Here's What Really Happened at That Company That Set a $70,000 Minimum Wage

Discussion in 'Getting Ahead: Careers, Finance and Productivity' started by samson1701, Aug 13, 2016.

  1. samson1701

    samson1701 Well-Known Member

    COMPANY: Gravity Payments
    2014 INC. 5000 RANK: 2864
    YEAR FOUNDED: 2003
    2013 REVENUE: $13.1 million
    3-YEAR GROWTH: 128%

    Before Dan Price caused a media firestorm by establishing a $70,000 minimum wage at his Seattle company, Gravity Payments... before Hollywood agents, reality-show producers, and book publishers began throwing elbows for a piece of the hip, 31-year-old entrepreneur with the shoulder-length hair and Brad Pitt looks... before Rush Limbaugh called him a socialist and Harvard Business School professors asked to study his radical experiment in paying workers... an entry-level Gravity employee named Jason Haley got really pissed off at him.

    It was late 2011. Haley was a 32-year-old phone tech earning about $35,000 a year, and he was in a sour mood. Price had noticed it, and when he spotted Haley outside on a smoking break, he approached. "Seems like something's bothering you," he said. "What's on your mind?"

    "You're ripping me off," Haley told him.

    Price was taken aback. Haley is shy, not prone to outbursts. "Your pay is based on market rates," Price said. "If you have different data, please let me know. I have no intention of ripping you off." The data doesn't matter, Haley responded: "I know your intentions are bad. You brag about how financially disciplined you are, but that just translates into me not making enough money to lead a decent life."

    Price walked away, shocked and hurt. For three days, he groused about the encounter to family and friends. "I felt horrible," he says. "Like a victim." An entrepreneur since he was a teen, Price prided himself on treating employees well at Gravity, which he co-founded in 2004 with his brother Lucas Price. Three years before, as a 16-year-old high school kid, Dan Price saw bar owners being gouged by big financial firms every time they swiped a patron's credit card. By first outsourcing technology, and then building its own systems, Gravity offered lower prices and better service, and grew rapidly for four years -- until the Great Recession nearly wiped it out. Traumatized, Price kept a lid on wages even after the economy recovered -- to save the company, of course! Why can't employees see that? Yet the more people tried to cheer him up about his wage policy, the worse Price felt.

    Finally, he realized why: Haley was right -- not only about being underpaid, but also about Price's intentions. "I was so scarred by the recession that I was proactively, and proudly, hurting my staff," he says. Thus began Price's transformation from classic entrepreneur to crusader against income inequality, set on fundamentally changing the way America does business. For three years after his face-off with Haley, Price handed out 20 percent annual raises. Profit growth continued to substantially outpace wage growth. This spring, he spent two weeks running the numbers and battling insomnia before making a dramatic announcement to his 120-member staff on April 13, inviting NBC News and The New York Times to cover it: Over the next three years, he will phase in a minimum wage of $70,000 at Gravity and immediately cut his own salary from $1.1 million to $70,000 to help fund it.

    The reaction was tsunamic, with 500 million interactions on social media and NBC's video becoming the most shared in network history. Gravity was flooded with stories from ecstatic workers elsewhere who suddenly got raises from converted bosses who tossed them out like Scrooge after his epiphany -- even, in one case, at an apparel factory in Vietnam. Price was cheered at the Aspen Ideas Festival and got an offer from The Apprentice reality-show impresario Mark Burnett to be the new Donald Trump on a show called Billion Dollar Startup. Gravity was inundated with résumés -- 4,500 in the first week alone -- including one from a high-powered 52-year-old Yahoo executive named Tammi Kroll, who was so inspired by Price that she quit her job and in September went to work for Gravity at what she insisted would be an 80-85 percent pay cut. "I spent many years chasing the money," she says. "Now I'm looking for something fun and meaningful."

    Hitting Pay Dirt
    Some of the staffers of Gravity Payments - the beneficiaries of Dan Price's wage policy.
    CREDIT: John Keatley
    Price had not only struck a nerve; he had also turbocharged a debate now raging across the American landscape, from presidential forums to barrooms to fast-food restaurants. How much -- indeed, how little -- should workers be paid? While financiers and C-suite honchos have showered themselves in compensation, most Americans haven't had a raise, in real dollars, since 2000. Especially in the wake of the recession, entrepreneurs and corporate bosses have tightly controlled costs, including wages. That boosts profits -- and bonuses. But at what cost? In a U.S. economy that is more than two-thirds consumer spending, GDP growth is chained to income growth. Workers can't spend what they don't have, nor do they have the home equity to borrow and spend. Weak wage growth helps explain why this long economic expansion has been so tepid.

    Until Price dropped his wage bomb, much of that debate was punditry. He gave it a name and a face: a modern Robin Hood helping the working class by stealing from himself -- and perhaps from shareholders of other companies whose bosses are now also putting employees ahead of profits: #imwithdan! Was it coincidence that Walmart, that paragon of parsimony, coughed up raises for its lowest-paid workers?

    Then the inevitable backlash came. Price has been pilloried on Fox News and trashed by the multimillionaire Limbaugh ("I hope this company is a case study in MBA programs on how socialism does not work, because it's gonna fail"). A Times story in July was so laden with quotes from disgruntled customers and staff that Price's worried friends called to say he always has a place to stay if things don't work out. Others accused Price of orchestrating a clever publicity stunt. ("If it was," he replies, "I'm a genius.") Shortly after Price announced his minimum, his brother Lucas sued him, claiming Dan had previously paid himself "excessive compensation" and asked the court to order Dan to buy Lucas's 30 percent share of Gravity "at fair value" or dissolve the firm. Lucas declined to comment; Dan denies his brother's claims.
  2. samson1701

    samson1701 Well-Known Member

    When asked about his brother, Dan maintains his usual upbeat, grateful attitude: "We're in such a great place with the company and Lucas helped me get here. Anything he gets, I won't begrudge. I'll be glad he got it and think he deserves it." Asked how he can remain so charitable when his own brother is suing him -- Lucas was best man at his wedding -- Price laughs and says he's been seeing a family therapist for about a year.

    Brother or not, he vows to fight fiercely to protect his company. "I will do anything to help Lucas reach his financial goals," Dan says, "as long as it doesn't lead to price increases to our merchants, decreases in services to them, pay cuts, or other types of cutbacks to our investments in our team."

    Raising your cost of doing business is generally not considered the best way to increase profits and improve market position. Yet the finish line for Price may be when he can lift his own salary up to market rate -- making it easier for the company to replace him, if necessary, and show CEOs that sacrifice by the boss is only temporary when overhauling a company's wage structure. He'd also like to get his $3 million loan back -- invested to "take us from a low to a high margin for error," he says -- but won't sweat it if that doesn't happen. "I started with nothing," he says. "I can always make enough to support myself."

    Price says establishing a $70,000 minimum wage is a moral imperative, not a business strategy. And yet he must prove the business wisdom behind it, not only to keep Gravity from sinking -- and going down with the ship himself--but also to achieve his long-term goal of transforming the business world. "I want the scorecard we have as business leaders to be not about money, but about purpose, impact, and service," he says. "I want those to be the things that we judge ourselves on."
  3. The Dark King

    The Dark King Well-Known Member

    Modern day hero. Great read fam.
  4. goodlove8

    goodlove8 Active Member

  5. samson1701

    samson1701 Well-Known Member

    Interesting read. Though, it totally glosses over the fact that him raising wages seems to be working. Why he did it isn't really the big issue in the grand scheme of things. The point is he's done something that we've been told would hurt businesses and kill jobs, but it did neither. It's done the opposite.

    This piece is a typical character assassination tactic. It tries to pull attention away from the results of the person's action (the real world changing story) and negatively focus it on why he may have done it. Also, let's make sure we throw in irrelevant and unsubstantiated allegations of spousal abuse, too, to further cloud the issue.

    As I always say, its about the policy not the person. Let's say, in the process of covering up a murder, you cured cancer. Sure, you're still a murderer and that should be dealt with, but you freakin' cured cancer. That's huge news and should be researched further to see why what you did worked and how we can expand the process so everyone can have this new cure for cancer.

    What he did was a threat to what CEO's have been telling us for decades. Of course he's going to get dragged through the mud. They can't let this new way of thinking take hold. Expect more attacks on his reputation, character and motivations as this story becomes more popular with the release of his book.
  6. The Dark King

    The Dark King Well-Known Member

    Wish I could rep you but yes this exactly.
    I have theory called the goat theory.

    If I save you from a burning building
    Cure your kids of cancer
    Feed the homeless I'm a hero but let me fuck one goat then I'm TDK the goat fucker and that's all I'll be remembered for.
  7. goodlove8

    goodlove8 Active Member

    Yeah I was thinking the same thing to a point.

    There was another article that showed the down side of the hike. I'll have to find it though. This move will be closely watched for a long time
  8. The Dark King

    The Dark King Well-Known Member

    I seriously don't get why working folks would have an issue with this. Working and getting paid enough to live a good life should be the floor in my opinion not the ceiling.
  9. DudeNY12

    DudeNY12 Well-Known Member

    Agreed! We've been hearing all kinds of theories (along political lines, of course) of how protections and such would hurt businesses, kill jobs, etc. Those same people defend higher prices, insane new fees (like in the airline and banking industry. It's obviously all about the bottom line regardless of what they have to do/not do.

    I've been a Costco customer for about 10 years now. Once I heard about how well Costco treats it's employees... I've been totally committed to staying with them over rival Sam's club.
  10. goodlove8

    goodlove8 Active Member


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