Well, it sounds like a couple of people in this thread hit the nail on the head.
Well, it sounds like a couple of people in this thread hit the nail on the head.
Bug surprise. What you incentivize you get more of. In this case providing big incentives to the worst performers and least valuable employees ends up losing the company good employees. About as predictable as the sun coming up in the morning.
I really wanted to be wrong on this one.
Only 3 months have gone by since the first article. I don't think the story is finished.
If he was going to make as bold a move as he tried, snags like this would have to be expected. He certainly knew he would loose employees, and customers, and probably also knew that his brother would be mad. This was not a surprise.
So, either it's a normal bump in the road and he still could succeed, or he was already on skid row and the entire original article was a fabricated publicity stunt, a final Hail Mary before his house of cards came down.
I'll still wait and see.
Fox said: The Times said Price has dozens of new clients inspired by his move but those accounts won’t start generating profits for at least another year.
NYTimes said: Three months before the announcement, the firm had been adding 200 clients a month. In June, 350 signed up.
Dozens is like 36 or 48. An extra 150 is more than dozens, Fox News. Seems like a long term investment in the company. Successful companies are usually driven by long term investment.
Reading the NYTimes article, it doesn't seem like the company is in dire straits. Most of the trouble seems to be the legal fees because his brother sued him.
http://www.nytimes.com/2015/08/02/business/a-company-copes-with-backlash-against-the-raise-that-roared.html?_r=0
See this is why I like to leave plenty of room for bad E36 M3 happening in my plans. Guy probably never saw a lawsuit from his brother coming.
Still, I hope he can stick to them, a lot of people want to see him fail for the worst reasons.
Funny how the web developer who left was upset that other people got a bigger raise than him, and at the same time was worried that the pay was so good that he'd never want to leave. Talk about crabs-in-a-bucket mentality...I doubt they needed a new web developer for more than 10 seconds though. I'd be glad to make that $50k really count.
the real stinger here is his brother who had a 30% interest in the company. he's suing him for the money he used to pay these people because it was owed to him, and he sued him within 2 weeks of the original story. dunno if that got any news coverage.
whats really telling is what they said about the suit:
"We don’t have a margin of error to pay those legal fees,” Dan Price.
madmallard wrote: "We don’t have a margin of error to pay those legal fees,” Dan Price.
Yeah, that's concerning.
That means that they have no margin of error for virtually any unforeseen circumstance. That doesn't sound like a great plan.
If I worked there, I'd be enjoying my pay raise, but I'd be job hunting.
It is quite obvious that the most productive of the productive left him.
And now he's got "everyone else."
“He gave raises to people who have the least skills and are the least equipped to do the job, and the ones who were taking on the most didn’t get much of a bump,” Gravity financial manager Maisey McMaster, 26, told the paper. She said when she talked to Price about it, he treated her as if she was being selfish and only thinking about herself. “That really hurt me,” she said. “I was talking about not only me, but about everyone in my position.” Approaching burnout, she quit.
she shouldn't have to defend herself to ANYONE for thinking about herself, and that this guy may have done so shows he's not actually an intelligent business man, he sounds more like someone who had a good few quarters and got carried away spreading it around with an agenda statement.
and apparently had no business doing that because it wasn't even his money to do it with...
she knew she was worth more to the company than those yahoos and went somewhere where she wouldn't/shouldn't have to justify it beyond her job performance speaking for itself.
In reply to Datsun1500:
The article also said he had to hire more than a dozen people (at the new higher rate) to handle the volume of calls, etc. his publicity generated.
But that would still only account for an additional $150K.
and apparently had no business doing that because it wasn't even his money to do it with...
QFT
So maybe there is some fuzzy math going on. I'm beginning to think things already weren't going so swell already and this was a publicity stunt. Sounds he didn't clue his bro (and partner) on before the great endeavor. To think the hardworkers weren't going to get pissed shows a real lack of understanding of the human psyche.
spitfirebill wrote: So maybe there is some fuzzy math going on. I'm beginning to think things already weren't going so swell already and this was a publicity stunt. Sounds he didn't clue his bro (and partner) on before the great endeavor. To think the hardworkers weren't going to get pissed shows a real lack of understanding of the human psyche.
I agree. It was a huge mistake to not involve his brother (30% owner) in the decision. There should have been a detailed plan of how the brother would be compensated in the deal.
He may have also failed to engage some of his most important employees and get them on board.
Although, it sounds like the financial manager did drop the ball. She was involved in doing the calculations and researching the decision. She knew it in detail. Sounds like she offered him too little too late- that she reconsidered her advice after he had already made the decision, and thought she could undo it. That's not helpful.
I really wish the math made a little more sense in any of the articles.
I want to believe in this, and just can't get past my skepticism, because of the math.
His net worth is $3 million, but his annual salary was $1 million. He spends a lot- my net worth is about 10X my annual salary (used to be 20X when I made less).
They lost "dozens" of customers, yet had 12,000+ customers and growing. 0.1%. That's peanuts. They should have been loosing that many every month through normal attrition.
They increased their new customer accounts by 75% in 3 months- that's monstrous. Truly impressive (if true). Why does it take 18 months for these to show revenues? There should be a revenue stream on day 1. Seems like a bank would happily lend on the increased business.
Did their financial analysis not include ANY transitional funds?
They never should have considered simply raising the salaries of all of the people who were just "punching the clock". If the pay is going to go up significantly, so should the expectations. Sounds like he is scared to make the hard decisions and get rid of the dead wood.
He made a huge, bold move that grabbed him a LOT of publicity. He appears to be wasting the opportunity.
Not surprising this isn't going well. It truly sounds like a last ditch effort for a failing business. What he will end up with is the bottom of the employee barrel and no one left to do real work.
In reply to Datsun1500:
Are you saying it's their fault?
In reply to Datsun1500:
The employees had no say in this decision. I don't see how anyone can place any of the blame on them. Even the people who applied after the announcement. This is all on the CEO's head. If it goes under it's still all on him, he was the one who did this.
In reply to Datsun1500:
I am in agreement with you on every point with the exception of placing any blame at all, for any of this, on the employees.
What happens to those employees who are making more than they are qualified for is not relevant to my question. They are just along for the ride.
It has not yet failed. In fact, they haven't actually said the company is doing badly. They said he is renting his house.
They said the company has:
Lost a few employees (they named only 2)
Hired a dozen more
Lost a dozen customers
Increased their new customers by 150 per month (which could easily be $2 million in annual revenue)
And entered into a law suit.
This is completely within normal boundaries for what it takes to run a business.
He's gonna have to toughen up. He's gonna have to fire a few people, raise his expectations of the rest of the staff, tell his attorney to lock down his brother for a year or so, beat the bushes for new customers, play hardball with his lenders, vendors and creditors, and say goodbye to a few old customers. He will also need to create a comparable incentive for higher paid employees. He needs to build FAST on the good will he created with his publicity stunt. He probably also needs a real CFO to guide him through the uncharted waters ahead (unlike the financial manager who quit).
I don't know anything about his business. If his margin is high enough, it could theoretically work (though shareholders would never like him giving away a large percentage of the profits). But so far, the math doesn't work.
I will still wait to see the outcome, and still want to see it work.
Xceler8x wrote: Owner of a Credit Card Processor Is Setting a New Minimum Wage: $70,000 a Year "Gravity Payments founder Dan Price surprised his 120 employees Monday: After reading that money fluctuations are a big problem for those earning less than $70,000, he decided to make that the minimum wage for all the employees at his credit-card payment-processing company. To do so, Price cut his own salary from $1 million to $70,000 (CEOs make on average 300 times an average company salary), and plans to cut into company profit. Thirty people at Gravity will see their salaries double as a result."
I am the only one who +1 this
mndsm wrote: And the award for hr department that suddenly hates their CEO due to flood of applications and calls.....
6 +s on this.
WTF is wrong with you people? Someone who had a chance to effect peoples lives, and did, on his own, because he thought it the right thing to do, and this is the response.
Yeah, maybe it is time to get off of this board for awhile.
In reply to Flight Service:
If the company fails to survive, the only effect he will have on people's lives will be negative.
It just doesn't make sense as presented.
It would be like telling your wife, "I think you should sleep with that guy because he is hot", and never consider that it might end badly for you.
For any business the success or failure rests with the CEO and management team.
In reply to Flight Service:
I don't really +1 things, but I went back to page 1 just for you.
Negative opinions tend to promote more action more than positive opinions. I hope it works out for him and the company and I think he wants to do good for his employees, but anything I can say on the matter is speculation and I don't care enough to argue about something no one really knows the details on.
If he really wanted to help his employees and do good will I think a more appropriate action would have been to install a generous bonus program based on individual and company goals. Based on what I've read, and I certainly won't claim to know it all, it appears to me to be a niave decision or publicity stunt.
Datsun1500 wrote: It's not a crabs in the bucket mentality. If you're at a place and a non skilled job pays $35k, but your job pays $70k because you went to school/work more/longer/whatever it justifies your sacrifice (whatever it is). Pay the non skilled guy $70k for the same job but you don't get anything, what was your sacrifice for?
The same thing often happens due to private HR decisions rather than the CEO announcing that everyone's pay will be bumped up to an equal amount, but it usually stays secret so nobody knows whether they should be upset. The way I see it, this is a pay transparency problem - at least the people who left had all the information they needed to decide whether they were comfortable with their pay.
There are different types of people who will leave over different pay situations so any change like this is bound to cause some people to leave as the rules change around them. I just have more disdain for the types who are happy with their pay but are unhappy that someone else isn't being paid less than them for not sacrificing as much. That looks like crabs-in-a-bucket mentality to me - "If I can't have it (100% raise) then nobody should"; or "Nobody should get ahead unless I get further ahead."
I think we all nearly agree that while the math didn't (appear to) work and the idea had some faults/flaws . . . This CEO attempts (so what if it was a stunt) are much better than the usual CEO transformational/cut-n-dash tactics.
When a CEO comes along and promises millions of bucks in take out to bring profitability (usually means cutting the biggest expense to business . . . the employee population) and drives the company to near ruin to meet his personal, short term benefit (aka super bonus for cost take out), he/she isn't questioned. In fact, it seems like the norm for the CEO to remove the assets (employees) that make the company money, then stand up on an investors' call 2-3 years later and say, "I thought we would be able to turn this around, but we made some miscalculations on how long it take to recruit the right talent. That was my fault and we are working to fix it."
In my line of work, miscalculations of that size means SZ is out of work in this performance driven environment; but the CEO gets his/her millions for poor performance.
If it is true that Price took his bonus (that was approved by the brother that is bringing the suit) and decides to redistribute it among the staff . . . So be it . . . Sure beats the norm that everyone appears to accept . . .
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