Something Rare

Gravity Payments was a private credit card and financial services company. It was founded by Dan and Lucas Price in February 2004. Dan the chief executive officer started the company after finding that small business owners were being over charged by credit card companies and they were paying as much as 5 percent to process their payment. Other services provided by Gravity Payments are processing of credit cards, POS (point of sales) systems, mobile payments, working capital etc. The company’s major customers were mostly small and medium sized businesses.

In April 2015, Dan Price announced the increase in every of his employees’ annual minimum pay from $34,000 to $70,000 over the next three years Her staff strength was 120. He came up with this decision after a friend of his complained of servicing her bills and student loan on an annual income of $40,000 To implement the new wage, Dan cut his income from $1million to $70,000. Also, about 75 – 80 percent of the company’s $2.2 million will be used.

“It was the right thing to do. I want everybody that I’m partnered with at the Gravity 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’s goal boxes -saving for college, buying a home, some of the basics, starting a family. I want everyone to have those basic opportunity” Dan Price, CEO.

“There’s no perfect way to do this and no way to handle complex work place issues that doesn’t have any downsides or trade-offs. I came up with the best solution I could …I know the decision to pay everyone a living wage is controversial” Dan Price, CEO.

The ground breaking news was met with an applause and excitement by many of his employees after his media spoke person Ryan Pirkle made the announcement However, there were mixed reactions on this. While some of the employees were excitement and surprised about the new development, others were not too pleased. Two of his best employees resigned same month in which the announcement was made as the new minimum wage was just for the junior staff. Some of the skilled staff felt cheated.

Gravity Payments also received criticism from other business men especially the middle class. They believe the decision will make them look stingy Steve Duffield was worried on how the decision will impact businesses since employees are the biggest expenses and they need to manage the cost so as to survive in business. While Gravity Payments customer base increased from 200 to 350, they also lost customers for the fear of price increasement despite repeated by the company assuring them of same price rate.

The Lawsuit

Lucas Price, Dan elder brother and co-founder of Gravity Payments, owned 30 percent share in the company. He filed a lawsuit less than two weeks after the announcement. In his view, the decision was a potential threat to the company’s long term survival and violate his rights as a minority leader. This further resulted to a messy and ugly fight in the family and crisis in communication.

Hidden Questions and Observations

While Dan Price had a beautiful and brilliant idea, he took the decision without informing his management team as I believe the company would have escape the litigation from Lucas.

Also, the Human Resources team would have called his attention on the impact of raising the salary level of low skilled staff without considering high/highly skilled as this will impact the morale of the senior/skilled staff and the unskilled worker would not be motivated to be skilled.

Hopefully Dan wins the lawsuit while he re-strategies. #MMBA3