SAY WHAT ??????
Love Letters to the Gravity Boss
Dan Price, chief of Gravity Payments,
raised the annual salary floor for his employees to $70,000. Most
responses were positive, but Mr. Price says that even the negative
letters were valuable.
By ERICA BERENSTEIN and JESSEY DEARING on Publish Date July 31, 2015.
Photo by Matthew Ryan Williams for The New York Times.
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There
are times when Dan Price feels as if he stumbled into the middle of the
street with a flag and found himself at the head of a parade.
Three months ago, Mr. Price, 31, announced he was setting a new minimum salary of $70,000 at his Seattle credit card processing firm, Gravity Payments,
and slashing his own million-dollar pay package to do it. He wasn’t
thinking about the current political clamor over low wages or the
growing gap between rich and poor, he said. He was just thinking of the
120 people who worked for him and, let’s be honest, a bit of free
publicity. The idea struck him when a friend shared her worries about
paying both her rent and student loans on a $40,000 salary. He realized a
lot of his own employees earned that or less.
Yet
almost overnight, a decision by one small-business man in the
northwestern corner of the country became a swashbuckling blow against
income inequality.
The
move drew attention from around the world — including from some
outspoken skeptics and conservatives like Rush Limbaugh, who smelled a
socialist agenda — but most were enthusiastic. Talk show hosts lined up
to interview Mr. Price. Job seekers by the thousands sent in résumés. He
was called a “thought leader.” Harvard business professors flew out to
conduct a case study. Third graders wrote him thank-you notes. Single
women wanted to date him.
What
few outsiders realized, however, was how much turmoil all the hoopla
was causing at the company itself. To begin with, Gravity was simply
unprepared for the onslaught of emails, Facebook posts and phone calls.
The attention was thrilling, but it was also exhausting and distracting.
And with so many eyes focused on the firm, some hoping to witness
failure, the pressure has been intense.
More
troubling, 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.”
As
Mr. Price spoke in the Gravity conference room, he could see a handful
of employees setting up beach chairs in the parking lot for an impromptu
meeting. The office is in Ballard, a fast-gentrifying neighborhood of
Seattle that reflects the wealth gap that Mr. Price says he wants to
address. Downstairs is a yoga studio, and across the street is a coffee
bar where customers can sip velvet soy lattes on Adirondack-style
chairs. But around the corner, beneath the elevated roadway, a homeless
woman silently appeals to drivers stopped at the red light with a
cardboard sign: “Plz Help.”
In his own way, Mr. Price is trying to respond to that request.
“Income
inequality has been racing in the wrong direction,” he said. “I want to
fight for the idea that if someone is intelligent, hard-working and
does a good job, then they are entitled to live a middle-class
lifestyle.”
The
reaction to his salary pledge has led him to think that if his business
continues to prosper, his actions could have far-reaching consequences.
“The cause has expanded,” he said. “Whether I like it or not, the
stakes are higher.”
On
a recent weekday evening, Mr. Price confidently threaded his way
through clumps of tourists and past the rows of flowers and fruits that
line Pike Place Market
in downtown Seattle. About 70 percent of the businesses that occupy
this nearly century-old marketplace use Gravity to process their credit
card payments, Mr. Price said. He started courting customers there more
than 11 years ago, while still attending Seattle Pacific University, a
small Christian college. He would go from stall to stall, shaking hands,
scribbling down phone numbers. Early on, he signed up Pure Food Fish.
The shop was a backdrop in the film “Sleepless in Seattle,” but more
important, it was run by the 86-year-old Solly Amon, who inherited the
pocket store from his father and is lovingly known as the “cod father.”
When other merchants heard Mr. Amon trusted Dan, they did too.
“They
give us tremendous service,” Mr. Amon said. He remembered an incident
years ago when Mr. Price had a new credit card machine up and running
within three hours after his old one died.
In
addition to providing the devices and software that merchants use when a
customer whips out a credit card, Gravity makes sure the money shifts
securely and quickly among buyer, bank and business. In an industry
dominated by global banking giants and mammoth processors, the company
last year processed $6.5 billion in sales for 12,000 clients, most of
them small and medium-size businesses.
Was
Mr. Amon bothered by Mr. Price’s new payroll policy? “He takes care of
his business, and I’ll take care of my business,” he declared.
Brian Canlis, a co-owner of his family-named restaurant,
is also a client. He said he, too, supported Mr. Price’s move, but felt
challenged by it. Mr. Canlis is already worried about how to deal with
Seattle’s new minimum wage, which rose to $11 an hour in April and is scheduled to reach $15 an hour for small businesses within five years.
The pay raise at Gravity, Mr. Canlis told Mr. Price, “makes it harder for the rest of us.”
Mr.
Price winced. “It pains me to hear Brian Canlis say that,” he said
later. “The last thing I would ever want to do is make a client feel
uncomfortable.”
But
any plan that has the potential, as Mr. Price has put it, to “set the
world on fire,” is bound to make some people squirm. Leah Brajcich, who
oversees sales at Gravity, fielded complaints from several customers who
accused her boss of communist or socialist sympathies that would drive
up their own employees’ wages and others who felt it was a public
relations stunt. A few were worried that fees would rise or service
would fall off. “What’s their incentive to hustle if you pay them so
much?” Ms. Brajcich said they asked. Putting in 80-hour weeks after the
announcement, she called the mistrustful clients, stopping by their
offices or stores, and invited them to visit Gravity to see for
themselves the employees’ dedication. She said she eventually lured most
back.
As
for other business leaders in Mr. Price’s social circle, they were
split on whether he was a brilliant strategist or simply nuts. As much
as they respected him, they were also disturbed. “I worry how that’s
going to impact other businesses,” said Steve Duffield, the chief executive of the DACO Corporation, who met Mr. Price through the Entrepreneurs’ Organization
in Seattle. “We can’t afford to do that. For most businesses, employees
are the biggest expense and they need to manage those costs in order to
survive.”
Roger
Reynolds, a co-owner of a wealth management company, said his
discussion of the pay plan with Mr. Price got heated. “My wife and I got
so frustrated with him at a cocktail party, we literally left,” said
Mr. Reynolds, who complained that Mr. Price unfairly accused him of
measuring his self-worth solely in terms of money and trying to hold
somebody else down. Everyone may have equal rights, but not equal talent
or motivation, Mr. Reynolds said. “I think he’s trying to bring in some
political and aspirational beliefs into the compensation structure of
the workplace.”
If
there was a 19th-century thinker Mr. Price drew inspiration from, it
would be not Karl Marx but Russell Conwell, the Baptist minister and
Temple University founder, whose famed “Acres of Diamonds”
speech fused Christianity and capitalism. “To make money honestly is to
preach the Gospel,” Mr. Conwell exhorted his listeners. To get rich “is
our Christian and godly duty.”
Growing up in rural southwestern Idaho, Mr. Price frequently listened to a recording of the speech on tape.
Every
day he and his four brothers and one sister rose as early as 5 a.m. to
recite a proverb, a psalm, a Gospel chapter and an excerpt from the Old
and New Testaments. Home-schooled until he was 12 and taught to accept
the Bible as the literal truth, Mr. Price also listened to the Rush
Limbaugh show for three hours a day — never imagining he would one day
be the subject of a rant by the host. Then it was time to help his
mother with organic gardening, composting and recycling.
Like
his siblings, Dan was fiercely competitive, said his father, Ron Price,
and hard on himself if he didn’t come in first at Bible memorization
contests, backyard football or board games like Life and Monopoly. “Dan
has always been a deal maker,” said his father, who is now a management
consultant.
The
isolation did not prepare Mr. Price for the complex social interactions
of junior high school. He was awkward, out of place. He remembered
joining in when a group of children started laughing, only to later
realize that he had been the target of their ridicule.
His
experiences did reinforce an independent, contrarian streak even as he
made a place for himself in the teenagers’ terrain. He formed a rock
band and got a girlfriend. After their first hug at 17, her conservative
Christian father demanded to know his intentions. The two were engaged,
and they married four years later. (They divorced amicably in 2011.)
His
parents instilled a sense of purpose. “We had a family mission” to
glorify God, he said. The household was run as a “family business” with
jobs and responsibilities carefully set out in charts and diagrams. “All
my siblings hated it, but I thought it was cool,” Mr. Price said with a
laugh.
Mr.
Price is no longer so religious, but the values and faith he grew up on
are “in my DNA,” he said. “It’s just something that’s part of me.”
He
transferred that zeal to his credit card processing business, which he
started out of his dorm room in 2004 with his brother Lucas, five years
his senior.
He
preached Main Street capitalism that promised to deliver good value,
low prices and individual service. His success won him a shelf full of
local business awards and even a chance to meet President Obama during National Small Business Week
when he was just 25. Though he now has the shoulder-length hair and
beard of a hipster, back then he looked like a baby-faced Donny Osmond
and sounded like Alex P. Keaton, the eager beaver Republican played by
Michael J. Fox on the 1980s sitcom “Family Ties.” He did not actively
oppose Seattle’s minimum-wage increase, but a reason he urges other
business owners to follow his lead on pay is to avoid more government
regulation.
Mr.
Price’s drive to succeed, fierce commitment to help small businesses
and exacting standards attracted other business-minded idealists. Some
even took pay cuts to work at Gravity. Keeping an existing client is
more important than getting a new one, he decreed. Never make a caller
hear more than two rings before picking up.
Nydelis
Ortiz, 25, a former Peace Corps volunteer in Peru (not to mention the
2010 Miss Vermont), said she was drawn to his passion and community
volunteer projects. Emery Wager, 30, a Stanford engineering graduate and
a former Marine, decided to forgo applying to Harvard Business School
so he could work closely with Mr. Price. (He felt vindicated when a
Harvard friend who had ridiculed his decision told him Gravity’s pay
scale was discussed in class.)
Maisey
McMaster was also one of the believers. Now 26, she joined the company
five years ago and worked her way up to financial manager, putting in
long hours that left little time for her husband and extended family.
“There’s a special culture,” where people “work hard and play hard,” she
said. “I love everyone there.”
She
helped calculate whether the firm could afford to gradually raise
everyone’s salary to $70,000 over a three-year period, and was initially
swept up in the excitement. But the more she thought about it, the more
the details gnawed at her.
“He
gave raises to people who have the least skills and are the least
equipped to do the job, and the ones who were taking on the most didn’t
get much of a bump,” she said. To her, a fairer proposal would have been
to give smaller increases with the opportunity to earn a future raise
with more experience.
A couple of days after the announcement, she decided to talk to Mr. Price.
“He
treated me as if I was being selfish and only thinking about myself,”
she said. “That really hurt me. I was talking about not only me, but
about everyone in my position.”
Already approaching burnout from the relentless pace, she decided to quit.
