The Gravity Payments announcement that the CEO, Dan Price, was taking a $930,000 pay cut to pay his team a minimum wage of $70,000 has recently caught headlines again because it doesn’t seem to be working.
It would be easy to point out the obvious problem with this approach, the same one Walmart is experiencing when they raised their minimum wage, that when you pay people for just showing up, you violate the social contract that employers and employees have that more talented, hard-working employees should earn more.
In other words, when people don’t earn a raise, (i.e. it’s just given to you as a minimum) it upsets those who have earned a similar raise or a very close amount.
However, that’s not the biggest problem with the Gravity Payments minimum wage.
The biggest problem, as-is generally the case, was Price’s ego.
If Mr. Price’s primary motivation was improving the way of life for his team members and he was happy to redistribute his wealth to do so, that would truly be a noble and generous act.
To ensure it’s success he only had to do 1 thing:
NOT TELL ANYONE
Had Price met with each person individually on his staff who was making less than $70k/year and told them, “Hey, I think you deserve an increase in pay and we can’t afford to do it all at once but over the next few years, we’re going to work hard to bump you up to $70,000/year,” it would have likely been an extremely successful adjustment.
- The longer term employees would not have felt unfairly treated because other, less-effective team members were now making as much as them.
- The people who received the raises would have actually worked harder (particularly if he gave them specific, actionable feedback as to WHY they received the raise).
- The public, political pundits and the press would have not ever known about it to debate it and his customers wouldn’t have left because of his perceived socialist experiment.
Price, unfortunately decided to take a different approach.
He setup a video camera, held a company-wide meeting, recorded himself announcing the minimum wage to his team and then shared that video with the media heralding himself as a generous and benevolent leader.
His actions fall under a simple concept I try to live by, “If you have to tell people you’re smart, funny or nice, you’re not.”
In other words, because he had to prove to the world that he is such a great guy and an example to be modeled by CEO’s everywhere, his plan backfired.
If he was a looking only to improve the lives of his team and never told anyone that he took a $930,000/year pay cut to help them, he would have been a great leader because his concern would have been solely for others.
So the question is, if it was that simple to execute properly, and it was, why didn’t he do that?
Since I don’t know Price, my insights about him come mostly from his actions however these 4 explanations are more of a reflection on shortcomings all successful entrepreneurs will struggle with at some point in our growth.
- Ego – “Pride comes before the fall”, are words that ring true for all of us and who wouldn’t want to become the national face of such a hot topic?
- Greed – Let’s face it, when you stage something like this along with video recording the meeting and interviews on national TV, you are trying to get free exposure to your business. There’s nothing at all wrong with free publicity. Unless you do it at the expense of your team while claiming it’s for their benefit. My guess is Price took a calculated risk to temporarily reduce his pay and then increase his income again (through a salary increase, dividends, a stock sale or sale of the entire business) as a result of increased sales coming from the low-cost PR.
- Political Agenda – Being a 31 year old with a 7-figure salary tends to inflate your self-worth so potentially he thought he could be the first person to prove socialism works. Or maybe he just thought of it as charity since he was donating his own salary and profits. (And by me mentioning this am I hypocritically pushing my political agenda? Sorry, it’s hard not to do.)
- Lack of leadership – As Simon Sinek reminds us, great leaders eat last. It doesn’t work the same way when you do something good so you can get personal media attention to show everyone how great you are.
This may look like I’m picking on Price…
Ok, I am.
But, unfortunately, this would be an instance of the pot calling the kettle black as I’m surely guilty of ego-driven mistakes in business.
However, when a situation this unique and popular comes to the forefront due to national media attention, it gives us the opportunity to learn.
And that’s my goal. To articulate both the good intentions and poor execution of this strategy, and separate the 2.
Dan Price appears to be a sincere, hard-working, intelligent and successful guy and his mistakes in executing a $70,000 minimum wage don’t change that.
Hopefully, this will help him, and other business leaders, consider that you CAN achieve seemingly impossible things (like a $70k minimum wage) when you become a servant leader and put the needs of your team ahead of your own ego.
Dan, if you read this, I truly appreciate your good intentions and hope my advice can help you execute better servant leadership going forward since that appears to be your goal.
To humble, servant leadership, Bryan