While most companies are playing “corporation,” Dan Price is redefining business as “cooperation”
By Alan Trapulionis
By April 2020, Gravity Payments revenues were down by 55% compared to the previous month. As a payments company, their revenues are directly dependent on the overall sales volume — which was down significantly amidst the accelerating Covid-19 panic.
Dan Price, the CEO of the company, had a tough choice to make. In a Tweet, he said that he could either fire 40 employees (20 percent of his staff,) or he could go bankrupt.
Instead, he did something that so many leaders never think of. He asked his employees for help.
I spent 40 hours talking with every employee about our finances and asked for ideas.
The result was magical. Six employees offered to sacrifice their paycheck altogether for a few months. More than 20 people agreed to give up half of their paycheck. Even those with serious financial commitments volunteered to chip in.
These savings gave Gravity an additional 9-to-12 months of runway, and, in the end, all 200 employees retained their jobs.
However, that is not the most amazing thing Dan Price has done.
Dan Price’s $70k Minimum Salary Policy Pays Off, Big Time
In 2015, Dan Price shocked the business world by taking a personal $1M pay cut to raise his company’s minimum salary to $70,000 a year. He was called a “socialist and communist” publicly. Gravity lost several customers — who either considered the move to be political or expected an increase in fees. Two of Gravity’s higher-paid employees left, considering the raise unfair to them.
Only time could tell whether Price’s philanthropic ideas would do well in capitalism. And it did.
In just 5 years, Gravity Payments’ processing volume has gone from $3.8 billion to $10.2 billion. However, as BBC’s Stephanie Hegarty put it, there are other metrics Price was proud of.
“Before the $70,000 minimum wage, we were having between zero and two babies born per year among the team,” he says.
“And since the announcement — and it’s been only about four-and-a-half years — we’ve had more than 40 babies.”
Hegarty further reports that before the pay rise, less than 1% of the company could buy their own homes (Seattle isn’t exactly a cheap area to live in.) Five years after the dramatic pay rise, 10% of the company’s employees have their own homes.
“Give, And You Shall Receive”
There’s a less-glamorous part to this story: Gravity’s almost threefold-rise in processing volume may be caused by all the buzz created by Price’s move, instead of the actual value created by the company.
Dan Price is now a public figure — but he wasn’t one before. Until 2015, Price was a low-key CEO from Seattle. After 2015, Price has become a study subject for Harvard professors, an inspiration for good-willed entrepreneurs and somewhat of a Jesus figure for job seekers.
He credits the growth of his company to the 2015 pay rise, but, having been covered by pretty much every major outlet in the country, I think it wouldn’t be a stretch to say that Gravity grew on account of that.
Price shares inspirational stories from within Gravity. One guy, he says, has lost more than 50lb as he could afford to spend more money on health. Another Gravity employee, who was commuting for over 1.5 hours every day to work, used to stress about having a flat tire — because he couldn’t pay for it. That changed after the pay rise.
Price says he’s disappointed more companies didn’t follow suit. However, if most of Gravity’s growth came from philanthropy-marketing, this particular storyline has been used up already — and there’s no reason for others to join the ride.
There is one lesson from all of this: doing extraordinary things for your employees attracts plenty of media attention. And, with some luck, that can very well turn into real business growth.