Monthly Archives: October 2015

What is the price for employees’ happiness?

After a conversation with Haley, a 32-year-old employee in late 2011, Dan Price, founder of Gravity Payments made a decision to decrease the gap between his CEO salary and that of his workers.  This past April, Price announced that all 120 of his employees will receive a minimum wage of $70,000.  Price’s plan arose after Haley accused him of “ripping [her] off” and restricting her from “not making enough money to lead a decent life”.

Is Price right in raising the minimum wage of his employees to $70,000? Skeptics will have to wait a few years to determine whether The Dan Price Pay Experiment is a sustainable strategy.

With an increase wages for his low-level employees, Price strives to increase his employees’ happiness, thus translating to more motivated employees who add value to the company and are more accountable as leaders.  By evaluating Price’s plan with Ron Conway’s startup guidelines, Price addresses two of the three ideas entrepreneurs must consider.  His decision to increase the minimum wage of his employees addresses “know[ing] your why” and “be[ing] intentional with culture”.  As an entrepreneur, Price values purpose, impact and service.  Through his decision, he hopes to demonstrate that Gravity Payments “stands for more than just profits”.   He portrays corporate social responsibility by valuing “doing good” and focusing on his employees’ well-being.  Although his plan had a limited connection to business, Gravity Payments has recorded both an increase in profit and retention rate.  While Gravity Payments reflects aspects of corporate social responsibility, how can they take it further and create shared value?

“I really think we’re ready to move on to this next phase in business where we see that we can actually benefit by serving.” – Dan Price

Referred to articles:

• Here’s What Really Happened at that Company that set a $70,000 minimum wage
• Why This CEO says his Million-Dollar Pay Cut was ‘Selfish’
• Photo: The Price Is Right 

Further Readings:

• Gravity Payments CEO describes the moment when he decided to raise his company’s minimum wage to $70,000 a year

In recent business news, SABMiller has agreed to a “takeover offer from rival Anheuser-Busch InBev”.  After four previous attempts, the top two biggest beer companies will combine and produce around 30% of the world’s beer, while controlling 31% of the global beer market.  While Anheurser-Busch InBev is focused in the Americas and Europe, its merge with SABMiller will encompass African brands which expand the company’s market by increasing its consumer base.

Beer giant Anheuser-Busch InBev will grow to encompass SABMiller

With the merge of the companies, one of Porter’s Five Forces is presented.  Anheurser-Busch InBev will now own more of the global market share, thus leading to an increase in entry barriers in the beer industry.  The merge increases the entry barriers because the new firm has greater control over the market and therefore has the opportunity to impact the price of beer.  The elimination of one of their main rivals also encompasses the idea that companies often take a threat and turn them into a partner.  SABMiller is one of Anheuser-Busch InBev’s biggest rivals therefore by merging the two companies together, Anheuser-Busch grew their company to encompass the strengths of their once rival.  With Anheusuer-Busch InBev positioned at the top of the ladder, the future merged firm will create a business that has larger customer segments (with the appeal of African brands) and an updated value proposition (increased branding).

Will the major deal create a beer monopoly?

Referred to article :

• Beer giants AB InBev and SABMiller agree takeover terms
• Porter’s Five Forces 
• Photo: AB InBev’s brands
• Photo: Chance card 

Further Readings:

• Anheuser-Busch InBev agrees to buy SABMiller in biggest beer deal ever  (Note: title states that Anheuser-Busch InBev “agrees” to buy SABMiller while the BBC Article states that SABMiller finally agrees after four previous attempts by Anheuser-Busch)

Uber is a growing business that offers a “controversial car-sharing service” across sixty countries.  By eliminating the dispatcher, Uber provides a quick and convenient mobile app that allows users to book a driver and make cashless payments.  Uber has seen significant growth within its first few years of operation; however, it has also seen many challenges with taxi uproars and government intervention.  Although the car sharing service becomes increasingly more popular, many major cities (Vancouver included) have banned the convenient alternative to taxis.  Should Uber be banned from major cities?

Uber’s aggressive strategy to “shoot first [and] argue later” has been highly criticized.  While its market valuation is $50 billion, the future of the company remains unknown.  The highly valued company has sparked outrage from taxi drivers for bending the regulations and avoiding the costly taxi licenses; however, the unclear regulations surrounding its services are the root of the controversy.  Uber should be allowed to remain in operation in all countries because as demonstrated with many other businesses, when no competition is present, companies often monopolize the market.  Uber’s customers are frustrated with the unreliable and expensive taxis; therefore, Uber provides a cheaper alternative to the traditional taxi service.  While there are many questions surrounding the legality of Uber, the company should partner with the government to provide clear and defined regulations that will allow their company to speed down the highway while eliminating the legal challenges.  As learned in class, by taking a threat and turning it into your partner, a more sustainable business can be created.  Although Uber presents significant competition to the taxi business, I believe that it is a legal and valid business and should remain in operation while the government’s work to provide more defined laws.

Uber hopes to expand into #VancUBER

Referred to article:

• Will Boris Johnson make us give up Uber?
• Photo: Uber Injunction
• Photo: Uber Vancouver on Twitter

In February 2015, a Swedish retirement home piloted an experiment that witnessed a switch from an eight-hour to a six-hour working day.  While maintaining the same wage, the experiment investigated the improvement in quality and efficiency of care within the retirement home, and the Svartedalens experiment has demonstrated successful results.  A shorter work day has allowed workers to “increase productivity while reducing staff turnover”.  As previously discussed in our tutorial, one of the highest and least recognized costs for a company is the staff turnover; therefore, this shift in working days helps reduce the company’s cost.  Although the cost for staff turnover is decreased, do the savings outweigh the cost for the employment of more staff needed to accommodate the extra shifts?

Cost, revenue and subsequently profit are all key figures that affect a company’s success; however, how do the employees’ wellbeing and the standard of service affect a company?  Both wellbeing and service are unquantifiable, so how does a company weigh the benefits of the improvements in service and employee wellbeing against the cost of the additional employees?  Although they may be unquantifiable, Toyota has correlated an increase in profits of 25% with staff making fewer mistakes.  While the Svartedalens experiment witnessed success in the health care sector in Sweden, there are many challenges that may arise with a decrease in monthly income.  To prevent a decrease in salary, one must compensate by adding another working day to their week; therefore, the benefits of a shorter working day may not take effect.  While there are many benefits associated with a shorter working day, I believe that it may not always be a beneficial option in all sectors of work.

Referred to Article: Efficiency Up, turnover down: Sweden experiments with six-hour working day