General

GRAVITY PAYMENT CASE EXECUTIVE SUMMARY

Chukwunalu Analogbei Written by Chuks · 1 min read >

Gravity Payments was a financial service company that processes private credit card payments in Seattle, Washington, USA

They provided financial services like credit card processing, POS (Point of Sales) system, mobile payments, working capital financing, and gift and loyalty cards

It was founded in February 2004 by 2 brothers: Dan and Lucas Price

Dan Price was 19-years old when the company started, after finding out that credit companies were overcharging small business owners, as much as 5% to process their payments

The company grew in 2008 and became the largest credit card processor in the state of Washington, serving more than 15% of small businesses in the Seattle area

Gravity Payment had had a philanthropic mandate since its beginning, donating 2% of the company revenue to charity through the “Gravity Gives” program launched in March 2008

In April 2015, Dan Price the 30-years-old Chief Executive Officer announced an increase in the annual minimum wage to $70,000 for all his 120 employees at Gravity Payments.

Mr. Price took this decision based on a study conducted by Daniel Kahneman and Angus Deaton, that emotional well-being increased with economic compensation, but only up to about $75,000

He wants workers in Gravity to live the best life they can, thereby challenging the long-standing income inequality problem in the U.S

The decision has a good side and the downsides: huge publicity, client base increased from 200/ month to 350, they receive more than 5,000 resumes in just one day and some old staff that were happy with the decision to leave the company

Annual Revenue of $150m USD from $6billion transactions and expected yearly profit of $2.2m in 2015 would be plowed into salary increase for card business that has thin margin structure

Dan Price started experiencing unexpected challenges and need to decide what should be done to deal with different reactions from company employees, customers, media, and his brother?

Problem Statement

What is the issue at Hand: Dan Price is facing different unexpected challenges after raising staff annual minimum salary to $70,000 USD?

Objective

Maintain the staff minimum wage increase and deal with the different reactions arising from the decision

Continue Paying $70,000 annual minimum wage and continue to thrive in business

Alternatives

What are the available options?

Reverse his decision

Reduce to a smaller raise with the opportunity to gain a future increase with more experience

Continue with the decision and deal with the reactions

Criteria

What will be impacted by my decision

Business sustainability

Employee morale and Work Ethic

Compensation plan

politics – wealth gap in the society

Decision Criteria

What is the cost implication of the annual salary increase? Dollar value

Will Gravity still be profitable in 2015?

How long can they sustain the salary increase and remain profitable?

Important Note

Life evaluation and emotional wellbeing are differently effectively affected by life’s circumstances. For example, emotional wellbeing, although not life evaluation, is better at weekends. College graduates have higher life evaluations but do not have better emotional wellbeing.

Take-Home Message

High incomes don’t bring you happiness, but they do bring you a life that you think is better,

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