Gravity Payments and CEO Dan Price made the headlines over three months ago after an announcement was released within the company, stating that the minimum wage for its 120-member staff will be raised to a staggering $70,000 within a three-year period. Not only the company staff but the whole world took notice and cited the move as humane and revolutionary.
However, today, the company again faces the spotlight, but for an entirely opposite reason.
The New York Times revealed that the announcement ended up producing a string of negative effects that the company is having difficulty coping with. For one, several long-time clients thought the move to be damaging- either as a political statement or an impending raise in cost- and chose to withdraw their business.
Two highly-valued employees, Maisey McMaster and Grant Moran, also handed over their resignation letters, having been overwhelmed by external pressures the raise came with and believing their efforts are not being fairly rewarded.
Forbes noted that the employees' action is best explained by the equity theory of motivation. The theory basically says that individuals are constantly calculating a ratio of their inputs (time, effort, skills, experience, etc.) to the outputs the organization gives them (salary, benefits, recognition, security, etc.).
Hence, someone who has worked longer or is completing more tasks for a company anticipates better compensation. That applies to both the base salary and raises.
The problems for Gravity Payments do not end there.
Perhaps the biggest blow to the company comes from Lucas Price, brother to CEO Dan Price and co-founder of Gravity with a hold on 30% of the total shares. Barely two weeks have passed since the initial announcement when Lucas filed a lawsuit demanding a buyout and a fee for damages.
With a court date set for May, Dan Price said that he had offered to "give up everything I have personally and everything I'll have for years to come."
Gravity Payments has since acquired hundreds of new accounts, which will compensate for their current losses but they are not bound to bear fruits for at least a year.
While the onslaught of problems and constant public attention continue to breed turmoil within the company, some people remain hopeful, Inc. shares.
MIT Sloan School of Management's Erik Brynjolfsson is one of them. He said that the disparity between CEO and average worker pay will be resolved if founders reframe their thinking regarding labor as a cost center.
Dan Price has already started the path. It may still be rough and unpaved, but it is certainly a step toward the right direction.
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