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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
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.
It is fallacy to assume that, just because revenue increased some time after this thing, it was because of this thing.
I hope this revolution you're talking about is people realizing they're being lazy dumbshits. 'cause I've been working since I was 12, and I gotta tell ya, in just 18 yrs of workin', there are a lot of dumb, lazy, motherfuckers out there. They do this deliberately. If I was a business owner, I want to pay you what you're worth; just like if I was a customer, I want to buy something I can afford and what I think is valuable to me.
I am not a fan of my generation's idea of a high minimum salary. I don't earn 70k a year. And I certainly don't, absolutely, have to have it. 'cause I'm not buying lifted trucks, dropping $2,400 a month on a mortgage... and I didn't go to a college that would charge me $100k for the degree. In fact, I have enough money to pay off my student loans now, and I would be debt free -- completely.
This revolution, better be, "Fuck, I am a lazy piece of shit, and I don't deserve all the money in the world to buy toys and crap."
You don't have to have a smart phone. You don't have to have a house with 2+ acres of land. You don't have to be able to go on vacation every goddamn year to some other country. In fact, I don't.
Live. Within. Your. Abilities... and grow them if you want more.
After the revolution, when everyone is making at least $70,000/year, gasoline will be $7.00/gallon. A modest sedan will cost $45,000. Modest started homes will start at $500,000. Rent will be around $2000/month for a dump. A four year degree will cost a calm $300,000.
Maybe by then, I'll be making a quarter mil annually. Thus starts another revolution for minimum wage to be six figures.
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."
You're describing the Copenhagen area, except education is free. I like it here.
-- Make America hate again!
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.
and I gotta tell ya, in just 18 yrs of workin', there are a lot of dumb, lazy, motherfuckers out there. They do this deliberately. If I was a business owner, I want to pay you what you're
People are deliberately dumb? A business pays you what your worth and not the absolute minimum they can by any means possible?
You might want to reevaluate your own intelligence before opining on others.
Yet another AC rant that misses the point, but I'll bite, if only for the benefit of the peanut gallery.
The point of this company's $70k minimum salary is an acknowledgement of the fact that every employee is valuable to the company, including the guy who cleans up your shit when you overflow the company toilet. If a position isn't vital to a business's operation, then there's no need for the position to exist. This has nothing to do with being lazy or entitled (nor is this about to become law, so don't soil yourself just yet). It's just a business owner who seems to have no interest in the usual M.O. of keeping as many employees as possible as close to poverty as possible.
Writhe your naked ass to the mindless groove.
If they are being too lazy, why pay them at all? If you are offering a reasonable wage, you should have plenty of applicants willing to work hard and jump through hoops for the job. If your pay is crap, don't be surprised if you get crappy workers. That has nothing to do with minimum wage.
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
I'll forgo the obvious "get off my lawn" jokes..
No, you don't have to buy the lifted truck. No, you don't have to buy a house (but if you do, $2400 a month is not ridiculous - especially compared with rents in that area that are more than that), but if you want to go to a four-year college, you will be paying $100,000. My state university charges $24,000 a year. For in-state students.
No, you don't have to have a smart phone, or a house with a bunch of land, or travel for vacation. You can live like a monk and be happy with the impenetrable amount of smug you have surrounding you, while your landlord fails AGAIN to fix your toilet. These things are not necessary, but they improve your quality of life. And that's really all people want, they want a salary that allows them to have a life that they enjoy outside of work.. and for there to be an "outside of work" where you won't get fired if you don't answer the phone from some idiot VP at 9PM harassing you because you're not still at work.
For so long, we've just accepted the fact that your corporate masters are living off the sweat of your brow, leaving you with little to show for it other than massive debt (which they also make money on by investing.) It's been so long that we don't recognize what an equitable work arrangement looks like anymore - the "social contract" that used to exist between a worker and his/her employer has been demonized as socialism and laziness. Wages stagnate while productivity and profits rise, and anyone that points out this fact is immediately attacked for being greedy, lazy and/or socialist.
The Millenials don't want anything that wasn't considered reasonable 40 years ago. They want a salary that they can live on, and they want to share in the success of their employer. These are not unreasonable things. Things have gotten so twisted that the dude offering this $70k minimum salary was repeatedly harassed by his peers in the business community - one of them actually said to him "If you pay your people that much, what incentive do they have to work hard?" The whole concept of getting what you pay for when you hire workers has completely fallen off the radar, because it would eat into the profits. No, these folks think that the less you pay someone, the harder they'll work. Which is bullshit. It should be the other way around, but we've all been convinced that this needs to continue so companies can be "competitive" (read: the CEO's third mistress wants another Porsche.)
Never underestimate the power of stupid people in large groups.
I'm pretty sure that's the reason communism and socialism always fail on a country-wide scale.
Socialism always fails on a country-wide scale? Good thing nobody told that to any Scandinavian countries, Denmark, arguably many European countries, etc...
"When information is power, privacy is freedom" - Jah-Wren Ryel
I'm honestly not sure if that was sarcasm, but if Norway is a failure then I want to be on the losing side.
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
This isn't new. Henry Ford stumbled across the same thing when he paid his auto workers $5/day - an unheard of figure at the time when average pay was closer to $2/day. He didn't do it because he was feeling altruistic. His factories were suffering from huge turnover, and it was expensive having to constantly train new workers. So he figured what the hell and jacked the pay up to reduce turnover.
What he discovered quite by accident was that while the $2/day pay seemed to be favorable for the employer, it wasn't favorable for the economy overall. That is, too much of the company's income was going to the company's owners who wasted it on stupid things like gold toilet seats which don't really help the economy. A $5/day wage seemed like it would lower the company's profitability, but the boost it gave to the economy more than offset that decrease since the average worker spends a greater share of his income necessities which help the economy. Like being able to buy the cars that Ford was manufacturing. And the net effect was that his company made even more money than at $2/day.
You can see the same thing if you compare the GDP per capita of various countries. The ones with greater income inequality tend to have lower GDP per capita. This is why despite being a fiscal conservative, I've never had a problem with unions (except in government jobs where there's no fiscal counter). Their functional mechanics may not be optimal, but they serve a valuable role in the economy.
The U.S. is a stark outlier in the above graph. It has one of the highest GDP per capita, but it's been regressing in Gini coefficient for a few decades now. To me, that indicates our GDP per capita could be much higher if we could get our income distribution to be more equitable. Yes that'll mean CEOs and mutual fund managers won't be able to afford as big a superyacht. But that money in the hands of the middle class would be much more productive for the economy than cruising around enjoying the scenery while burning 10 gallons of fuel per mile. $70k as a minimum wage probably overshoots the optimal point, but we're far enough below the optimal point that I'm not surprised the dire predictions for the company didn't come true.
(And yes, I really am a fiscal conservative. What both liberals and conservatives have to realize is that they're both right. Under certain economic conditions, liberal philosophies are correct. Under other economic conditions, conservative philosophies are correct. The trick is to figure out where the transition points are and not to stick with one philosophy long after you've left the regime in the solution space where it's true. Like believing that since some regulations are good, therefore completely regulating everything to make a state-controlled economy is best. Or if that since sometimes deregulation is good, completely deregulating everything is best. Even the Henry Ford example I gave above works only up to the point where workers start to lose incentive to improve due to insufficient increase in salary from those improvements.)