Communication is Key

It is so interesting how acts with the best of intentions, not properly managed can backfire negatively. Many times, this is the situation we find ourselves also the cause of many problems and conflicts. I recall a sermon when a priest once said, most people fall short not because of what they do, rather many err because of their inactions.

This was the situation of in the case of Gravity Payments, a case study of my analysis of business problems class. With all good intentions and the passion for charity and equity, Dan Price took a unilateral decision to raise minimum wage of workers in his company to $70,000 (>50%). This sudden increase though seemed good and got many staff excited, it was bound to be short-lived, due to the manner in which the decision was taken.

Dan Price had taken this decision without engaging his business partner (and co-founder). He also committed about 80 per cent of the company’s profits to achieve the wage increase. He did this without thorough expert analysis and as such the decision could potentially have a negative impact the company’s survival. He had also had to reduce his own wage by 93% in other to increase the minimum wage of his employees. Therefore with all good intent, Dan erred and hurt others.

He did not think of the impact of his supposed good will to others; his brother, his immediate family, competitors and even his employees. This singular act had the potential to drastically impact the quality of life of his immediate family and dependants, as they need to make major life style adjustments due to the sudden drop in his wage. Similarly his business partner is being committed to this decision without his consent. His partner might have made other commitments in anticipation of the percentage of the Company’s profit, which he is entitled to, by virtue of the partnership. This might pose an integrity challenge on his business partner thereby tainting his image on other commitments.

Finally, Dan’s action can cause uproar in other firms as workers may begin to seek such huge increases as well. It may also dampen the morale of employees who have put in a lot of effort on their job, if remuneration wasn’t commensurate with performance. Besides, sudden raise in wages may not necessarily improve quality of life of the employees as some may rather become reckless in spending given the unplanned sudden extra funds received and may even feel a lesser sense of job security.

The learning from this case place emphasis on communication. Dan faced a legal suit from his business partner, a lot of criticism from some of his employees, the media and competitors alike. The unexpected challenges and criticisms Dan encountered could otherwise have been avoided had he properly engaged his stakeholders. In other words, communication is crucial in taking business decisions.  A novel and otherwise brilliant and well executed plan, without proper communication and engagement can easily go sour giving a negative and opposite outcome than intended.