That being said, a bump in pay will almost certainly help reduce costs associated with retention and retraining and may turn out to be a good business decision, not to mention the publicity.
Recruitment has real costs. Hiring and training, and dealing with the hiring mistakes you make, all cost money. Having a happy staff saves a lot of money, time, and headaches.
Especially if by going somewhere else they have to take a significant cut.
while there are some benefits to increasing salary very large increases may negatively affect those already at a higher pay scale and some may dissociate effort with reward.
now if you dangle the carrot out there as a truly obtainable reward for meeting fair targets, then it truly becomes incentive for both retention and reward
Has there been any comment by the higher-paid-but-by-no-means-rich contingent of the company? I imagine there are quite a few developers, engineers, and other technical folks in the $90-125k+ range there whom this does not affect directly, but may impact their ability to get raises? The article states company profits are going from $2MM to $500k so the odds of this impacting someone's 3% raise if they make $125k is slim but still a possibility depending on team size and composition (I would think).
I was thinking about this when reading the article myself. It has to help retention as it instantly becomes less desirable to move company if the market salary is far below what your current company is paying, which is what this will do.
For the time being it's great for all involved. The employees benefiting from it should be careful in terms of how they adjust their lifestyle based on the extra income though, because if the company went under or there were redundancies or similar they are almost assuredly going to experience a significant drop in their earnings.
I think this experiment will have quite a few positive net outcomes (publicity, reduction of cost with recruitment and retention, etc) but on the longer run employees making 70k will automatically know that they are on the lowest pay scale so I'm unsure how that will work out.
What many people believe: The CEO has set a minimum compensation bar to help those with market wages below $70k.
What has actually happened: The CEO has determined that going forward, he'd rather hire people with higher market wages and more experience versus paying lower wage workers.
Over the next few years, the company will slowly shift to one with a more experienced workforce. This could pay off, and would not be that unusual. What is different is he drew a specific line in the sand and grandfathered in his hires prior to the change.
"His idea bubbled into reality on Monday afternoon, when Mr. Price surprised his 120-person staff by announcing that he planned over the next three years to raise the salary of even the lowest-paid clerk, customer service representative and salesman to a minimum of $70,000."
"“They were walking me through the math of making 40 grand a year,” he said, then describing a surprise rent increase or nagging credit card debt.
“I hear that every single week,” he added. “That just eats at me inside.”
Mr. Price said he wanted to do something to address the issue of inequality, although his proposal “made me really nervous” because he wanted to do it without raising prices for his customers or cutting back on service."
Source: http://www.nytimes.com/2015/04/14/business/owner-of-gravity-...
I get that, but at the same time, if I wasn't treated like a disposable cog, maybe I wouldn't jump ship even if I was actively being poached? Just an idea.
From what I've seen/heard/experienced, hiring is amazingly difficult, and the main reason most professions don't suffer a lot is that there is a large pool of sufficiently capable people that accuracy isn't necessary, and where tech and other profession particularly suffer (and thus expose the problems that are otherwise universal) is that demand far exceeds supply.
I'm hijacking your comment a little, since I agree with your base point that attracting better people would improve their applicant pool and I fully expect they'd see a benefit from this (whether my point is correct or not), but I did want to point out one of my pet areas of concern: We all suck at hiring.
It is a violation of a CEO's fiduciary responsibility to pay significantly more than market value for anything. That includes salaries.
Example: CEO announces the company will pay double for all office supplies. Desks, chairs, computers, etc., the company will pay double market rate.
How quickly would he or she get fired?
How many people would immediately conclude he or she was irresponsible or nuts?
Right.
Now, if he has loans outstanding, his bankers might raise an eyebrow about whether this move reduces his ability to repay; private investors would have a similar concern. But if he can demonstrate that his business will continue to deliver the returns he's committed to to those creditors, what does it matter to them whether he is spending additional money on his staff, or on replacing all the potted plants in his office, or on giving himself a big fat bonus?
What about happiness? Less stress? Not hating the 8-10 hours a day you spend of your life working? Why is funneling money up the chain to those that already have more than any human could possibly know what to do with, such a great thing ???
Yes yes. I know. I have a 401k too. We're all in on this, but I'm glad that somewhere, someone, decided to take one for the team, so to speak, and made a few dozen people happy. Just because he could. And if that pissed off a bunch of "investors" because the shares dropped from $82.52 to $81.88, I'm ok with that.
Employee market rates are a function of quality too. If paying twice as much gets you employees who create three times more value, that shouldn't be a controversial decision either.
There are too many stories of CEOs dropping their salary to $1 just to find out later they got huge bonus, stock, and option grants.
I don't care how much CEOs make. I do care about the bogus self congratulatory PR stunts meant to dupe the heard into thinking this company is inline with their thoughts on "social justice".
- A CEO makes $1MM and owns 100% of a company making $2MM in profits every year.
- A CEO makes $1.00 and owns 100% of a company making $500K in profits every year.
Regardless of how large his profits disbursement is, he's intentionally putting himself in a worse financial position so that the majority of his employees get a massive pay increase in an expensive urban part of the country.
Just because it's a good PR move doesn't mean it isn't also a good move in general and a good move as a human being.
Giving people more of what they want is not automatically the correct move. It may sometimes be the correct move. You can cause a lot of harm by giving people what they want when they shouldn't have it. Look up info on how most people handle lottery winnings if you doubt this.
There are many less optimistic ways to interpret this change, and there may be some fallout down the road. I wouldn't jump straight to "a good move in general and a good move as a human being".
I think those lauding this as a morally virtuous move aren't basing this on principle. Hiring 1 employee for 100k isn't better than hiring 2 employees for 50k assuming equal qualifications. The team with two employees will be more productive and stay in business longer than the competitor (who spends twice as much on everything and won't stay in business).
From the article: > The company made $2 million in profit last year, and that will drop to about $500,000 with the new pay increases, according to company figures.
In that sense it rings hollow because it is clearly a publicity stunt.
I think this is a general issue with all of these activities, and really any activity in a company, that you shape the message that you want to send to the world rather than there being an accurate representation of what is actually happening.
I wonder if there is a way technologically to bring radical transparency to the workplace so that this kind of stuff is discoverable without the company needing to put out press on it.
Success Kid has a bone to pick with you.
Granted, it's not ruled out that this is a paid publicity stunt, but frankly, it has all the right bits to be an attractive story without any sinister manipulation:
* CEO makes 1 mill - that's a very special number to people's minds. * The little guys make bank - everyone loves that!
I'm sure the company is happy to reap the rewards of attention (I'm sure their HR dept has no problem drawing applicants now!), and likely even tried to capitalize on the announcement in general, but frankly, this is exactly the sort of story that all my relatives* would tell everyone they know about, no push needed.
*Funny how "relatives": serves as a placeholder for "the non-savvy/cynical/technical masses". Guess I have my own streak of cynicism.
Definitely not what I said, cause this isn't about "growth" or product. Internal accounting and salary changes at small tech companies don't find their way into all the major tech papers organically - especially not with accompanying video etc...
1. he'll actually take $50,000/year in direct salary, and
2. that all of the call center etc. employees got bumped up to $50k/year immediately, and
3. that, as the article states, it indicates cutting profit from 2MM to 500K,
I don't know that I'd call it a publicity stunt.
As others have pointed out though, all it's doing is moving up the skillset requirements of people they hire in the future. So while it helps the few people who are already on-board by getting a raise (which is great by itself), it likely wont help an entry level person who now won't be hired in at 70k.
See:
https://news.ycombinator.com/item?id=9371854
https://news.ycombinator.com/item?id=9375978
It seems to be a real hot-button to say the least.
That said I think jurnos really like this kind of narrative and subject, since it's really appealing to theirs audience.
It's a sort feedback loop that time will help to "break".
Besides, what is fair?
With wealth inequality higher than ever before, most people see a CEO's salary as astronomically unfair. Do CEO's really have some super power that a minimum wage worker doesn't have? Can one man's intelligence, good looks, charm, or physical strength actually be worth 1000% more than another man? Hard to say.
Although capitalism promotes incredible growth and works for the most part, there is a reason why communism became popular in many countries. It stems from a fundamental discontent about the definition of fairness and wealth among the proletariat.
So if you want the real answer to the question of "What is fair?" I would say "Ask the majority."
\s
https://en.wikipedia.org/wiki/Henry_Ford#The_five-dollar_wor...
"Could the company have gotten to the point of $2m in profit by starting everyone off at min $50k+?"
When/If there is an exit, he will cash out a LOT more than his employees. That's his real 'bonus'.
In Wall Street/corporations, executives are less prone to have exits so they give themselves tremendous bonuses.
A totally different case.
