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home / study / business / operations management / operations management questions and answers / a few years ago, dan price, ceo of gravity payments, which processes credit card transactions ... Question: A few years ago, Dan Price, CEO of Gravity Payments, which processes credit card transactions for... A few years ago, Dan Price, CEO of Gravity Payments, which processes credit card transactions for businesses, announced that the minimum employee annual pay would be increased by the end of 2017 to $70,000. He also announced that as part of the plan to fund the pay increase for employees, he would reduce his own annual compensation from roughly $1 million to $70,000, at least until profits increased enough for him to feel he should be paid more. The new pay policy would result in 70 out of the company’s then 120 employees receiving a pay increase. Price’s rationale for the pay increase was “so people who are giving their blood, sweat and tears for our clients can live a normal life and pay their bills.” To put it mildly, Price’s announcement drew a lot of attention and generated conflicting opinions. Describe as fully as possible the rationale given by Dan Price for the pay increase. What additional data (for example, on which outcomes) would you like to have to evaluate whether the pay increase was a good idea, and which measures are the company using? How has the company fared since implementing this decision? Has this been implemented anywhere else? What other companies are significantly increasing their minimum wage and for what reasons? What is your overall assessment whether raising the minimum pay for all employees to $70,000 was a good idea? Be sure to think not only from a personal perspective but also from an internal/external and organizational perspective

Answer 1

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The rationale behind Dan price decision could be that employees are very important and valuable for companies. they give their best efforts when they are motivated. I would link his rational from motivational theories in which employees are motivated when they have higher salary or get pay increase. He does not only increase minimum salary but also decrease his annual compensation from $1 million to $70K which shows his moral values that he is not money oriented while he is people oriented.

there are companies which increases the minimum pay raise like Beginning on Nov. 1, Amazon raised its minimum wage to $15 per hour for the company's 250,000 full and part-time employees, as well as for its nearly 100,000 seasonal employees.

The wholesale retailer announced in June that it was raising its minimum wage to $14 per hour from $13. Costco pays employees some of the highest wages among U.S. retailers, with the average hourly salary of $22.50.

I think this was not a good idea based on my personal as well as organizational perspective because of this decision, there are chances of conflict between employees as well sibling of the Dan price who sue him this decision.

The new pay policy would result in 70 out of the company’s then 120 employees receiving a pay increase. this means all employees were not getting pay raise means all of them will have some sense of insecurity, low morale because 70 employees were getting pay raise while remaining were not which is not fair.

The change lost the company two long-standing employees due to the flat payment structure.(Cohen, Patrica ,2015 )

In October 2015, Dan Price was sued by his brother and co-founder Lucas Price over claims that Dan received excessive compensation and that he had been working against Lucas' interests. Dan prevailed in the case on July 8th, 2016 and was awarded attorney's fees and other expenses incurred from the lawsuit. (Bishop, Todd ,2016)

The company processed $3.4 billion in payments in 2014 and $10.2 billion in 2018.( Kristof, Nicholas ,2019)

so, overall i can say that his decision lead to employee dissatisfaction in some of the employees and legal cases outside his business by his brother which is not good sign of this decision.

refenece-

Cohen, Patrica (2015-07-31). "A Company Copes With Backlash Against the Raise That Roared". The New York Times. Retrieved 2015-08-20.

Bishop, Todd (2016-07-08). "Dan Price, the '$70k CEO,' prevails in lawsuit filed by his brother and Gravity Payments co-owner". Geekwire. Retrieved 2016-07-21.

Kristof, Nicholas (30 March 2019). "Opinion - The $70,000-a-Year Minimum Wage" – via NYTimes.com.