
Seattle CEO who pays workers at least $70K US says it's paying off - pseudolus
https://www.cbc.ca/radio/asithappens/seattle-ceo-who-pays-workers-at-least-70k-us-says-it-s-paying-off-in-spades-1.5482394
======
aeturnum
I'm glad that this has worked out for them! It's a scary thing to be sure -
upping your costs with uncertain gains.

I think when people insist this "wouldn't work" in many cases they are missing
the point. This is obviously not a move you make without fundamentally
changing how you manage the company, but I think all service delivery
companies could make this change.

From the article:

> Now, many are starting families and buying homes. He estimates one-third of
> Gravity workers have become debt-free, and two-thirds have significantly cut
> back on their debt.

> Her junior colleagues work harder than ever, she said, easing everyone
> else's workload in the process.

This suggests structural transformation in how the company distributes work
and also deep investments in the people at the company. These can be
successful strategies! They limit your agility when it comes to staffing
changes, but not every problem or opportunity requires staffing agility.

I suspect at high levels this kind of thing might also look like Netflix's
approach to pay and jobs (high pay, low security)[1].

[https://www.npr.org/2015/09/03/437291792/how-the-
architect-o...](https://www.npr.org/2015/09/03/437291792/how-the-architect-of-
netflixs-innovative-culture-lost-her-job-to-the-system)

~~~
Fire-Dragon-DoL
To be fair Toyota was in a similar situation long time ago

------
lend000
I've encountered a number of small to mid sized engineering contracting groups
and specialist LLC's wherein everyone makes well over $70k. Google's median
compensation is over 200K company-wide with 100,000 employees, but this
doesn't include part time contractors at facilities. Gravity Payments is on
the larger side for such a strict "minimum wage", but I doubt they are the
largest. It seems the only novel thing here is the politicization of the
message.

The payments industry is relatively low-turnover (compared to other "tech"
companies at least) and doesn't require as much innovation once a vendor has a
foothold in their market. Could this policy have been successful before they
were profitable with recurring customers?

I.e. I imagine some startups have attempted a policy like this -- is there any
data on the success rate for "flat compensation" companies versus more common
meritocratic and seniority-based compensation structures?

~~~
jdkee
“ but this doesn't include part time contractors at facilities.“

And how would the numbers look if full and part-time contractors were
included?

~~~
0_____0
hahaha way lower.

i did pcb design work at google at a very junior level as a temp, made $15/hr

------
H8crilA
This is good but clearly wouldn't work in many cases. Amazon, 2019 [1]:

    
    
      number of employees = 798k
      yearly pretax GAAP earnings = $13,976,000k
      yearly pretax GAAP earnings per employee = $17,514.
    

This means if all Amazon employees got an extra $18k year end bonus in 2019
then Amazon would have reduced their GAAP earnings to slightly below zero. You
can do this calculation easily for any public company, just find their 10-K's
on SEC.gov.

[1] Form 10-K, for FY ended December 31, 2019:
[https://www.sec.gov/ix?doc=/Archives/edgar/data/1018724/0001...](https://www.sec.gov/ix?doc=/Archives/edgar/data/1018724/000101872420000004/amzn-20191231x10k.htm)

~~~
m0zg
Amazon specifically adjusts its margin to show as close to zero profit as
possible. Jeff's mantra is "your margin is my opportunity", and on top of that
he gets to pay $0 in corporate taxes, what's not to like?

IOW, Amazon is not a very good example.

~~~
H8crilA
Let's do Wallmart, latest 10-K, 12 months ending Jan. 31, 2019 [1]:

    
    
      Pretax earnings: $11,460,000k
      Employees: 2,200k (yes, 2.2 million people, worldwide)
      Pretax earnings / employee: $5,209
    

And yes I'm picking examples of companies that have a lot of employees; I'm
sure Facebook or Google can bump up bonuses.

[1]
[https://www.sec.gov/Archives/edgar/data/104169/0000104169190...](https://www.sec.gov/Archives/edgar/data/104169/000010416919000016/wmtform10-kx1312019.htm)

~~~
m0zg
You're picking examples of companies with deliberately razor thin profit
margins.

~~~
H8crilA
I agree, but I'm also picking large employers (because that's how you'd get a
lot of impact from a change like this). Which one then? :).

Boeing? 10% margin (before the MAX - not in 2019, so not a Google or Facebook
but still quite good). 12 months ending December 31, 2019:

    
    
      Number of employees: 161k
      Pretax earnings: $-2,259,000k (loss; that's the MAX fiasco)
      Let's take pretax earnings for 2018 instead: $11,604,000k
      Earnings per employee: $72,074
    

$72k bonus (but nothing more) is theoretically possible, for 161k people.

In a good year, not in 2019 with the MAX troubles. Assuming shareholders are
somehow OK with this. And assuming you need $0 for growing your business (like
new factories, machines, acquisitions, hiring more people). And assuming
you're leaving yourself with zero room for error (no cash cushion for a bad
year), because sure as hell Wall Street will not give you investment-grade
credit once you need it so that your bonds can go into old people's retirement
accounts and slowly blow up there.

------
omegaworks
>two senior Gravity staffers quit in protest, saying the sudden pay hikes were
unfair, and that junior workers would slack off.

>But Rosita Barlow, director of sales at Gravity, told BBC News the opposite
has been true. Her junior colleagues work harder than ever, she said, easing
everyone else's workload in the process.

What a wonderful way to make toxic management get rid of itself.

~~~
frollo
Probably, getting rid of toxic management helped at least a little in
increasing productivity.

------
lmeyerov
This keeps getting pushed. When I dug in, the CEO of the company was taking
out $1M+/yr despite revenue < $20M/yr for the co, and then had a media blitz
when the salaries came back to earth.

I walked away with a couple of different lessons, including on why this keeps
showing up in places :)

~~~
01100011
This same story made the front page a few days ago. Is someone astroturfing
this story on HN?

------
dang
Recent and related:
[https://news.ycombinator.com/item?id=22440922](https://news.ycombinator.com/item?id=22440922)

------
1-6
Minimum tech-person wage?

------
maerF0x0
Also on Feb 28 by BBC:
[https://www.bbc.com/news/stories-51332811](https://www.bbc.com/news/stories-51332811)

------
m0zg
I mean, median pay in Seattle is $93K. Of course it's "paying off".

------
8bitsrule
"Customers wrote him angry letters. Right-wing radio personality Rush Limbaugh
dubbed him a communist."

Price: 'we've been relying on billionaire philanthropists for so long, and I
don't really think that's working out very well for us...'

~~~
vsareto
>Communism = Private company CEO decides to pay his workers whatever he wants

I didn't know Rush Limbaugh could be that hilarious

~~~
jorblumesea
Like how both sides use the concept of states rights.

Some state passes legislation the party in power doesn't like, they use the
Fed govt to clamp down on issues. A few years later when the party in power
loses majority, they pass legislation on the state level, and complain about
their rights being infringed on when the same behavior happens.

Rules for thee, not for me.

------
vondur
Kudos to the CEO for taking a pay cut.

------
VWWHFSfQ
If I recall correctly, $70k was originally what _everyone_ in the company was
paid. Regardless of position. Including the CEO.

Looks like now it's the _minimum_. They had to bump the skilled positions to
market rates.

~~~
dhosek
No, it was the minimum. There was some grumbling by people who were previously
paid ≤70K but more than others that they were being devalued by having their
salaries the same as those who previously had been paid less, but nobody was
reduced to 70K.

------
roguesupport
Anyone who believes a word of this, does not know a thing about money...or
basic accounting, for that matter.

The credit will dry up pretty quickly with stunts like this, and the fact that
he doesn't call it a success is VERY telling.

No business fails because it does not generate revenue; they only fail when
they do not generate CREDIT. This is a "dit.com" era scam. EVERY job at that
company can be automated, and you only get credit when you are reducing costs
and expanding. This guy is jerking off in public, nothing more.

This article will not age well

~~~
6510
70 k seems a lot for a single step.

I've seen from up close how salary declined for about 1000 people in an
unskilled physical job (that didn't change for 100 years). They were initially
paid handsomely. Today 700 people do the same work for 1/5 of the money.

When paid handsomely the workers went out of their way to get the job done in
time.

When pay sufficiently declined they stopped doing that. To get rid of the
uncertainty they contracted another company to manage it. (along with a bunch
of other work)

When pay declined further that company hired another company specialized in
the task.

When pay declined further that company hired a job agency to fill the holes in
the schedule and another company to monitor materials and supply them.

Its funny in a way, people on the work floor use to make their own schedule.
If they needed extra employees they would call their wife, their kids, their
friends, their neighbors - you have to come help right now!

If tools and materials were lacking they would jump in their car and go get
it. They often paid it out of pocket and didn't bother asking it back.

All of the money and then some went towards an army of office folk who have
been unable to organize a large list of things for longer than 6 months.

The quality of work is inferior in countless ways but with all these managers
and administrators they did manage to increase cost. I estimate it is
something around 2-3 fold.

What use to be a beautiful paper administration is now a series of crufty apps
made by people who don't understand the work. When the apps fail the old
employees are happy to do it on paper again. When the work schedule is
delivered the employees start rearranging it.

The only long term employees who stuck around are the ones who don't give a
flying fuck if the work is done properly if at all. It use to be that people
worked double shifts just to get things done.

The solution, management thinks, is to hire better more expensive managers and
more of them.

