The year 2020 was rocky. Millions of people were laid off or furloughed. The pain may continue into the near-term future — but even once our lives stabilize, this won’t be the only time an economy stumbles. Companies will again face this choice: Eliminate a great team that’ll be difficult to rebuild, or somehow absorb massive financial losses.
Dan Price says there’s a third way, and he proved it out this year. The solution, he says, is to act as a team. “Your team is so much smarter than you,” Price says. “Mine is. Give power to your people, be honest and democratic. They will find solutions that you can’t see.”
Price made waves in 2015 when he took a million-dollar pay cut to institute a $70,000 minimum wage for his employees, so he isn’t the kind of boss who is quick to do layoffs. But he was feeling pressure this year. His company, Gravity Payments, processes credit card payments for more than 20,000 small businesses — and as their revenue disappeared at the onset of the pandemic, so did Price’s. “We were losing $1.5 million a month,” he says. “We had three months before we’d be out of business.”
He explained this to his team of 200, and they offered a solution: Instead of layoffs, let them anonymously volunteer for pay cuts. “I thought it was crazy,” Price says. “I figured we’d waste a week’s worth of time to learn it wouldn’t work.”
He was wrong. His team volunteered nearly half a million dollars a month off their salaries. Some offered their total pay; others offered 50 percent; others offered 5. (Price capped all contributions at 50 percent.) “It extended our runway to somewhere between six and 12 months,” he says. By late summer, he was confident enough in Gravity’s future that he paid back all employees.
“Businesses love to talk about caring for people, but the conventional wisdom is, what really matters in these situations is your balance sheet,” he says. “Leaders will do layoffs deeper and quicker than needed so they can start rehiring sooner and manufacture a comeback story.”
But now, Price says, he knows of another way. Don’t cut your team. Work with them instead. “We’re here because of our people.” – Dan Price