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$70k Salaries Didn't 'Backfire'; Gravity Payments' Profits Have Doubled (inc.com)
AmiMoJo writes: 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. The move sparked not just a firestorm of media attention, but also a lawsuit from Price's brother and co-founder Lucas, claiming that the pay raise violated his rights as a minority shareholder. But 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.
Good PR that ties in with a current hot button issue is good for business! Film at 11.
The only thing necessary for evil to triumph is for it to be pitted against a slightly greater evil
They like working for you... Who'da thunk?
So when the revolution comes and the rich bastards are being lined up for the firing squad, Gravity's CEO will be the *last* against the wall. In fact, we might even retain him because we need that kind of thinking after, to rebuild.
If telephones are outlawed, then only outlaws will have telephones.
As soon as your 15 min of fame is over.... Let me know how it's going then.....
"File to fit, pound to insert, paint to match" - Aircraft Maintenance 101
A great deal of this good news comes almost directly from the media coverage, not the fact of the the changes to pay structure. Still, it's an interesting case and I look forward to seeing how things are going in the 2 to 5 year range after the media coverage can be removed as a factor in the organization's performance.
Helping with organizational effectiveness is our job.
Jury is still out on if it will be a successful model, but it sounds like he needs to learn to live within his means on his new salary.
A lot of people are going to see some sort of causal link between them raising the salaries and the business soaring. And while I'm sure a big salary bump does bring a certain stability to those who previously had the lowest salaries in the company, that morale boost probably doesn't explain, by itslef, the big sales increase the company has seen. I'm guessing the inrush of clients was caused by the PR storm this has created, and any try to replicate their growth will be met with less excitement.
Get over it, it's been done.
The real question is, was this the original intent of the salary bump?
She: Hey, are you a traitor? Me: No, I'm atheist.
By raising the prevailing wage, the employer can be more selective whom it hires, and productivity improves.. no brainer here.. But most companies, run by MBA, Jack Welch mentality, can't see past cost to the intangibles, namely productivity, and low turnover..
It is fallacy to assume that, just because revenue increased some time after this thing, it was because of this thing.
There is no way this can be true. Wasting money paying people means less money for the executives and owners, i.e. the important people who are the brains and heart and soul of the company. Employees are easily replaced.
It should be commonplace for senior engineers to be earning $3M-$5M per year. Wages haven't kept up with money creation. Workers aren't enjoying the profits that the companies are reaping.
Instead, call center personnel make 80% of what an experienced senior engineer does? That ain't right.
There are lots of tin-foil hat sites and ThinkProgress is one of the more prominent. If /. wants to be the ant--vax, gluten free moonbat goto site, fine. I'll delete the bookmark.
Not long a pizza chain local to the Minneapolis area raised their starting wage to $11/hour and they've seen tangible rewards from doing this.
Damn_registrars has no butt-hole. Damn_registrars has no use for a butt-hole.
Even after the media attention has died out, the awareness of the company has been catapulted forward in irrevocable way. No one knew who they were before, now they are known for their media attention getting pay policy, and now people actually know who they are for the business they do. So long as their service makes business sense, awareness acquired under one strategy is not that unreasonable to retain just by 'doing your job'.
Not saying it's a bad idea or can't help or that it's a good idea and can't hurt, just saying this case is a lost cause for a controlled understanding of the impact of this strategy absent of the media attention no matter how close you look and long you wait.
XML is like violence. If it doesn't solve the problem, use more.
This doesn't count because, as other Slashdot members have said, the news is a big contributor to this. Nontheless, I am very suprised no one's every run a study on this - paying employees more is cheaper in the long run because you save on training costs, you have higher morale, and you get much more quality for your money - one good worker at 80k per year can easily be worth 3 workers at 40k per year, and it also means less people to pay benefits for as well as a more tightly knit group with a smaller communication overhead.
This practice started with some assholes in suits who wanted to pad out their already bursting accounts at the expense of those they are responsible for; not because any study actually demonstrated long term cost savings by getting many cheap employees with low wages over better trained higher ones.
"Set a man a fire, he'll be warm for the rest of the night. Set a man afire, he'll be warm for the rest of his life."
He had to sell all his stock and mortgage houses...it sounds like he needs to learn to live within his means on his new salary.
You make it sound like he had to sell his stock and mortgage his house because of the pay raises. You have it backward. He chose to sell/mortgage (ahead of time) in order to make the pay raises possible.
This is what people who tout the "gig economy" and job hopping as the future don't get. There are some companies out there who will spend the time, hire the right people, and keep them for as long as possible by paying them and treating them fairly. They aren't sexy Web 2.0 startups, nor are they public companies for the most part, so you don't hear about them as much. Loyalty may be dead, but I think a lot of companies don't like the idea of churning through yet another batch of contractors/employees and would rather stay productive than retrain everyone constantly.
The flip side is that the company is now forced to be extremely careful about who they hire. Sure, it's the US and you can get rid of someone because you don't like their shirt color that day, but you invest more in each employee by paying them more. So, a model like this can't work in a massive corporation that will hire hundreds at a time, not looking too closely at their qualifications. This is a good thing though -- hiring discipline makes sure you only bring on people who are actually going to do a good job. You just have to be dilligent and prepared to get rid of the people who are clearly coasting before they cost you too much.
Personally, I'd like an environment like this. People are happier when their financial situation isn't dire and they can take care of their basic needs. Someone who isn't stressed about paying their mortgage or their other bills will be able to use those processor cycles taken up by worrying on the task at hand, which is probably what the owner had in mind. The truth is this, for every 10 crappy IT sweatshops, there are 1 or 2 decent employers who offer stable work. People who find situations like this tend to stay in them, which is good for productivity. I just wish we could get the sweatshop-to-stable ratio somewhere below 1.0 at least...
It also helps that Gravity Payments is a credit card processor -- talk about a guaranteed, never ending revenue stream from which to pay your employees.
Take a company like Amazon, they show very little profit, and instead reinvest the money into the business. I'm not saying this company hasn't improved, but wouldn't something like average stock price over the last month compared to 6 months ago be a better indicator of how well a company is doing, assuming the hype over the move has died down?
It only works while he is the only one doing it and getting massive coverage. As soon as he's out of the spotlight, they're going to have to get back to competing with the rest, but now have to deal with (possibly) inflated staffing costs.
ORLY?
It's worked for the west coast burger chain In-N-Out for decades. (They're NEARLY the oldest burger drive-through-and-eat-in in existence.)
Their people are very happy, very productive, and generally give extremely good service. With no advertising besides an occasional location-ahead billboard they're constantly swamped with customers. When the rest of the burger chains were having a strike, they were business as their (excellent) usual.
They pay their line people almost half-again what the typical fast-food chain pays, plus medical, dental, and vision for both full and PART time workers. This continues up the ranks to store manager as well.
Simple, good, ingredients and fast, friendly, happy service has done it for them pretty much since burger chains existed, and the competition hasn't caught on YET.
Bantam Dominique roosters crow a four-note song. Once you've heard it as "Happy BIRTHday" you can't NOT hear it that way
It's been the American business model for years, though it only works if you keep exporting vinegar in the long run.
Inheritance is the sincerest form of nepotism.
Leveraging assets to invest in a business is not exactly a new idea. But it will certainly be interesting to see which way the long tail points when the ripples even out.
no one got a raise to 70k yet, its staged over several years.
I am very suprised no one's every run a study on this
It's been a century... but really? No one... like a certain automotive manufacturer in 1914... http://www.forbes.com/sites/ti...
Inheritance is the sincerest form of nepotism.
While it is undeniable that the current boost in business is coming from the PR, I think it will work long time. Most CEOs completely underestimate the value of workers that cumulate a deep knowledge as they cumulate years in the business. This is particularly true of programmers. I can't count the number of "genius" managers who tried to make sure everyone in the team can be replaced at will so they can fire whenever they wanted and keep wages as low as possible. In the end it hurts the company, but said managers hide this fact as much as they can because they are responsible for it. Then the company starts going down slowly because the good elements eventually leave with their knowledge. When the wages are generous, people in general tend to make sure they stay by working harder. I know I do. Turnaround kills knowledge-based companies more than anything else, I think.
John Boehner once said that if it wasn't for the minimum wage he wouldn't have been able to pull himself up, job by job, into Speaker of the House...
It's no wonder you have problems.
Seriously, $2400 ($200/month) for 2-phone plan? Mine is $70 for two iPhones with unlimited talk, text, and shared 4G of data (we've got wi-fi everywhere so why pay for 10G or more?).
And $100/month for the triple play is not bad, but that adds up to only $1200, not the $5200 you deducted for it.
And if you can't afford all the expenses of having a kid on top of the other things you're spending on, perhaps you ought rethink the decision to have one. Or maybe you could cut the TV and landline if you need to buy diapers.
Let's check the state of the business in a year when no one cares.
As an employee, I can just as easily say that when I've worked at jobs at which I was compensated well, knew I could be rewarded even more, and certainly didn't want to lose the position no matter what, I worked my tail off and held myself to very high standards.
When I knew that I could easily get another job at the same level of compensation, and that no matter how hard I worked it was unlikely to be rewarded with more pay, I put more of my time and energy into other avenues, like improving my skill sets and networking outside the company, so that I could transition elsewhere—as well as into simple quality of life stuff, since I knew that work wasn't going to enhance my quality of life all that much.
So you're saying employees work less well = pay them less well.
I'm saying pay them more = they'll work more and better.
Chicken and egg. Which comes first? The rewards or the pay? You make one argument. I'll make another.
Why are employees not as great as they could be? I'll go out on a limb and say it's because you're not motivating them to be as great as they could be, either through great leadership (which is rare), a great environment (slightly more common), or great compensation.
And if you get great leadership, a great environment, *and* great compensation, I'm betting you'll somehow magically find that you have the best employees on the planet, who would do almost anything for the company—and do it at a very high level.
STOP . AMERICA . NOW
Thought experiment: if we did, would it become easier to start a business selling stuff to Americans?
I've been self-employed for close to a decade now, and see a good correlation between people's general state of broke-ness and whether they can spend money on MY stuff. They could increase the minimum wage to $70K and leave me OUT (as I'm an entrepreneur and earn no wage but hopefully my net profits) and I would bet you anything there is to bet, that I'd be doing better.
We're in the future, I can sell over the internet. I have ALWAYS made a significant amount of my global sales to people in 'socialist' Scandinavian countries. They have money to spend.
I wonder what proportion of the growth can be attributed to his company being in the national consciousness from the press coverage it garnered?
The article says "revenue growth rate" has doubled. That could mean anything, especially if their revenue growth rate was minuscule before. Without knowing what their growth and growth rate was before the statement means nothing.
It also says "profit" has doubled. Maybe, but I find really hard to believe that a company's "profit" has doubled in six months - especially when they didn't even say what was meant by profit.
When you're paying $70k a year, you have your choice of thousands of highly qualified, extremely productive, workers to choose from. This is not the sort of situation in which a lazy employee is likely to survive at a company. You get what you pay for - at both ends of the spectrum.
Oh, and as far as Communism is concerned,the old USSR was organized very much like a single monopolistic employer paying everyone minimum-wage. (Or paying them artificially large amounts of worthless currency.) The joke Russians then is the same that applies to minimum wage workers today: "They pretend to pay us, and we pretend to work."
Add on top of that, the modern day US teabagger's belief that you can slash taxes (to the megawealthy) with no loss in government services, and you end up with a classic example supporting the horseshoe theory (which states that extremists on both lunatic wings resemble each other far more than they do the center). In this case, both Communists and Teabaggers think you can violate basic economic principles, and get free goods and services from the government, simply by voting for it.
I was responding to the parent of what I responded to.
...his brother Lucas has to be a greedy dick willing to tank the company.
No matter your good intentions and hard work and success, you can always count on someone trying to drag you back down.
I am a skeptic of this claim..... So, his revenue doubled AND his profits doubled, which implies his expenses also doubled.....
In other reports, you will find that Dan Price has also mortgaged his house, sold all of his stock portfolio, and put ALL of the resulting $3MM into the business to give him an operating cushion.....
Question: If the company has double the revenue and double the profits, then WHY does he need to mortgage his home and cash in his stocks so he can put all of the money into the business?
So.... I am skeptical. The company is privately held, thus his accounting does not bear much outside scrutiny at all. So.... I am skeptical.
Question is whether this is a repeatable model at scale?
Did revenue grow because his employees were suddenly motivated by higher pay or because of the free PR he got as a result? I tend to think the latter. And, if that's the case, this isn't a repeatable model. If everyone started doing it, it wouldn't be a news story anymore and therefore, no free PR, no bump in revenue, just higher expense. If their business model supports higher expense, then great for them. But that won't be the case for most companies, especially public ones.
because the others obviously don't know what their are talking about.
And this started only 6 months ago. Let's look again when salaries are actually the 70k figure... Of course, higher salaries do make sense for successful tech companies... It's only when the employ manufacturing and other labor work that this would be really hard. I'm curious if they outsource things like cleaning the toilets, etc.
-- these are only opinions and they might not be mine.
the owner "paid" for the increase in employee salaries by lowering his salary.
Also worth pointing out that people are making "at least" $70,000 - which implies that some (i.e. "more valuable") people are making more than $70,000. So this isn't some sort of "commune".
Under the "nothing new under the sun" category - Henry Ford did something similar during the early days of the assembly line (1914), introducing a $5 a day minimum wage (increasing from $2.34). The problem Ford had was people hated working on an assembly line. Employees would work a relatively short time then quit. The constant hiring and training was expensive - but more than doubling the daily wage was enough to increase employee retention and actually saved the company money ...
It ain't what they call you. It's what you answer to. http://mylyceum.us/
Since the wage expenses are being phased in, they'll lag the productivity and publicity boosts to revenue. Whether these initial boosts can be sustained sufficiently to ensure future profitability is tbd. To be sure it's an interesting experiment and even should it not succeed one hopes that some progress towards supporting the middle class, as it were, will come out of it.
I'd be more inclined to believe them if they weren't trying to prove a political point here, especially when I see "AmiMoJo writes" and I know it's someone with a deep emotional investment in something other than a fair-minded evaluation of this. It's his money and he has every right to pay his employees any amount so long as it's at least minimum wage. I care more about whether this is getting a fair evaluation given that it's meant to bolster political recommendations than whether anyone freely chooses that.
And now those two employees that quit might have in in line for a nice increase. Too bad they weren't part of this good outcome.
Laws are rules for the court, but merely a bottom bar to hit for life. Think beyond laws in your actions always.
but grownups don't need to make things up in order to pretend they are better than self-important parasites.. We know we are. The sooner you grow up the sooner you will realize that and the sooner you will stop insisting that everyone else pretend that you have something usefull to add to a grownup conversation.
Wow, those are amazing results from a relatively minor investment. Just think if he had made the min salary $500,000!
I'll see your list, and raise you: Does 500k / year really seem that high now?
Your ad here. Ask me how!
I think the higher salaries are being phased in. So, I don't think the full $70k has been implemented yet. They are getting the benefit of the publicity, but not the full pain of the increased salaries. We have yet to see if the $70k salaries are sustainable as the business expands.
Lots of douche bags whining about the increased pay, yet nobody complains about CEO pay. Interesting. If employees are being paid too much, what the fuck do you call CEO compensation.
... one reason it may be working for In-N-Out is that, traditionally, fast food workers are scraping the bottom of the barrel. Worker retention is a *big* issue with fast food places. A normal issue a fast food manager has to deal with is people just not showing up for work.
On the other hand, might not at least some of that behavior be the result of the low pay, rather than inherent in the workers themselves?
If the companies pay the workers as if they expect them to take a hike with no company loyalty, is it any surprise when the workers live up to these expectations whenever it's convenient for them?
Bantam Dominique roosters crow a four-note song. Once you've heard it as "Happy BIRTHday" you can't NOT hear it that way
I hope those 30 employees continue living as if they were making $35k so it won't be a big shock when the company fails and they must obtain job at another firm that's paying the market rate for their skills.
the good ground has been paved over by suicidal maniacs
So it was the media stunt of 70k that actually benefited the company....
What if you are a company that is in business providing services to wealthy people with OCD?
In that case the janitor probably should be the highest paid employee right?
Just remember that what value we place on a job often has nothing to do with 'worth' in the sense that most people think of it. Above subsistence humans will naturally expend outrageous amounts of time doing absolutely 'worthless' things.
Know why Europeans were able to 'trick' native people into selling stuff for 'worthless' beads?
Because in the Americas many societies considered elaborately decorated clothing to be a status symbol. Something of 'worth'.
In Europe they already had early mass production mills for things like beads and one worker could turn out dozens or even hundreds of bright beads an hour.
In the Americas each single bead was painstakingly made and polished by hand. Each bead could take half a day to make or more.
Hence, from the point of view of the native people these Europeans were the crazy ones.. You want to give me a big bag of beads representing thousands of hours of hard work for this deer I killed and butchered in a single afternoon? Sure thing crazy white guy I'll take it!
But now take a big step back and see that most things we think have 'worth' are arbitrary anyway.
Some day the hottest job might be janitors because of the OCD flu of 2043.. And with the Agoraphobia Plague of 2055 everyone will want to be a 'computer worker' and then it will be keyboard jockeys complaining at why they can't get a minimum wage they can live on while all the Janitors will be bitching why should some 'sicky' who was not smart enough to be born with natural immunity to the OCD flu and Agoraphobia Plague should get payed the same as them. After all, Janitors are doing work others can't.
Remember, 50% of the population has a lower IQ than the other 50%.
They are still people, they still labor, and they deserve to be fairly compensated for the labor they perform.
Just because YOU were born with the 'unfair' advantage of intelligence, and perhaps a natural inclination or interest in a lucrative field, does not mean that people not as lucky should suffer. It is not a character flaw to be unintelligent or to lack some natural skills.
If you work a full week you should get a full week of pay. I don't care what you do.
The "common knowledge", about this, is based on calculations originally done on mechanical calculators or even by people called "computers", back before electronics.
When electronic computers came out the calculations were written in code, but it was the -same- calculations.
Talk about "over simplified" and "over averaged"!
Most of these ideas about business and economy could use some modern Engineering Analysis... 8-)
Let me know when shit doesn't block toilets, carpets sweep themselves, trash is never produced and nobody visits the offices and needs to be received at the foyer.
THEN you won't need a janitor or secretary.
Tell me, what happens when you get laid off and find H1Bs have reduced your asking pay? Sell crack?
If you want to start tracing back where we really "went off the rails" with salary increases not corresponding directly with increased buying power anymore, you find the divergence began right after America got off of the gold standard.
I've never been a big proponent of the idea that gold is the "best option" as the tangible resource to tie the dollar to, but I think the concept itself made a lot of sense. If you don't have *something* of value backing each dollar printed, you're essentially expecting people to believe in its value on sheer faith. That, in turn, opened the floodgates to devaluing the currency because the Fed could simply order more money be printed to cover the costs of any loans or government expenditures. The end result is the multi TRILLION dollar debt ceiling the government just voted to raise again last Monday, and the shrinking of your actual buying power.
Claims by Millennials that employers now believe "the less you pay someone, the harder they'll work" and the like are nonsense, and completely ignore this root problem with our money.
What *really* happened (speaking as a gen-X guy who lived through it) is we generally took to heart the advice our parents taught us, that we'd be able to get ahead with plenty of hard work and dedication. If we had an employer who promised the company would pay us overtime to work extra hours, a lot of us sacrificed and took them up on the offer. If an employer suggested there was a potential for faster career advancement by proving you went "above and beyond" what was required in a job position (often requiring working more than the standard 8 hour day), a lot of people chose to do that. Unfortunately, the value of the U.S. dollar was declining at the same time -- so that notion that putting "work first" and suffering a bit in the short term would pay off in the long term just wasn't coming true. (It would make sense to amass as much savings as possible while you're still young, so it can go into investments like a 401K plan where the money "goes to work for you" earning money just by sitting there. But people were finding they had to keep working that overtime or going "above and beyond" just to tread water.... so the "extra money" to invest didn't always materialize.)
Today's workers see that our generation failed at getting ahead with all of that extra work, so they think the answer is to rail against it and demand employers just compensate them better for doing less. They're not getting that the whole financial system is rigged against us.
I'm sure you're right- I'm not arguing against your premise. I'm just pointing out that I'm an outlier. I already know from experience that making more than 75k made me happier on a daily basis. I also have a modification for an age old adage that gets thrown around: People who say money can't buy happiness have obviously never had money.
The incentive is to not get fired from that sweet paying job, dumbass. What more motivation does one need? I know this from experience. I'm right in the heart of it everyday. I have a union job and I can tell you the lazy good for nothing union moocher is an old thing. They don't work that way anymore. The union will not protect you these days if you screw things up because they know you're screwing it up for everyone. There is absolutely nothing with 200 miles of my location that pays the $35/hr I make here. The people here are dedicated, we get the job done and do so with metric scores above 92% and have done so for the past 15 years. People don't leave here unless they retire or get rolled out on stretcher. There is no employee churn. It isn't perfect, sure. We might have one person a year get fired (out of about 2000 employees) or just leave for life reasons. You simply don't know what it means to have a well paying job with happy employees. And if you're the one running it I understand why. I'll say it again, you're part of the problem and not the solution. You're just one of those greedy conservative assholes who only want to shit on the peons. The world will be a better place when you finally die.
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Buying my lifted truck outfitted with uPhone10 and fucking beautiful whores in Amsterdam yearly IS WITHIN MY ABILITES, jackass. I went to college. I worked manual labor. I have done my time and broken my body to finally be able to afford this lifestyle. You're jealous and simply want to take it away. You can fuck right off!
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