Company Testing Standardized Salaries Is Struggling

jmcbain writes: In April 2015, Dan Price, the CEO of online payments company Gravity Payments based in Seattle, announced that all employees would have their salary bumped up to a minimum $70,000. Slashdot covered this news. Since that time, however, things have not gone well. Some employees quit because they felt it was unfair to double the pay of some new hires while the longest-serving staff members got small or no raises. Furthermore, after reducing his own salary from $1M to $70K, Mr. Price is now renting a house 'to make ends meet'. On an unrelated note, Mr. Price's brother, who is a co-founder of the company, is suing him.

Comments

Life imitating art?

[K. S. Van Horn]

This sounds like something out of an Ayn Rand novel. It's very similar to something that happens in Atlas Shrugged.

Re:Life imitating art?

[K. S. Van Horn]

John Galt, the pivotal figure in Atlas Shrugged, once worked as an engineer with the fictional Twentieth Century Motor Company. After the original owner died, his heirs decided that employees would work according to their ability, but be paid according to their needs.

Needless to say, it did not work out well.

Re:Life imitating art?

[CauseBy]

I tried. I got the book and started reading. When I got page 100 I stopped and thought about what I had read, which was nothing. Whatever story she tried to tell in that book, she took her sweet time in getting the plot going. I threw the book away. Any author who can't start a story within 100 pages is a shit author who needs a better editor.

Maybe I'll try again someday. I'll start halfway through the book and see if maybe the story starts by then.

Re:Life imitating art?

[Stormwatch]

WARNING, SPOILERS AHEAD

Halfway through the novel, the protagonist meets a hobo who used to be a worker at the Twentieth Century Motor Company, whose bankruptcy years before was a key event in the novel for several reasons. He tells what had actually happened there:

After the founder's death, the heirs decided to manage the company under the motto: "From each according to his ability, to each according to his needs." The consequence was obvious: all workers pretty much turned into beggars, inventing more needs, while anyone who demonstrated competence was required to work harder. While the press praised the "enlightened" management, productivity collapsed, quality went to shit, and clients ran away.

Re:Life imitating art?

[dbIII]

Needless to say, it did not work out well.

Of course it didn't, because it was a pre-determined strawman in a novel as a snarky complaint about Rand not being paid what she thought she deserved by Twentieth Century Fox in her entry level job.
Rand was so fucked up that she was comparing Hollywood employment to Soviet Russia! Read a bit about Rand's life and you'll understand where she is coming from and that she knew almost nothing about the the west and did not wish to know much about the west. She hated Stalin, but if Stalin had wanted to plant the seeds of political discord in the USA with a political movement he couldn't have done better than Rand no matter who he paid to do it.

Her fantasies are Twilight for people in a democracy that wish they could be Royalty instead, and they fuck up anyone that takes them at more than face value. The message that you could be special if it wasn't for all of those Serfs having a say in how the country is run is utterly fucked. You should have to earn the right to rule instead of being born to it like Digby.

Re:Those making more than new minimum salary

[drinkypoo]

I've seen minimum wage go up by 40% since I entered the work force, but my own salary has only gone up by 25% in that same period.

You know that the minimum wage hasn't kept up with inflation in over two decades, right? So if your wages are doing even more poorly than the minimum wage, you're getting fucked and hard. But you're complaining about the people who are getting fucked way harder than you, because them getting fucked slightly less hard means you get fucked slightly harder. What about the people doing the fucking? Maybe you should stop attacking your natural allies.

That NYT article in full

[Bearhouse]

Having run a company, I can get this...it's a refreshing and seemingly decent approach to sharing the wealth.
Great contrast to all the money-grabbing, "screw the employee" bosses that are in the news all the time.
Maybe where he went wrong is not allowing an "upside".
Sure, not everybody who *thinks* they deserve extra really do.
But in my experience some sure as hell do...the trick is to identify them and give them fair value.
(My top staff regularly got 20% over market rates - they earned me far more, so I was happy to pay.)

Snip: "You can ignore economics, but economics won’t ignore you.
That’s the tough lesson Dan Price, CEO of Gravity Payments, a Seattle credit-card processing company, is learning.
Four months ago, Price announced he’d slash his own multimillion-dollar pay and set a company-wide $70,000 minimum wage.
He got the idea after a friend explained her difficulty paying back student loans and surviving on $40,000 a year — a salary many Gravity employees were making.
Price’s stand against income inequality made him an immediate darling of the left.
But key employees saw it differently.
Financial manager Maisey McMaster liked the idea at first — until she thought about it.
“He gave raises to people who have the least skills and are least equipped to do the job,” she told The New York Times. Meanwhile, “The ones who were taking on the most didn’t get much of a bump.”
She thought it would be fairer to give smaller raises, with the clear chance to earn more with experience. Price brushed off her doubts; she quit.
Also out the door: Web developer Grant Moran. He says, “Now the people who were just clocking in and out were making the same as me.” Plus, having your pay level a very public matter is a problem, with “friends now calling you for a loan.”
Moral of the story: Some people work harder than others; some have stronger skills — and they don’t think it’s fair that they’re paid the same as others.
Price will soon be left only with workers worth his chosen minimum wage — or less.
The company is already in chaos thanks to the policy — but the big problem is ahead, as it tries to keep growing and innovating with only mediocre talent"

Re:That NYT article in full

[laird]

Don't leave out that the business is booming, doing much more business than before, and getting tons of applications from high quality candidates attracted by the higher wages.

So yes, the transition might be bumpy. But nobody's salary went down, so they're all making at least what they agreed to for their job. It seems weird to me that people are angry that while they got a raise, but so did lower paid workers, so they aren't making as much more than the other guy as they used to.

A good writeup is at http://www.forbes.com/sites/mi... .

Re:That NYT article in full

[Shadow of Eternity]

And in the meantime those two selfish assholes who quit solely because they couldn't stand to see other people not treated worse than them have made themselves radioactive. Why would I ever want to hire people who might throw a huge public tantrum and quit because I don't treat other people badly enough to soothe their ego?

Re:That NYT article in full

[Anonymous Coward]

Indeed. Gravity Payments isn't struggling. They've lost a few customers, but they've gained so many new customers that they had to hire new employees to handle them all. The CEO's salary reduction isn't enough to cover additional new hires forever - he went from a million dollars salary to $70k, and gave all that money to the employees. So the company has to pay for the new hires' minimum 70k salary, and pay it out of the millions they're making from the massive growth surge Price has created with his generosity.
Yes two employees have quit. Yes Price is being sued by his brother. Sour grapes, all of them, pissed off because others were getting goodies and they weren't.
The big story here is how economists somehow fail to report the hugely increased profitability of the company.

Exactly

[Anonymous Coward]

Those who can contribute significant, above-and-beyond value naturally feel that people should be rewarded in proportion to their contributions.

Those who cannot contribute significant, above-and-beyond value naturally feel that everyone should receive equal rewards, regardless of their contributions.

By setting policies that pander to the second group, you wind up losing members of the first group, resulting in a company full of under-performing slackers. No surprise such a company doesn't do well.

Re:Ha!

[geoskd]

If i just spent 100 grand on a 4 year degree and gave 2 years to this company i wouldnt be as happy about it

Why? Nobody except the CEO took a pay cut. In fact everyone got at least a small raise. These guys are actively unhappy because *someone else* got a fair shake for a change? Thats just retarded, mean and more than a little childish. I could see if they had been given a paycut, but they were in no way affected except that someone they work with got a windfall. If you weren't getting a fair wage, then why were you still working there? If you were getting a fair wage then GROW UP.