Adim Effanga Written by Adim Effanga · 2 min read >

Our session on ‘Analysing Business Problem’ really made an impact on me. ‘GRAVITY PAYMENTS’ was the case we analysed. Such a phenomenal case. Initially, I thought it was a formulated story until I GOOGLE it to confirm that it was a true event.

Who does that?

Here’s a background:

GRAVITY PAYMENTS is a credit card processing and financial services company. It was founded in February by two brother, Dan, and Lucas Price. Dan Price grew up in Nampa, Idaho, was 19 years old at the time, and a freshman at Seattle Pacific University, a small Christian College. He (Dan) and his brother started the company after finding that small business owners were being overcharged by credit card companies and paying as much as 5 per cent to process their payments. While in High school, Price had worked as a salesperson in a payment processing company in California.

In April 2015, Dan Price (now 30yrs) announced that ALL employees would receive a minimum annual salary of $70,000 over the next three year. He also slashed his own annual salary from $1,000,000 to $70,000. In his words: “It is the right thing to do. I want everyone that I am partnered with at Gravity Payments to really live the fullest, best life that they can…I think that’s the (income level) where you can start to check off those life goal’s boxes- saving for college, buying a home, some of the basics, starting a family. I want everyone to have those basic opportunities”.

 He further said that his decision was informed by research which was carried out in Princeton University by a Psychologist and an Economist, which showed that emotional well-being increased because of economic compensation. That low income exacerbates emotional pain.

While it got a wave of high-fiving and clapping from most of the employees, few were not comfortable with his audacious move, hence, he was experiencing challenges from different people few months after.

Two of his best employees resigned on the grounds that Dan firstly, did not take their skills, experience, and qualification into consideration; lower staff with low skills were earning equal remuneration with them. Secondly, they didn’t like the fact that their salary was made public.

Some customers were against the “socialist” gesture and stopped their business with Gravity Payments. Other customers withdrew their businesses due to an anticipation of a fee increase, despite the repeated assurances from the company that this would not happen. Other CEOs in the same close-knit, entrepreneurial network complained that his decision made them look stingy.

Lucas Price, Dan’s older brother and co-founder of Gravity Payments, owned 30% share of the company even though he had not been in operational decisions for years. He filed a lawsuit less than two weeks after his brother’s surprising announcement. In his view, this decision was a potential threat to the company’s long-term survival and violated his rights as a minority shareholder

The Judge ruled that there was nothing wrong with Dan’s decision being that he had the higher shareholding and since he has been in operational position, he was in the best position to decide what was good for the company and its employees.

Dan Price’s decision eventually turned out to be effective. Staff achieved a high level of motivation, job, and personal satisfaction. Revenue increased significantly because of a high rate of customers who wanted to be identified with Gravity Payments. In 2020, during the lockdown, the company did not make profit, most of the staff refused to collect salaries while others agreed on a huge pay cut to keep the business running.

In 2021, staff contributed and bought Dan Price a TESLA!

From this story, I have learned that management and leadership approach is not ‘cast in stone’, it is unique. A leader must identify what works best for him and his company. I have also learned that profit should not be the only aim of running an enterprise, we should think carefully on the impact we can make in the lives of others. This will bring fulfilment that money cannot give.


OMB in General
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