In April, Dan Price, CEO of the of the credit card payment processor Gravity Payments, left employees, customers, and the media dumbfounded when he announced he would raise minimum pay for all employees to at least $70,000 a year.
The move drew the ire of his brother Lucas, who claimed that, as co-founder, the pay raise infringed upon his rights as a minority shareholder.
But Price's unorthodox strategy has paid huge dividends for the company. Revenue and profits have doubled since, with customer retention rising from 91 to 95 percent. A few weeks after Price made the initial announcement, the company was barraged with over 4,000 resumes and saw a huge surge in customer inquiries.
Price began giving out 20 percent annual raises to his staff after in 2011 after an employee complained over low pay. Thanks in part to a productivity increase of 30-40 percent, profit was still comparable to that of the prior year. He handed out the same raised the next year and achieved the same outcome.
Now the company is aiming to implement larger pay increases, a plan that will cost close to $2 million. To cover the cost, Price cut his own pay to $70,000 from $1.1 million. He also drained his retirement accounts, sold all his stocks, and mortgaged two properties to pour $3 million into the company. He's also pledged not to fire employees, raise prices, or cut executive pay to make his plan work.
Dan Price clearly foresaw the potential payoff from rewarding employees with higher salaries. Either that, or he did his research: Studies show that raising pay increases performance and productivity, reduces turnover, improves customer service, and attracts better job candidates, all of which can lead to higher sales and lower costs. It's a great domino effect for the company, to be sure.
I just wonder how the company manages the overwhelming volume of job applications it is receiving. I would assume they've had to hire a dedicated staff of human resources managers to get things under control.
I think many CEOs in Corporate America would be wise to follow Price's example. Unfortunately, despite many people working harder today than ever before, they haven't seen a pay increase in years.
The move drew the ire of his brother Lucas, who claimed that, as co-founder, the pay raise infringed upon his rights as a minority shareholder.
But Price's unorthodox strategy has paid huge dividends for the company. Revenue and profits have doubled since, with customer retention rising from 91 to 95 percent. A few weeks after Price made the initial announcement, the company was barraged with over 4,000 resumes and saw a huge surge in customer inquiries.
Price began giving out 20 percent annual raises to his staff after in 2011 after an employee complained over low pay. Thanks in part to a productivity increase of 30-40 percent, profit was still comparable to that of the prior year. He handed out the same raised the next year and achieved the same outcome.
Now the company is aiming to implement larger pay increases, a plan that will cost close to $2 million. To cover the cost, Price cut his own pay to $70,000 from $1.1 million. He also drained his retirement accounts, sold all his stocks, and mortgaged two properties to pour $3 million into the company. He's also pledged not to fire employees, raise prices, or cut executive pay to make his plan work.
Dan Price clearly foresaw the potential payoff from rewarding employees with higher salaries. Either that, or he did his research: Studies show that raising pay increases performance and productivity, reduces turnover, improves customer service, and attracts better job candidates, all of which can lead to higher sales and lower costs. It's a great domino effect for the company, to be sure.
I just wonder how the company manages the overwhelming volume of job applications it is receiving. I would assume they've had to hire a dedicated staff of human resources managers to get things under control.
I think many CEOs in Corporate America would be wise to follow Price's example. Unfortunately, despite many people working harder today than ever before, they haven't seen a pay increase in years.
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