Perhaps you’ve heard of CEO Dan Price and his company, Gravity Payments.
Price made headlines five years ago when he did two things. He instituted a minimum salary of $70,000 for all 120 employees at his credit card processing company. He also lowered his pay from a little over $1 million to $70,000. More on this in a bit.
With the ongoing economic crisis caused by COVID-19, Price and Gravity Payments have faced the same issues many businesses are currently confronting. Mainly, plummeting revenue and massive layoffs that have been hallmarks of the economic catastrophe caused by the spread of the novel coronavirus.
At Gravity Payments, revenue dropped 50%, or about $1.5 million a month. With those losses mounting, Price was looking at needing to layoff about 20% of his workforce, or about 45 employees, to survive. That solution was, of course, less than ideal.
Another potential solution was for Price to raise the price he was charging his customers by about $20. Since most of Gravity Payments’ customers are small businesses and already suffering huge losses, that solution was deemed untenable. Even with the price increase, Gravity Payments would still need to add 15,000 new customers to weather the storm.
“Across all of our merchants, there was a 55% drop in revenue over the last month,” Price recently told Fast Company. “That is a bigger decrease than during 9/11 and during the Great Recession.”
Like his move five years before, Price looked for, and found, a unique solution that would keep his company going while still looking out for his employees. The first thing he did was to have an all-hands-on-deck meeting with everyone in the company to describe the situation Gravity Payments was in and elicit creative solutions.
Next, along with his COO, he scheduled 40 one-hour group meetings with all of his employees. They asked for ideas from them for ways to get through the looming difficult months ahead.
“We just put all our cards on the table,” Price said. “And we listened.”
An unconventional, yet creative, solution emerged from those meetings.
Employees agreed with Price. Raising the prices for their struggling customers wouldn’t work. They also agreed on a move reminiscent of Price’s decision five years earlier to lower his salary for the benefit of all. 98% of the 220 workers at the company were willing to take less pay in order to avoid layoffs and keep the company going.
The financial sacrifice each employee could afford to make varied depending on the circumstances of each individual. So, they asked everyone to confidentiality fill out a form stating how much they were willing to give up. In the end, nearly every employee offered to give up some percentage of their salary. That percentage ranged from 100% from 10 employees to 5% from those that had financial obligations. Price also eliminated his salary.
The salary reductions resulted in 20% less in salary costs. The cuts won’t be permanent, but the savings bought Gravity Payments nine to 12 months to get through the crisis.
“This has bought us a lot of time,” Price said. “That could mean the difference between surviving as a business or going under.”
As mentioned above, it was in 2015 that Price became nationally recognized when he phased in a minimum $70,000 salary for all of his employees. At the time, the move was met with equal parts adulation and skepticism. There were those that called him a socialist or otherwise questioned his motives. Maybe it was all just a PR stunt or a move to avoid a lawsuit from his brother and co-owner of Gravity Payments.
However, as we all know, actions speak louder than words. Price knew that, too, and answered his critics, in part, by putting his money where his mouth was. To make such a move possible, Price cashed out his retirement accounts, mortgaged two properties he owns, and sold all of his stocks. He was all in.
Although Gravity Payments lost some customers, the move ultimately paid off. Revenue increased, profits doubled, and new customers more than replaced those that had left. Even more important to Price, employees’ quality of life soared. More people were able to purchase homes, pay off debt, and have kids.
"It's worked very well for us. I'm pleased that we're making progress and that people's lives are better,” Price told the CBC. “I'm happier than I've ever been. I don't miss those other things," he said. "It's way better for me to be part of a system where people are having their needs being met, even if I have less."
This news article is part of a set inspired by the late Fred Rogers, the iconic host of the child-friendly educational TV show Mister Rogers’ Neighborhood. While it was intended to offer comfort to children, it’s something that can serve all of us well right now.
“When I was a boy and I would see scary things in the news, my mother would say to me, ‘Look for the helpers. You will always find people who are helping’.”
So I’ve been looking for the helpers. Of course, they’re easy to find in our healthcare workers, delivery drivers, postal service employees, and grocery store clerks. Employees in those fields have stepped up in a way that soothes the soul and offers faith and optimism in humanity. They’re true heroes.
It’s happening in the business world, too. This week, I’ll be looking at a few of those people, both well known and not, that are making important contributions.