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Case

:
Gravity Payments
Floor Salary
 "Gravity Payments
exists to stand for the
little guy or gal who
believes in the
American dream and
is willing to chase it."

• Founded in 2004 • Private Company • CEO and Founder: Dan Price Introduction • Industry Sector: Banking & Finance • Number of employees: about 100 • Product: Credit card processing • Revenue: $ 150 Million (2014) • Profit: $ 2.2 Million (2014) .

000 for all employees by 2017 • Some employees reached a doubled salary • All employees with a salary over $ 70k didn't get a similar increasing Case • Price's idea came from a study by Angus Deaton and Daniel Kahneman • Threat that employees are facing in terms of long term motivation .• 2015: CEO Dan Price decided to change the policy • Floor salary of $ 70.

• CEO tried to improve life of employees • The Princeton article made realized that there was a motivational problem with the employees because they were not being paid near these $70. respectively hygiene factors (see Herzberg) • If employees don’t have to think about basic stuff they work more efficiently .000 minimum Why did Dan Price change the policy? • Basic needs of all employees should be covered (see Maslow).

• Profits has been doubled since the announcement • Customer retention rate grows from 91% to 95% • Happiness of employees has generally increased Positive Effects • Gravity Payments is now considered to offer very competitive compensation packages that allows all employees to maintain a higher standard of living .

their own profit of $2.• Short term sacrifice • Some clients were upset by the political message this move indicates and feared that prices would increase • Shackles high performers to less motivated employees • Former employees are not happy with income distribution Negative Effects • Due to high salary hike.2M will be dedicated to the salary increases • Company more charity than profit orientated => bad reputation at Wall Street .

 'Is it fair?'. Managers say . His own brother. 30% shareholder in the company suing him  Cut down his own salary of $1 million to $70000 Negative Effects  He has to mortgage his won house to pay his employees a paycheck. Lucas price.

• Some entry level employees feel that they have not earned the raises they have been given. • The performance of employees increase based on their own perception of equality among the employees and the market. .Equity Theory • Conclusion Employees who were very experienced were unhappy that their salaries were not increased as much as those with less experience.

in the long run employees will be frustrated as the foundations of the equity theory states this. Conclusion • This policy change is disrupting the normal hierarchy and employees are happy for now with their raises. .Equity Theory • The equality measure comes about how much experience. effort and skills you have related to the salary. recognition and benefits the company gives to employees.

• “Hygiene factor only keep employees from being unhappy but doesn’t necessarily motivates them” • They didn’t try to find out actual cause of dissatisfaction of employees if any. . • Even if they increase the salary.Herzberg Theory • New salary offered by Gravity Payments is above the market standard. Conclusion • Even before the policy. hygiene factors of the employees were being met and policy change caused strain on employee satisfaction. they might be unmotivated because of motivation factors of Herzberg theory.

• Gravity Payments should introduce a graduated pay scale that allows employees to quickly move up the salary ladder as they earn experience. .Recommendati on • The minimum salary should reach the $70. • The new minimum salary can be a promise within an allotted amount of time and allows the employee to earn their higher compensation without upsetting more experienced coworkers.000 but whether or not to get this amount will depend on your performance.

000 according to the equity theory Gravity Payments should include a bonus to make sure the more you contribute the more benefit you get. • Once on the $70.Recommendati on • Every single job position performance should be measure correctly and eventually the salary risen to $70.000. .

Questions? .