying to get EMV support implemented. After dealing with some small CC processors I see why USA is the last to adopt EMV.

    Also I wonder if they might be currently experiencing this: https://en.wikipedia.org/wiki/Hawthorne_effect [wikipedia.org]
    • (Score: 1, Offtopic) by fishybell on Tuesday October 27 2015, @11:20PM

      by fishybell (3156) Subscriber Badge on Tuesday October 27 2015, @11:20PM (#255332)

      Off topic, but the thing that bugs me about EMV [wikipedia.org] is that since some retailers now force me to use the chip instead of swiping, and it is inevitably 10 times the wait, and often needs to be restarted. Right now, it's just a pain in the ass for no perceived benefit. I know that it is supposed to be more secure (although still not 100% secure, or even close), I'm sure most people aren't sold because of the delay at checkout alone.

      • (Score: 1) by pinchy on Tuesday October 27 2015, @11:57PM

        by pinchy (777) on Tuesday October 27 2015, @11:57PM (#255343) Journal

        With the payment backends I deal with, the time for an EMV transaction to get authorized is the same as the card mag stripe swipe. These dont support contactless so you have to leave the card inserted until the approval comes back which can make the wait time a lot more apparent.

        But the implementation quality of course can vary wildly. Its gonna be a while before they get the bugs hammered out of the ones that got certified by the skin of there teeth.

      • (Score: 0) by Anonymous Coward on Wednesday October 28 2015, @12:50AM

        by Anonymous Coward on Wednesday October 28 2015, @12:50AM (#255366)

        One more reason to pay with cash. I only use my CC for internet purchases nowadays. Cash is fast, cash is anonymous, cash has no minimum fees. Just don't get mugged or your pocket picked.

      • (Score: 2, Informative) by Clev on Wednesday October 28 2015, @02:11AM

        by Clev (2946) on Wednesday October 28 2015, @02:11AM (#255391)
        Considering it's already been hacked [wired.com], I wouldn't say it's a whole lot more secure than magstripe cards.
        • (Score: 5, Informative) by TheRaven on Wednesday October 28 2015, @09:25AM

          by TheRaven (270) on Wednesday October 28 2015, @09:25AM (#255484) Journal
          The people who first discovered most of the EMV compromises are in the office just across the hall from me. In spite of that, it is far more secure than magnetic stripe. The equipment required to copy a magstripe is cheap and ubiquitous. Most of the EMV attacks rely on either MITM attacks on the payment terminal or stealing stealing the card and inserting the chip into a fake card below a proxy chip that does MITM. The rest rely on weaknesses of implementation (and allow the store part to be attacked, not the customer part). In contrast, you can have a magstripe copied in seconds by a machine that an underpaid sales clerk can fit in the palm of his hand.

          That said, I do find it hilarious that the US banking industry waited until the compromises were public before deciding to adopt it.

          --
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  • (Score: 5, Interesting) by RedBear on Tuesday October 27 2015, @11:16PM

    by RedBear (1734) Subscriber Badge on Tuesday October 27 2015, @11:16PM (#255329)

    I have found it very amusing, ever since this was first announced, how angry it makes so many [conservatives/capitalists] that someone would dare to just voluntarily start paying all his employees an excellent wage, as if this is some sort of crime against capitalism or will result in widespread economic disaster. I noted from the previous article that most of the "kerfuffle" was from clients pulling out their accounts because they believed this would result in higher fees. Clearly, it hasn't. And still, only two employees quit, which was the same number as the previous article stated a couple of months ago. Obviously those two employees were way too attached to the false idea that your pay level in this country has anything to do what you've actually accomplished or how long you've been around or how much you "deserve" to be paid relative to someone else, and they just couldn't let it go. In my direct observation that idea is complete nonsense and has been for a long time.

    I look forward to seeing how well this company does in years to come, and wonder how quickly other companies will start to jump on this "voluntary economic socialism" bandwagon. A lot of folks in this country are super tired of trying to make a living on wages that have been nearly flat for almost 40 years while the guys at the top have received massive pay raises every single year during the same 40 years. It's interesting that the acknowledgement of how silly the situation has become is finally coming from some of the people at the top.

    Meanwhile, in Iceland, CEO salaries are still capped at 4x the base wage, and they get along just fine.

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    • (Score: 4, Insightful) by Tork on Wednesday October 28 2015, @01:13AM

      by Tork (3914) on Wednesday October 28 2015, @01:13AM (#255373)
      I think it's funny how many [conservatives/capitalists] don't understand the 'demand' part of Supply and Demand. You'll notice that most companies have some sort of sales and marketing department intended to raise demand, but consumer groups rarely do anything to encourage supply. In other words, consumers don't produce commercials commercials saying: "We want Cherry Root Beer!"

      Who's really leading that parade? Job creators, indeed.
      --
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      • (Score: 2) by ikanreed on Wednesday October 28 2015, @02:57AM

        by ikanreed (3164) on Wednesday October 28 2015, @02:57AM (#255406) Journal

        Well, yeah, actually they do.

        They can't afford to use wide-audience targetting advertisements, but they use the things that actually represent the power larger groups have.

        They start petitions to companies. And companies often notice if there is a group of die hard fans for one of their discontinued product. They tend to reinstate it at a higher price, which satisfies those die hard fans and makes it economically viable.

        Only example I can think of is that kraft or general mills or someone reinstated a popular cake frosting.

        • (Score: 2) by Tork on Wednesday October 28 2015, @03:33AM

          by Tork (3914) on Wednesday October 28 2015, @03:33AM (#255423)
          My favorite example is how Napster users basically begged the world to create iTunes. But, yeah, I'd say both our examples are minuscule to the efforts that companies like Coca Cola put into earning customers.
          --
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        • (Score: 0) by Anonymous Coward on Wednesday October 28 2015, @05:16AM

          by Anonymous Coward on Wednesday October 28 2015, @05:16AM (#255446)

          Only example I can think of is [...] cake frosting

          In Maine, they became unhinged when Nabisco quit making Crown Pilot Crackers. [google.com]
          It's part of a traditional chowder recipe.

          -- gewg_

  • (Score: 2) by bziman on Tuesday October 27 2015, @11:48PM

    by bziman (3577) on Tuesday October 27 2015, @11:48PM (#255341)

    So I think that having a $70k minimum salary is great, and I'm glad they are doing well. BUT, I am forced to wonder if their success is more strongly correlated with their increase in press about the minimum salary, versus the direct effects of the salary itself... that is, would they be doing as well if they'd raised everyone's pay without telling the world about it?

    • (Score: 0) by Anonymous Coward on Tuesday October 27 2015, @11:59PM

      by Anonymous Coward on Tuesday October 27 2015, @11:59PM (#255344)

      Undoubtedly a boost, but the fact that they haven't run into the ground due to cost overruns is still the main achievement.

    • (Score: 4, Interesting) by vux984 on Wednesday October 28 2015, @12:01AM

      by vux984 (5045) Subscriber Badge on Wednesday October 28 2015, @12:01AM (#255346)

      Yeah... that's what i took away from it too. A bunch of resumes and a bunch of customer inquiries... could they have spent the money directly on marketing any more effectively? Probably not.
      Will the interest and growth continue at this pace, without the stream of press this generated? Also probably not.
      So the questions is... How long will the stream of press continue?

      • (Score: 3, Insightful) by Tork on Wednesday October 28 2015, @01:43AM

        by Tork (3914) on Wednesday October 28 2015, @01:43AM (#255382)
        One question I have is how much more care are the employees putting in for their customers. I know I stick with certain higher priced services because they have a good service reputation. I doubt I'm alone.
        --
        Slashdolt Logic: "23 year old jokes about sharks and lasers are +5, Funny." 💩
      • (Score: 5, Insightful) by M. Baranczak on Wednesday October 28 2015, @03:07AM

        by M. Baranczak (1673) on Wednesday October 28 2015, @03:07AM (#255412)

        Will the interest and growth continue at this pace

        See, this right there is the problem with most business leaders. They're not satisfied with just making a profit. They're not satisfied with making a profit that's steadily increasing. They want a continually increasing rate of growth, anything else is considered a failure.

        Sounds to me like this company was doing well before the raises. Now they're doing even better. If the hype does wear off, they'll still be coming out ahead.

        • (Score: 2) by vux984 on Wednesday October 28 2015, @03:01PM

          by vux984 (5045) Subscriber Badge on Wednesday October 28 2015, @03:01PM (#255609)

          They want a continually increasing rate of growth, anything else is considered a failure.

          Some people think that and I agree with you its crazy. But this isn't that case. This is potentially a case of spending $X a month every month for a benefit that will drop off after a few months.

          If the hype does wear off, they'll still be coming out ahead.

          No. because he'll still be paying the higher wages after the hype wears off.

          Suppose I pay X% of my budget in advertising for a month and it gives me a sales bump. That's great. Then next month I cut the advertising, and the sales drop off. That's not unexpected either. But I have that X% back and I can launch a new ad campaign. The key is that I need to change it up. If I lease a billboard for X$ month, the first month it will generate some interest, the next month less, the next month less. Eventually I need to cancel it and do something else or at least put new art up or something because its effectiveness is declining.

          In this case though he he can't just cancel his employees wages increases after its no longer generating buzz to free up the money to move onto the next ad project.

          • (Score: 2) by M. Baranczak on Wednesday October 28 2015, @04:00PM

            by M. Baranczak (1673) on Wednesday October 28 2015, @04:00PM (#255647)

            So basically, you're asking "can they afford it?".

            If they could afford the raises when they were first put into place, then they'll still be able to afford them once the publicity bump wears off. The alternative scenario is that the boss knew that the raises would put him into the red, but was hoping that the publicity would offset that by raising revenues. That would be a pretty risky move - not totally implausible, but unlikely.

            • (Score: 2) by vux984 on Wednesday October 28 2015, @04:21PM

              by vux984 (5045) Subscriber Badge on Wednesday October 28 2015, @04:21PM (#255664)

              Not really. I'm asking how much intrinsic benefit there is to paying the employees more. It might well be a net benefit to the company. But right now, its really hard to know because any benefits of the program itself are comingled with the benefits from the hype about the program. Eventually the PR-hype-bump benefits will fade.

              I'm just not impressed with the journalism and analysis fail around it so far.

              First they write OMG! Company XXX is paying its employees a bunch! and they plaster that all over the internet.
              Then they write OMG! Its totally working, profits are way up, customers are calling them left and right.
              What's next? Three months from now, "OMG, the company we simply can't stop writing great things about and providing free advertising for is still doing great!! It must be because of how much they are paying the employees!!"

              The truth of the matter is that it might actually be working to some extent, but right now we can't factor out the effect the journalism about the incident has had on it. And the journalists are failing to realize their part in the success.

              Heh, its like some macro heisenberg uncertainty principle in action; where the journalists change the outcome due their part in observing the experiment.

              • (Score: 3, Insightful) by Joe Desertrat on Thursday October 29 2015, @06:56PM

                by Joe Desertrat (2454) Subscriber Badge on Thursday October 29 2015, @06:56PM (#256168)

                The truth of the matter is that it might actually be working to some extent, but right now we can't factor out the effect the journalism about the incident has had on it. And the journalists are failing to realize their part in the success.

                For their type of business, long term service contracts, there is no reason to expect that business will tail off after the publicity dies down, providing they continue to provide a high level of service. The growth rate may slow, but if they are making money now they should continue to do so at an increasing rate.

      • (Score: 2) by mojo chan on Wednesday October 28 2015, @08:54AM

        by mojo chan (266) on Wednesday October 28 2015, @08:54AM (#255482)

        It doesn't really matter why they are doing well, the point is that they are not falling apart like previous articles claimed. So at the very least, increasing salaries doesn't seem to have hurt them.

        --
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        • (Score: 2) by vux984 on Wednesday October 28 2015, @02:51PM

          by vux984 (5045) Subscriber Badge on Wednesday October 28 2015, @02:51PM (#255607)

          If this benefit is due to the Press, then

          a) the press will eventually fade, and the benefit along with it
          b) and even the bump will not be reproducible by other companies. because the press won't report on the 10,000th company that does this. It won't be news anymore.

          If its due to increased productivity due to better pay

          a) it will continue
          b) will be reproducible by other companies

          So yeah, It matters why it worked.

  • (Score: 2) by darkfeline on Wednesday October 28 2015, @12:00AM

    by darkfeline (1030) on Wednesday October 28 2015, @12:00AM (#255345) Homepage

    Lots of kudos to them. This sets a strong precedent for other companies to start doing the same, although I hope the growth isn't just due to PR and actually comes from increased productivity, since that's all most CEOs care about.

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    • (Score: 3, Interesting) by slinches on Wednesday October 28 2015, @12:04AM

      by slinches (5049) on Wednesday October 28 2015, @12:04AM (#255347)

      Yes, lets get Walmart to do this for all 2.2 million US employees. That would only come out to $154 Billion in annual salaries. I'm sure they could absorb 10x their net annual income in increased worker pay.

      • (Score: 2, Interesting) by meledian on Wednesday October 28 2015, @12:40AM

        by meledian (268) on Wednesday October 28 2015, @12:40AM (#255361)
        Looking over the 2014 report, looks lIke they only made about 125 billion in profit. http://stock.walmart.com/files/doc_financials/2014/Annual/2014-annual-report.pdf [walmart.com]
      • (Score: 4, Insightful) by Anonymous Coward on Wednesday October 28 2015, @12:57AM

        by Anonymous Coward on Wednesday October 28 2015, @12:57AM (#255368)

        > Yes, lets get Walmart to do this for all 2.2 million US employees.

        Howabout, lets at least get Walmart to pay all of their 2.2. million US employees enough that they don't have to use foodstamps?

        • (Score: 2) by slinches on Wednesday October 28 2015, @05:02AM

          by slinches (5049) on Wednesday October 28 2015, @05:02AM (#255443)

          How about we let the employers and employees decide what's a fair wage for an hour of work? The only "fix" is to raise the minimum wage and that just makes it harder for younger people who may be able to live off of a lower paying job while working to pay for school.

          Besides, is the situation where a few people who are employed part time are receiving government benefits that damning? Should Walmart employees also not accept need based financial aid for school?

          If the system is going to be set up this way, why complain when it works as intended?

          • (Score: 2, Insightful) by Anonymous Coward on Wednesday October 28 2015, @06:48AM

            by Anonymous Coward on Wednesday October 28 2015, @06:48AM (#255459)

            How about we let the employers and employees decide what's a fair wage for an hour of work?

            Because they have continually proven, again and again, that what they decide is "fair" is anything but, and is just barely above slave-level exploitation. That's why minimum wage became federally mandated in the first place.

          • (Score: 2, Informative) by Anonymous Coward on Wednesday October 28 2015, @07:44AM

            by Anonymous Coward on Wednesday October 28 2015, @07:44AM (#255474)

            The only "fix" is to raise the minimum wage and that just makes it harder for younger people who may be able to live off of a lower paying job while working to pay for school.

            Found the grandpa. You are decades behind the times. Living independently off the minimum wage, let alone less than the minimum wage has not been possible at any point for anyone under 40. Working your way through school has not been possible without extreme amounts of help for at least half of that time.

          • (Score: 2, Informative) by Anonymous Coward on Wednesday October 28 2015, @03:10PM

            by Anonymous Coward on Wednesday October 28 2015, @03:10PM (#255612)

            Lets see here. Minimum wage? 7.25 How many hours will you be given? Probably around 25. 25*7.25 = 181.25 a week. The is 725 a month (Assuming 4 weeks in a month, will be slightly more). I am not even going to deduct taxes or anything lets see if we can work with 725.

            Studio apartment? in the cheapest markets probably around 450.
            Electric? 30 a month if we shut off the lights and sweat out the summer.
            Gas? 30 a month assuming we live far south.
            Water/Sewer? 15 thats on the cheap side, remember this is best case scenario.
            Food? 100 a month if we eat lotsa ramen.
            Buss pass? 50.
            Assorted necessacities? 100, you know clothes, shoes, haircut, soap, cleaning supplies, household sundries.
            Phone? 20, cheap prepaid.

            450+ 30+30+15+100+50+100+20= 795

            That is 45 dollars more then you make. That also doesn't include health care, taxes, social security, state taxes. So to live you would need at least two of these jobs, and sometimes finding one is hard enough. Finding a second that doesn't interfere with the schedule of one is almost impossible in many of these part time gigs where your schedule is often decided the week before by the supervisor.

      • (Score: 3, Interesting) by CoolHand on Wednesday October 28 2015, @03:44PM

        by CoolHand (438) on Wednesday October 28 2015, @03:44PM (#255639) Journal
        A large number of Walmart's employee's are part time, so probably wouldn't get the same annual salary. Also, only 1.3 Million are in the US, so a large number of foreign associates with lower cost of living might survive comfortably on far less of a salary. In fact, a huge number of Walmarts inside the US are in areas with much lower cost of living that where the business in the article is located. So, $70K/year for ALL Walmart associates might be out of the question, but a live-able salary per region for all full time associates may in fact be much more possible.
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  • (Score: 1) by meustrus on Wednesday October 28 2015, @12:27AM

    by meustrus (4961) on Wednesday October 28 2015, @12:27AM (#255358)

    The CEO probably read this article recently too. [soylentnews.org] Or at least already knew about these rich people problems, being one. Probably has enough money to not have to worry about it. And hey, by dropping pay from $1m down to the $70k minimum, you probably don't have to deal with so many people who like you for your money. Not that this is a problem I have, but hey, looks like a win-win scenario to me.

    Although it seems most people responding to the original article didn't notice that the pay raises were being paid for out of the CEO's pay.

    --
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    • (Score: 0) by Anonymous Coward on Wednesday October 28 2015, @10:14AM

      by Anonymous Coward on Wednesday October 28 2015, @10:14AM (#255495)

      Apparently the CEO came close to hitting the wall and had to reshuffle finances to survive

  • (Score: 0) by Anonymous Coward on Wednesday October 28 2015, @02:12PM

    by Anonymous Coward on Wednesday October 28 2015, @02:12PM (#255588)

    A software company's financials depend on the products and services it built in the past, and the momentum from sales and business deals, usually much more than six months in the past.

    Let's see how they're doing two years from now, we'll read the followup.