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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.
It is fallacy to assume that, just because revenue increased some time after this thing, it was because of this thing.
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."
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.
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
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.
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
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/
... 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