Gravity Payments The Common Good or Too Much

Gravity Payments: The Common Good, or Too Much in Common? Chris Kinkor BUS 479

Preview • What/Who is Gravity Payments? • Why are they relevant • What they did • Positive and Negative Consequences • Advancing the Common Good – Catholic Social Teaching – HR view on Compensation • My Thoughts – Q&A

• Credit Card Processing company established in Seattle, Washington back in 2004 • Specializes in helping small community businesses through customer service, consulting, and accepting credit card payments • Values-driven company culture

Dan Price, CEO • Founded company with brother, Lucas • Colleague complained about $35, 000 salary • College friend struggled on $40, 000 salary – Compared to Gravity Payments salaries • Heard happiness comes at $70, 000 salary • Then came the radical decision

• Old Minimum Salary: ~$35, 000 (CEO made $1. 3 million) • Experiment (2011 -14): Raised salaries by 20% per year • New Minimum (2014) $70, 000 for ALL positions

Consequences! Positive Negative • Applications skyrocketed • Lucas (Dan’s brother) files lawsuit – Over 4, 500 one week after announcement • New monthly customer inquiries: – From 30/month to 2000/month – Reduced cost of doing business • Increased Customer Retention – 91 -95% (Industry Average 68%) • Revenue and Profits doubled since announcement – Estimated $1 million in legal fees • Employee backlash – Claimed it was a “political stance” – Only helps least-skilled workers • Had to sacrifice big time – Mortgaged his house – Emptied retirement accounts – Sold his stocks and assets to pay for the salary hikes – Still may not afford it

Advancing the Common Good • Catholic Social Teaching • Socialism/Marxism – Quadragessimo Anno – Centessimus Annus – Deuteronomy 24: 15 – Proletariat vs. Bourgeois – Stresses material equality for all • Adam Smith/ Free • Stresses Dignity of Market Theorists Work, Rights of Workers – Invisible Hand • Values Labor over – Eschews Government in Capital, Minimum Wage favor of businesses

The HR Perspective on Compensation • Job Documentation – Job Analysis • Job Evaluation – Job Families • Pay Structures – Bands, Zones • Market Surveys • Performance Leadership

My Opinion/Analysis • Mr. Price had great intentions – Aimed to further the Common Good – Undoubtedly helped lower-end employees – However, not ideal execution/planning • Negative externalities – Too Much + Too Soon = Too Bad – Future Suggestions: Phase in Wage Hikes; Raise Proportionally to others

For Next Time… • Consult Compensation Professionals • Be Consistent • Think Gradual QUESTIONS?