Dan Price, in 2004 founded a company called Gravity Payments with his brother as a co-founder. Dan owned 70% shares, while his brother owned a 30% minority stake. Gravity Payment is a credit card processing and financial services company that catered for small and medium-sized businesses. The company was started because Dan believed that these small and medium businesses were overcharged for credit cards and financial services. His company provided the cheapest offers in the industry by charging less than half of the industry rate. In 2008, Gravity Payment became the largest credit card processor in the state of Washington.
Dan is a man with a large heart and he, through Gravity Payment had a philanthropy mandate called Gravity Gives. This mandate cost the company 2% of its annual revenue as donations to charities and cancer research center. In addition, he has the desire for everyone to thrive well without the burden of poverty either globally or locally. One of the ways he identified to solve the problem of poverty is to address the earning income. In April 2015, Dan reviewed the minimum wage of his company to $70,000 after encountering a 2010 study conducted at Princeton University by Angus Deaton and Daniel Kahneman. The study concluded that those who made less than $75,000 were likely to experience emotional pain and job dissatisfaction. Consequently, everyone previously earning below $70,000 in his company were upgraded and now earns $70,000. For a company with a staff strength of 120 people, 70 people qualified for the bumped-up salary.
Know your stakeholders
Upon the announcement, the members of staff, especially those who received the bumped-up salary were overjoyed and surprised. But unexpectedly to Dan, some challenges arose shortly after the announcement. Some critical members of staff, especially the highly skilled ones were vexed because their raise wasn’t performance-driven. They believe they contributed more to the business’s bottom line than the lower cadre staff. Furthermore, the public announcement by Dan was a breach of their confidentiality. They didn’t want the issue of their salaries discussed in public because of increased financial pressure on the employees. Likewise, the group of fellow CEOs within the industry felt offended because Dan did not consult with them before indirectly increasing the minimum wage of the industry. This puts them in a bad light and under pressure to imitate.
To worsen the situation, Dan did not consult with his brother (who owned a 30% stake in the business) before taking and implementing the bumped-up salary. This oversight annoyed the brother, Lucas and he filed a lawsuit against Dan.
Noteworthy is that despite these challenges and the perceive negatively consequential decision by Dan, the business benefited positively. Gravity Payment grew its bottom line significantly until covid-19 struck. More surprisingly, the staff at a town hall meeting voluntarily suggested and accepted a pay cut so the business can survive the pandemic. In 2016, the staff bought Dan a Tesla car as a show of appreciation. The moral of this simply is, take care of your staff and they will, in turn, take care of your business.