Remember that story a few days ago about Dan Price, the young CEO of payment processor Gravity Payments? (see: story)
He announced to his staff (and the world) that the new minimum wage in his company would be $70,000. That $70,000 minimum would be phased into 3 years and he would take a cut from his own million dollar salary to achieve this. Seventy thousand statistically is the sweet spot for employee happiness and the gesture seemed incredible to an outside world where CEOs and staff have very different pay scales.
I got a few messages and texts asking me if I heard about it. For the most part the messages came from people who would otherwise have limited to no knowledge about the payment processing industry, but now knew about Dan Price and Gravity Payments. I’m sure the fact that Price vaguely resembles Tom Brady (pictured below) helped my wife take notice—but that is another topic for another blog).
The coverage Price and Gravity Payments have received since making the announcement illustrates something: their move to make the minimum wage in their company (regardless of position) $70,000 is less a statement about the minimum wage and income inequality as a whole, and more a brilliant strategic move on their part.
Here are a few reasons why.
1. Their potential customers just became very aware of them.
Gravity Payments had to be doing okay, or they wouldn’t be able to afford this initiative, even with the CEO taking a pay cut. However, I’m guessing the payment processing industry is an industry that is hard to gain strategic advantages in. There are only so many ways to process payments, and in any industry like that, competition comes down to price. No one wants to compete on price—it’s a race to the bottom.
Gravity’s announcement made themselves heard in a way that a traditional marketing campaign could never do. And it made them heard to just their customers, but their customer’s customer.
2. Their customer’s customer just became aware of them.
I have worked in industries that provided services to businesses that the customer never saw. Paper shredding, for example. Does a patient care who shreds medical records at a clinic? They care that their privacy is protected, but they don’t really care which company does the shredding. Do you care who the payment processor is in your online transaction?
You might now.
Consumers (and, contrary to conventional “wisdom”, not just millennials) care about how the companies they do business with treat their employees and impact their communities. A “processed by Gravity Payments” logo or statement may become more meaningful to some consumers (and to the retailer) in a way that other payment processor relationships could never be.
3. Gravity Payments just strengthened their talent pool.
It’s nice to like what you do. However, people still go to work because they get paid. Money isn’t the only thing that matters, but we all have responsibilities and bills to pay. A minimum wage of $70,000 will improve the quality of applicants for open positions, and help motivate existing employees to continue performing at a high-level. In the article I read a few employees said their salaries would move from $40,000-$45,000 to $70,000.
That kind of salary increase is life changing. I was fortunate enough to experience it, and it meant I became a home owner, which at one point in my life felt like an unreachable goal.
To know that working at Gravity Payments could fundamentally change your life will inevitably attract and retain a higher caliber employee. Employees, all the way down to whatever the position is that rests at the bottom of the org chart, will be highly qualified assets.
The minimum salary at Gravity Payments may be $70,000 once Price’s plan is implemented, but it won’t be the maximum. With a team of people who had to compete with a large pool of applicants for every position in the company, Gravity will have a pool of intellectual capital that will likely result in higher maximum salaries.
Rather than the trickle-down economics we’ve heard about for the last thirty years, what is happening at Gravity Payments is an experiment in trickle-up economics.
Your Small Slice of the World
While I don’t know what the solution is for income inequality on a societal level, Dan Price seems to be genuinely committed to doing something about it in his small slice of the world. And even if that wasn’t his primary motivation, and he was more motivated by the potential bottom-line benefits to the business he started, all the better.
Because when an issue is big, like income inequality, the solution will take people doing what they can in their own small slice of the world, and business leaders seeing a bottom-line benefit to making socially conscious decisions.
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