…my goal when making this decision was for other business leaders to recognize that you can pay a living wage and not only survive, but thrive…Dan Price
Profit motivates the bulk of businesses, which I’m not against; after all, individuals go into business to make profit, offer value, and create an impact. They just overlook the last two. Workforce salaries are considered as expenses that must be kept to a minimum and many employees have suffered as a result of management’s drive to maximize profits at any cost. In many circumstances, this is true, but not in the case of Gravity Payments.
In 2015, CEO of Gravity Payments, Dan Price took an unprecedented step; he announced a plan to increase salary to $70,000 for each of his 120 employees, in part by accepting a pay cut himself. Dan reduced his income from $1,000,000 to $70,000. He got the notion after chatting with a buddy who made less money than he did. He had also read a research by Angus Deaton and Daniel Kahneman that showed that emotional wellbeing increased with income compensation. The study also indicated that low income perpetuates the agony of emotional trauma and that high earnings buys life pleasure, not necessarily happiness.
Dan had come to feel that by making the decision, the firm would be better served by devoted employees who felt appreciated, lived in a stress-free atmosphere, and thus stayed with the company longer.
Get to know Dan Price
- He was a tremendous philanthropist.
- He founded his financial services firm at the age of 19 and now owned 70% of the company, with Lucas Price, his brother, owning 30%.
- He was genuinely concerned about the well-being of his staff.
- He questioned the wage disparities in the United States.
Dan was laughed at and humiliated when he was interviewed on FOX News at the onset of this revelation. They predicted his company’s failure and accused him of being a socialist; other business owners claimed he made them appear stingy. At the news station, the FOX employees who escorted him into the program room emceed by seven-figure hosts, on the other hand, told him that they couldn’t make ends meet on their minimum wage at their current job and cheered him for his act. (Imagine that)
In the weeks that followed, the firm was repeatedly chastised by the press, which expressed the hopes of it becoming “a case study in MBA schools on how socialism does not work because it is doomed for failure.”
GP then faced a lawsuit immediately after Dan announced the 70,000 living wage, from Lucas Price, his brother, who claimed that Dan’s action threatened the organization’s long-term sustainability.
Fast forward a few years…
Dan Price reports that six years after making the decision that many predicted would destroy his business, his revenue has tripled, the customer base has doubled, 70 percent of his employees have paid off debt, many have purchased their first homes, charitable donations have increased by 155 percent, the company won the lawsuit and turnover has decreased by half. His company is now the subject of a Harvard Business School case study. (In your face, FOX!)
Dan claims that during the outset of the COVID pandemic, they lost 55 percent of their sales instantly. To avoid layoffs, his loyal staff offered to accept temporary salary cuts. They all made it through the storm after which he willfully compensated them and is now also providing salary increases.
Dan Price chose to swirl up a circle of pleasure and prosperity rather than down the spiral of dread and poverty. Dan’s gesture was incredible not just for his employees, but for the whole industry, and it has become a model for firms all around the world, with business owners imitating his example.
Well, I’m going to send my CV to GravityPayment, see ya!