The Price is Right: Why Higher Salaries Won’t Single-Handedly Solve the Workforce Crisis
Six years ago, Dan Price, the founder and CEO of Gravity Payments, set off a media firestorm when he raised the firm’s minimum salary from $35,000 to $70,000 and slashed his own $1 million salary down to $70,000.
He was hailed a hero by some and harshly criticized by others.
Many analysts predicted the company would soon be bankrupt. But that has not happened; instead, the company is thriving.
Six years later, revenue has tripled, the number of employees has doubled, the turnover rate was cut in half, and both the starting salary and CEO salary remain at $70,000.
Here and now, wage increases are top of mind as employee turnover is skyrocketing and prospective employees are being wooed with higher starting salaries and sign-on bonuses.
Undoubtedly, pay raises are needed. The wage gap is significant. According to the Economic Policy Institute, average CEO compensation is 320 times more than the salaries of their typical workers. (Six years ago, it was 265 times.)
But make no mistake about it: money can’t buy love.
For 20 years, Gallup has reported 70% of the workforce is disengaged, and companies have thrown money at the problem investing more than ever in perks and bonuses to try to reverse the decline.
Yet, employee engagement hasn’t improved. At all.
If money isn’t having the desired effect, what will?
Trust. The organizations thriving and successfully engaging employees are trustworthy. Specifically, employees believe their leaders are credible, honest, and fair, and that their leaders respect them.
Some people will read Price’s story and only see dollar signs. Those people are missing it. Employee engagement can’t be bought. While fans and critics alike marvel at Price’s pay structure, that’s only half the story.
His team has been referred to as fiercely loyal which can only come from a trusting, people-first workplace culture. Here’s how one employee described Gravity Payment’s leadership during the pandemic:
“They didn’t do any layoffs. They didn’t raise merchant fees. They let the employees decide how to manage the situation. We decided to do voluntary pay cuts – enough to hold us over. We stopped raises. When things got better (but still losing money), they put our pay back to what it was. Then they paid us back what we gave up. Then this year, they opened up raises again. Then you know what? They made up for the raises we missed in 2020. How many other companies out there would do that?”
Engaging workplaces are rooted in trust and trust is built by the leaders. Leaders set the tone for how people relate to each other, what information can be shared, how information is shared, how employees are developed and treated.
Indeed, the pressure to find and keep talent is heating up and will continue to do so. Leaders will be forced to decide whether they want to keep the best talent, and those that do will remain competitive.
But mark my words – money will have little to do with it. If your organization is struggling with turnover, let’s have a conversation.
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