CEO Dan Price shows his team the meaning of employee appreciation.
In 2015, Dan Price, the CEO of credit card processing company Gravity Payments, changed his focus. He realized he needed to show true employee appreciation for his staff’s hard work and reward them. He made headlines by raising everyone’s salary. In fact, he made the lowest salary in the company $70,000.
He’s Bound to Fail
The financial industry was up in arms. Conservative television and radio hosts said he would absolutely fail. One even said it would likely be studied in MBA courses on business failures. They expected his business to go bankrupt quickly. But it didn’t play out that way.
The COVID-19 Impact
Six years and one pandemic later, Dan and his business are thriving. He admits that the pandemic did hit their bottom line by 55%. Gravity Payments was close to going under. The employees who he took care of decided to return the favor. The staff volunteered to take huge pay cuts (40-60%) to help keep the business afloat. This allowed Gravity Payments to not only stay afloat but continue to grow.
How He Did It
In order to make his $70,000 rule work, Dan had to take a huge cut in pay, to the tune of one million dollars per year. He downsized and sold his second home. He now lives at the same $70,000 salary that his lowest paid employees do. And yes, that means that many make more than their CEO. But it paid him and his company back many times over.
The Value of Happy Employees
The increase in salaries of Dan’s employees allowed them to do things they couldn’t before. Some employees actually had their $35,000 salary doubled. This enabled many to buy houses (a 10x increase in home purchase by employees) and start their families (more than 60 children born to employees in six years). Employee attrition was halved. The number of employees doubled. And the business tripled.
The Successful Formula
Dan’s reasoning is simple. The happier employees who feel truly rewarded and valued stay longer. They care about their job and being successful at it are important to them. Staying longer at the job makes them better and more efficient, which improves the customer experience. And he just leads a happier life this way.
The formula has been so successful that Gravity Payments was able to not only survive the difficulties of the pandemic, they made so much that Dan could pay back his employees all of the money they sacrificed to keep the company afloat. And what did they do for their $70k per year CEO that sacrifices so they know how valued they are? They pooled their money and bought him his dream car as a present.
Dan Price is a visionary and leader who chose to go against what is common and break his own ground. He, his employees and his company are all better for it.
Read more about Dan here.
Special segment about Dan on CBS Mornings
Dan’s book Worth It is available on Amazon.com and probably everywhere else.
This blog was originally written as a case study as part of my Masters in Leadership Studies program at Northern Vermont University.