That's great news, for those 30. Not so great for the 30 other people he could have hired, as discussed previously. Some other potential downsides: • Gravity Payments will be at a disadvantage compared to the competition. Customers might approve of the CEO's generosity, but not be willing to pay extra for the product. All else being equal, this business will be more likely to fail, which is bad for all employees. • Clerks and service reps will be making far more than they can earn elsewhere. They may be appreciative and perform better, but they will also cling to their position and refuse opportunities that require relocating, or postpone retirement. It could end up as a positive sense of loyalty, or a negative "not leaving till they fire me." • There will be little incentive for formerly lower-paid employees to perform beyond what is necessary to keep their job. Again, this may be more performance than they did to earn $35K, but when the corporate ladder is horizontal, there's no need to climb. • A clerk that earned $35K must have brought more than $35K worth of revenue to the company, or they would not have been hired. It is not likely that they brought $70K worth of revenue, or they could probably have gotten a better-paying job elsewhere already. Paying above revenue amounts to charity. Charity is a very good thing, but it may be hard to justify should lean years come. Even if the company prospers, the accountants may recommend using automated tools rather than human clerks which lower the bottom line. • When the company does need a new clerk, an applicant who is only qualified as a clerk will be at a disadvantage compared to an applicant who also has other skills. The lower-skilled worker will be unable to negotiate based on salary for an opportunity to get a job and learn new skills. Thanks for sharing this; I am glad to learn of this guy's example, and hope he can make it work.The paychecks of about 70 employees will grow, with 30 ultimately doubling their salaries
That's great news, for those 30. Not so great for the 30 other people he could have hired
-This assumes that he could benefit from additional human capital. Maybe he's running at maximum efficiency. Gravity Payments will be at a disadvantage compared to the competition
-You assume that someone will have to pay extra. He clearly states that he is diminishing his own salary and taking funds from the companies GP dollars to fund this. How does this effect the marketplace? I would assume he knows his company, his product, his projected growth and has calculated how sustainable this is or is not. • Clerks and service reps will be making far more than they can earn elsewhere
-So what? So what if someone feels a sense of security and doesn't want to leave it. Man, you are grasping for reasons not to like this. There will be little incentive for formerly lower-paid employees to perform beyond what is necessary to keep their job
My guess is that the employee formerly earning $40k and now earning $70k will be better at their current position. Will they want to move up to another position and work hard to get there? Sure, why not? There are ample studies that show that things like a sense of purpose, the ability to learn and master a new area of expertise and the ability to "move up" are often greater motivators than money. A clerk that earned $35K must have brought more than $35K worth of revenue to the company
You can't think of employees for a company like this as "rev earning" in all jobs. How do you quantify the amount of revenue a customer service rep brings in? A receptionist? A janitor? You can't. How many home-runs does a pitcher hit in baseball? Not many. So they must not be important to the team, right?