If you want roaring success, you can’t afford to think and act like your peers. And entrepreneur Dan Price proved that. Having raised his employees’ minimum wage to 70k dollars 6 years ago after cutting his own CEO pay by a million dollars, Dan’s now reaping the rewards, both in terms of finances, worker job (and life!) satisfaction, and loyalty.
An experiment that many said would fail now has some critics considering that Dan’s approach may have merit. “Always invest in people,” Dan highlighted in his recent post on Twitter and I fully support this approach. However, it makes sense not just on an ethical level but on a financial one, too. Have a read through the entrepreneur’s summary of how the decision to massively increase his employees’ wages impacted the company overall and what it was like 6 years ago to weather the storm of criticism with media skeptics like Fox News at the forefront.
I had a quick chat with Dan and he said that he's feeling happy about his team and their success at work. "I wish the critics would see that the issues most people out there face are systemic and we need to stop blaming people for the failures of the system," he pointed out to Bored Panda that his critics have been focusing on the wrong issues.
In Dan's opinion, increasing the minimum wage to 15 dollars is just the start of change in the US: laws must be passed to keep the people at the top from "using the system to eliminate competition." He shared some of the things that he believes ought to change to improve the nation: "Healthcare access without the threat of financial ruin, early childhood care, care for seniors, higher taxes on those making the most and having the most (i.e. wealth tax), and we absolutely need to get money out of politics." The entrepreneur opened up to Bored Panda that by proving that his way works and without having large companies follow suit, he's shown that they "can't or won’t fix these issues unless they are legally forced to do so." Be sure to read on for our second interview with a financial expert and his insights into Dan's decision to increase his employees' wages.
Dan Price, the CEO of Gravity Payments, celebrated 6 years of having cut his own pay by a million dollars to increase his employees' wages
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Dan tweeted out a video where he shows just how wrong his critics, including Fox News, were
Here's exactly how the decision to increase his employees' pay impacted the company 6 years down the line
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Sam Dogen, the founder of the Financial Samurai blog who has 13 years of experience in investment banking, gave Bored Panda his take on Dan's decision to reduce his own pay to boost his employees'. "Employee loyalty is incredibly valuable and underrated. In order to create employee loyalty, not only must they get paid well, but they need to have ownership in the company," Sam said. "Once you even have a small equity stake in the company, your attitude changes for the better. For example, you'll probably work a little harder, say nicer things about your company outside of work, and pick up a piece of trash in the hallway." You'll find his other insights on Dan's compensation model below.
The founder of the Financial Samurai blog, Sam, said that the main reasons why larger companies don't follow in Dan's footsteps is very simple: it comes down to greed and ego. "C-level executives want to make the most money possible before they move on. Secretly, many of these C-level executives know that can't positively affect their company's stock price to warrant their compensation. However, some C-level executives do accept low salaries or just token $1 salaries a year. They then get paid millions in stock options," the financial expert explained to Bored Panda.
According to him, companies fear that they'll be less cost-competitive if they raise the compensation that employees receive. "Further, there is fear some employees who were making less may not work as hard, thereby bringing down productivity," he said.
"The approach will likely never become mainstream because competition is too fierce," Sam warned us that, realistically, we probably won't see Dan's approach spread. "However, incorporating equity as part of an employee's compensation structure is important for company loyalty."
One of the most eye-opening impacts the change Dan drove forward had was how they faced the Covid-19 pandemic. “At the start of the pandemic, we lost 55% of our revenue overnight. Our employees were so invested they volunteered to take temporary pay cuts to prevent any layoffs. We weathered the storm, paid everyone back, and are now giving out raises,” Dan writes.
In other words, his investment in his employees’ quality of life made sure that ‘Gravity Payments’ was kept afloat in difficult times. Trust begets trust, loyalty begets more loyalty.
Dan listed how besides their revenue tripling, they also increased the number of employees who, as it turns out, now had enough financial stability to start having children, paying off debt, and buying homes.
What’s more, the gap between the highest and lowest-earning employees shrunk massively. Dan admitted that he was “an awful CEO” before, but now he’s inspiring other businesses to follow in his footsteps. However, Dan pointed out that it’s mostly small businesses that do this while large corporations aren’t biting (yet).
More money might not change much when you’re already well-off, but it has a huge impact when you’re forced to work a second job just to make ends meet. Or, as Dan put it, “Money buys happiness when it gets you out of poverty but not when it gets you from well-off to very well-off.” He added that he doesn’t miss the millionaire lifestyle and doesn’t regret having cut his pay by such a huge amount.
Some people were curious to find out how Dan's lifestyle changed
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Dan believes that what he did made a lot of business owners uncomfortable
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Meanwhile, others were interested to find out what businesses, if any, have followed in his footsteps
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The entrepreneur revealed that some employees weren't happy with the changes and left, however, things still turned out well
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Some Twitter users pointed out that what Dan's been doing is a great example of doing business well
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Others shared that businesses don't have to copy Dan's decisions perfectly, but should instead aim to follow the spirit of the changes he made
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And here's how some other people have been reacting to Dan's recent Twitter post
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What do you think of the changes that entrepreneur Dan made to his company? Do you think the results speak for themselves? Do you think your quality of life would improve much if your wage was increased to at least 70k dollars per year? Share your thoughts below. Oh, and you’ll find Bored Panda’s recent articles about Dan’s views on businesses and the economy right over here, right here, and here.