In April of 2015, Dan Price CEO of the credit card processing firm Gravity announced that he would be raising the minimum wage at his firm to $70,000 per year. Obviously, this announcement was an extreme shock to his 120 employees as well as the rest of the world. The media pestered Gravity with a dichotomy of praise and skepticism, however the decision has proved to be worth the risk as of now. After around 3,500 job applications in the first week, Gravity moved towards now increasing revenue, doubling profits and obtaining an employee retention rate of 91-95%. This has not come without sacrifice for Price, the CEO has cut his salary from $1.1 million to $70,000 along with several other changes to his life.
This article is an excellent example to apply to our recent class on organizational culture. Price clearly has exemplified the positive consequences of creating a very friendly and rewarding culture within a company. However, this strategy does not inevitable create success. In my opinion, the pros of increasing employee wage rates could be: higher performance, better teamwork and collaboration due to behavioral improvement, and more selection of elite job applicants. Contrarily, the increase could also create a lazy attitude, as employees are assured ample pay. The excessive cost of wages may also not be reasonable, and effect profits in a negative way. Clearly, Price did a good job assessing his company in order to make sure that his decision was not a bad one; Consequently, the company has begun to reap the benefits.
