Withhold Judgment, Please

He's got game: Dan Price was recognized
before the 2015 firm-wide pay raise.

Gravity Payments CEO Dan Price attracted scads of favorable publicity when he raised his 120-employee firm's minimum wage to $70,000. To help fund the cost increase he cut his own $1 million salary. Now the company is facing difficulties, though it is not (yet) in extremis. The NY Times [bold added]:

a few customers, dismayed by what they viewed as a political statement, withdrew their business. Others, anticipating a fee increase — despite repeated assurances to the contrary — also left. While dozens of new clients, inspired by Mr. Price’s announcement, were signing up, those accounts will not start paying off for at least another year. To handle the flood, he has already had to hire a dozen additional employees — now at a significantly higher cost — and is struggling to figure out whether more are needed without knowing for certain how long the bonanza will last.

Two of Mr. Price’s most valued employees quit, spurred in part by their view that it was unfair to double the pay of some new hires while the longest-serving staff members got small or no raises. Some friends and associates in Seattle’s close-knit entrepreneurial network were also piqued that Mr. Price’s action made them look stingy in front of their own employees.

Then potentially the worst blow of all: Less than two weeks after the announcement, Mr. Price’s older brother and Gravity co-founder, Lucas Price, citing longstanding differences, filed a lawsuit that potentially threatened the company’s very existence. With legal bills quickly mounting and most of his own paycheck and last year’s $2.2 million in profits plowed into the salary increases, Dan Price said, “We don’t have a margin of error to pay those legal fees.”

Comments:

The high-performers, unappreciated in recognition and/or pay, depart for greener pastures, while the low-perfomers clock in for their $70,000 salary. Thus do most socialist dreams fail.

Mr. Price is an admirable person, clearly sacrificing personal gain for his beliefs.

He has the right to run the company the way he sees fit, and customers and employees have the right to do business with him based on their beliefs, as well as the price and quality of the services they receive. The trouble is that so many people became invested in his success or failure based upon ideology, not whether his company is delivering a quality product at a reasonable price.

Let's withhold judgment: we still don't know that failure will be the final outcome. The glory of capitalism is that millions of people are all trying to find a better way, and often success comes in unexpected ways that we can all learn from.