Mostly whimsical reflections on life
Dan Price, the CEO of Gravity Payments, put a new spin on the issue of the minimum wage. He will raise the minimum wage for his employees to $70,000 per year and cut his salary to match it.
Price’s daring payroll move has more to do with income inequality than the minimum wage. Yes, a higher minimum wage will enable his workers to buy a house or pay down their college student loan debt. But something closer to pay equality – where the top guy goes from $1 million per year to $70,000 – creates a new corporate culture.
Gravity Payment employees understand their boon is being paid for by Price’s personal pay cut – and by carving out a portion of his Seattle-based credit card processing company’s $2 million-plus annual profits. Price has turned his company into a profit-sharing enterprise, and that has far more profound implications than paying a higher minimum wage.
My partners and I started our PR company 25 years ago and quickly concluded that sharing profits with employees was an important business principle. Instead of individual economic rewards, we molded profit-sharing into a team incentive. When anyone landed new work, we all benefitted. When someone found a smarter and cheaper way to do something, we all benefitted. No one, least of all me, had to walk around and demand people work harder or smarter.
Our approach – and the approach Price seems to be taking – has been validated over and over through the years. No one has to be pushed to hustle for new work. No one has to be told to get a proposal done in time so we don’t have to send it by an expensive courier.
Sometimes profit-sharing is trivialized by referring to it as bonuses. There is a difference that is more than semantic. Bonuses are typically awarded when times are good and bosses, at their discretion, agree to offer them. Profit-sharing isn’t a variable. It is a business constant, a group goal. The only thing that varies is how much and that depends on how much the enterprise earns through the collective effort of everyone on staff.
We learned early on that profit-sharing must go hand in hand with an open-book philosophy. Partners, professional staff and administrators all need to understand how the company is doing – what are its revenues and billings, how is money being spent and how much profit is being generated.
When accurate data is presented clearly to everyone, you don’t need a series of staff meetings to explain what it means. People can see the numbers and respond accordingly. And they have more incentive to respond accordingly.
Price is receiving a lot of positive media for his decision to bump up pay for his workers, and deservedly so. What may seem to some as brash will appear to others as brilliant.
In listening to Price discuss why he made the move on pay, I come away believing that he wants to spark a conversation about income inequality – and he wants to serve as an example for activist corporate CEOs to act more like leaders.
Price has ensured the loyalty of his current crew. And he likely has made his inbox a hot destination for people looking for a better-paying job in a company with a conscience. It wouldn’t be surprising if his actions don’t attract a slew of new business, notching even larger profits that he can share. As an entrepreneur, he should turn his actions into a brand that stands apart from his competitors.
But Price’s greatest contribution is in building a culture where work at his company is more than a job. He has made it an opportunity to realize the American dream of owning your own home, starting a family and giving back to the community.
Price has put his money where his mouth is. That makes him a leader to watch and follow.