Could this be the best boss in America?

A year ago this week I wrote a post about Dan Price, CEO of a Seattle-based Gravity Payments. He raised, in stages, the base pay of all of his employees to $70,000. To help cover the cost, Price cut his own salary by 90%. 

Half a million people read the post. It clearly touched a nerve. Some commentators applauded Price’s move, calling it generous, even inspiring. Others were strongly critical. Instead of raising the minimum for everyone, they argued, Price should have rewarded his hardest-working, most productive employees. 

Media coverage likewise was divided. Inc. magazine put him on their cover, with the caption, “Is This the Best Boss in America?” But conservative talk show host Rush Limbaugh slammed Price’s action calling it “pure, unadulterated socialism.”  He added, “I hope this company is a case study in MBA programs . . . because it’s gonna fail.”

Now twelve months have now passed and that hasn’t happened. Price himself has had some struggles, but Gravity Payments has not only survived, but is going strong by most measures. 

Price’s biggest challenge was being sued by his brother Lucas, who has a minority interest in the company. He claimed Dan had raised salaries in order to decrease its value and then buy Lucas’s interest on the cheap. After a three week trial, a judge dismissed all the claims and ordered Lucas to pay Dan’s legal costs. 

There were lesser problems, as well. Two of Price’s top employees quit almost immediately, miffed that their raises were smaller than new arrivals would be getting. And several clients left, too. As a consequence, press coverage that had been largely positive turned more skeptical, and in some cases, hostile. 

For the business itself, however, most of the developments were positive. The company added 4,000 new clients—a 55% bump from the prior year. Employee turnover fell 19% compared to the company’s six year average. And job applications rocketed 1,000%. As for the bottom line, revenue in the first quarter of 2016 increased 33% over the prior year. Profits were down slightly due outlays for software and the addition of 24 new employees who were just coming up to speed. 

As to employee morale, the data are mixed. Price’s original motivation in raising salaries had been sparked by studies that seem to show that a $70,000 income is an emotional sweet spot of sorts. Getting to that level relieves people of the stress of living paycheck to paycheck (provided they manage their money wisely). Higher income is nice, of course, but doesn’t seem to propel people further, from contentment to euphoria. 

In fact, a monthly company survey recorded a happiness spike when Price announced the raise, but then the numbers returned to their previous levels. (That’s consistent with research that shows most of us have an emotional baseline that fluctuates somewhat with transitory events, good or bad, but we soon revert to our regular state.) 

On the other hand the survey doesn’t comport with what some employees say. A story in USA Today this spring reported that Ayssa O’Neal, a 22 year old customer support rep plans to move into a more expensive apartment that will cut her nearly two-hour commuting time by more than half. Her colleague Cody Boorman, 23, has now paid off he’s debts and is contributing $18,000 a year to his 401(k) account. He says that the raise “really did take the stress away in terms of worrying about tomorrow.” He and his wife decided to have their first child earlier than they had planned. 

There aren’t many companies that can change their salary structure as dramatically as Gravity Payments did. But the experience so far at Gravity is an intriguing reminder that paying employees well isn’t only a matter of fairness. It can also build loyalty and foster productivity. 

Moreover, what goes around, sometimes comes around. A few weeks ago Price’s employees surprised their boss by “giving him a taste of their own medicine,” as they said in a post on the company site. They wanted to thank him “for all of the sacrifices he’s made and challenges he’s face for each of us . . . Dan has never once put himself first. 

For several months, they secretly chipped into a fund to buy him a thank you present. On the company’s website they’ve posted a video of them giving him the keys of a brand new Tesla. That gesture speaks volumes about what they think of their boss.

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Professor Michael Wheeler teaches at the Harvard Business School.

Version 1.3 of his Negotiation360 self-assessment/best-practices iOS app includes coaching videos and a new tactics exercise.