Price made international headlines in 2015 when he announced his plan to raise the minimum salary of size" and profitability. The company's profit was $2.2 his 120 employees to $70,000. At the time, the aver- million in 2014. Bloomberg Businessweek reported age employee salary was $48,000. that "at private companies with sales like Gravity's total He decided to phase in the salary increase over revenue, salary and bonus for the top quartile of CEOs three years. The minimum starting salary became is $710,000. .. . At companies with sales like Gravity's $50,000 in 2015 and $60,000 by December 2016 net revenue, the top quartile pay falls to about and $70,000 by December 2017. Price plans to pay $373,000. At those with a similar number of employ- for this increase without raising prices to customers by ees as Gravity, the top quartile of CEOs makes reducing his own salary from about $1 million to $470,000 in salary and bonus."105 $70,000, and by diverting about 80 percent of com- Price told a CNBC anchor in 2011 that he was mak- pany profits for 2015. This strategy is critically impor- ing "probably $50,000" in 2011, which he noted was tant because profit margins are slim in this industry, the "most I'd ever made in my life." This statement con- and any price increases are likely to result in a loss of trasts with data reported in a lawsuit filed by Lucas customers. 102 Price, who retains a 30 percent stake in the company. Many employees were ecstatic at the news of the According to a reporter for Geekwire.com, "The filing salary rise. One hundred received an immediate pay discloses Price's compensation as CEO dating back increase, and 30 saw their pay double. Others were five years. It says Price received $957,811 in compen- not so happy and perceived the decision as inequita- sation in 2010, $908,950 in 2011, and more than ble. Maisey McMaster, a 26-year-old financial manager, $2 million in 2012, which represented more than said, "He gave raises to people who have the least 20 percent of Gravity Payment's $9.9 million in sales skills and are the least equipped to do the job, and the that year." 106 ones who were taking on the most didn't get much of a Price's compensation is at the heart of his brother's bump." She felt it would have been fairer to give lawsuit, filed about a month before the wage increase was announced. Lucas Price claims Dan Price was tak- smaller increases with the opportunity to earn a future ing millions out of the company, detracting from the fi- raise with more experience. McMaster told Price about her feelings, and accord- ancial benefits of being a minority owner. Bloomberg Businessweek reviewed court papers ing to an interview in The New York Times, he sug- and stated that the lawsuit claims Price "improperly gested she was being selfish. She quit. Grant Morgan had a similar reaction in his Times in- used his majority control of the company' to overpay terview. "I had a lot of mixed emotions," he said. His himself, in the process reducing what Lucas was due. Daniel's actions have been burdensome, harsh and salary was raised to $50,000 from $41,000. "Now the wrongful, and have shown a lack of fair dealing toward people who were just clocking in and out were making Lucas,' the suit alleges."107 Lucas Price wants his the same as me. It shackles high performers to less brother to pay for damages and buy him out. motivated team members." He also quit. A judge ruled in July 2016 that Lucas Price had Some customers left the company because they failed to "prove his claims that Dan had overpaid him- viewed the pay increase as a political statement or a self and inappropriately used a corporate credit card prelude to higher fees. 103 or personal expenses. The judge also ordered Lucas A few key events seem to have prompted Price's to pay Dan's legal fees," according to a reporter for decision to raise wages. One was a 2011 conversa- The New York Times. 108 tion with Jason Haley, a phone technician making about $35,000 a year. Haley told Price, "You're rip- ping me off." A surprised Price said, "Your pay is APPLY THE 3-STEP PROBLEM- based on market rates." Haley shot back that "the SOLVING APPROACH TO OB data doesn't matter. I know your intentions are bad. You brag about how financially disciplined you are, Step 1: Define the problem. but that just translates into me not making enough A. Look first at the Outcome box of the Organizing money to lead a decent life."104 Price was shocked Framework in Figure 5.11 to help identify the and upset. important problem(s) in this case. Remember Price also came to feel that pay inequality between that a problem is a gap between a desired and a himself and his employees was simply wrong. He told current state. State your problem as a gap, and a reporter from The New York Times that income in- be sure to consider problems at all three levels. equality "just eats at me inside." If more than one desired outcome is not being According to Bloomberg Businessweek, Price's accomplished, decide which one is most original pay was "atypical for a company of Gravity's important and focus on it for steps 2 and 3. Foundations of Employee Motivation CHAPTER 5 197B. Cases have protagonists (key players), and C. Now consider the Processes box in Figure 5.11. problems are generally viewed from a particular Consider concepts listed at all three levels. For protagonist's perspective. Identify the perspective any concept that might be a cause, ask yourself, from which you're defining the problem-is it that Why is this a cause? Again, do this for several of Dan Price, Lucas Price, or Gravity employees? iterations to arrive at root causes. C. Use details in the case to identify the key D. To check the accuracy or appropriateness of the problem. Don't assume, infer, or create problems causes, be sure to map them onto the defined that are not included in the case. problem. D. To refine your choice, ask yourself, Why is this a problem? Explaining why helps refine and Step 3: Make recommendations for solving the focus your thinking. Focus on topics in the current problem. Consider whether you want to resolve it, chapter, because we generally select cases that solve it, or dissolve it (see Section 1.5). Which recom- illustrate concepts in the current chapter. mendation is desirable and feasible? Step 2: Identify causes of the problem by using ma- A. Given the causes identified in Step 2, what are terial from this chapter, summarized in the Organizing your best recommendations? Use the content in Framework shown in Figure 5.11. Causes will appear Chapter 5 or one of the earlier chapters to in either the Inputs box or the Processes box. propose a solution. B. You may find potential solutions in the OB in A. Start by looking at Figure 5.11 to identify which Action boxes and Applying OB boxes within this person factors, if any, are most likely causes to the chapter. These features provide insights into defined problem. For each cause, ask, Why is this a what other individuals or companies are doing in cause of the problem? Asking why multiple times is relationship to the topic at hand. more likely to lead you to root causes of the problem. C. Create an action plan for implementing your B. Follow the same process for the situation factors. recommendations. LEGAL/ETHICAL CHALLENGE Should Senior Executives Receive Bonuses for Navigating a Company through Bankruptcy? Consider this report from The Wall Street Journal: "On the way to bankruptcy court, Lear Corp., a car-parts that the bonuses were "customary" and "fully market d 28 factories, cut more than 20,000 competitive." Lear has subsequently rebounded, adding 23,000 jobs since completing the bankruptcyPROBLEM SOLVING PROBLEM-SOLVING APPLICATION CASE Dan Price, CEO of Gravity Payments, Established a Minimum Salary of $70,000 for All Employees Dan Price grew up in a family of seven, whose evangelical Christian parents homeschooled him and A survey of comments on Glassdoor reveals a combi- his siblings until they were 12. The family had nation of pros and cons about working at Gravity. A strong roots in reading and studying the Bible, which sampling of comments include the following: PRACTICAL AND APPLIED EMPHASIS was a daily activity. Price was very interested in learning the scriptures and reached the finals of a Pros: Bible-memorization contest in the fifth and sixth "I have never worked for a company that cares for grades. 97 their customers more than Gravity. Company cul- In 2004 Price, then 19, started Gravity Payments ture is the best I have worked with." with his brother Lucas. The brothers initially had a 50-50 stake in the company, but about 18 months "The company is built on a foundation of later Lucas Price ended his direct involvement in community and teamwork. I have built some the company and Dan Price became the majority long-lasting friendships. We are a community of owner . people who are competitive, love to learn, and want to grow." Gravity Payments is a credit card processing com- pany. According to an article about the company in "I love the team of people I work with! They value Bloomberg Businessweek, "The day-to-day work at the unique skills and experience that I have, sup- Gravity Payments is pretty unglamorous. Gravity is a port me in accomplishing my goals, challenge me middleman between merchants and payment net- to bring my best, and inspire me to push to new works, namely Visa and MasterCard, which in turn con- heights." nect to banks that issue credit cards."98 The office is a "Gravity Payments offers an incredible opportunity conglomerate of "desks and computers in bland for employees to seize responsibility and grow per- cubicles-but the space is reorganized every six sonally and professionally. .. . You really do get out months so people can sit near different colleagues." what you put in as far as effort being rewarded with Price does this because he doesn't want people to get additional responsibilities and trust." too comfortable. 99 "Management genuinely cares about your success The corporate home page describes the com- and professional growth. Even though people work pany as follows: "Take care of your team, and hard . . . the environment is fun and social." they'll take care of your clients.' Gravity Payments recognizes the value in establishing an entrepre- Cons: neurial, goal-oriented, rewarding, honest, and inno- vative culture, which is what makes our company "It can be intimidating to work with such high such a remarkable place to work. We believe in a quality and capable people. Personal sacrifice is holistic and balanced lifestyle, supporting our team often necessary to provide a high level of service members with: and support for our customers and teammates." $70,000 minimum wage "It's no secret that this industry is tough. As a rep you have to be very driven and handle plenty of . Unlimited paid time off rejection." . Medical, dental, and vision insurance "Be prepared to work long hours .. ." . Bonus opportunities "Many days are filled with rejection and apathy." . Flannel Fridays "This is not easy work. Anyone who is just looking Company-sponsored outings to do the minimum and collect their paycheck will Volunteer opportunities not be happy nor successful here. Be prepared to Catered breakfasts and lunches" 100 operate at 100 percent at all times, as there is rarely down time."101 196 PART 1 Individual Behavior