3 Reasons Why One Company’s $70,000 Minimum Wage Hurt Everyone Who Got It

There are three big reasons why this is destructive, and such a bad idea for the people who work there.

Dan Price, the CEO, thought he was giving everybody a great gift great four months ago. Everybody loved it up front. But big cracks are appearing in the idea, because giving everyone a $70,000 minimum wage simply continues the archaic wage practices of the Industrial Age. And it has the same effect—destroying the human spirit. Here’s why.

Reason #1—People Want to Make Meaning, Not Money In her research on Generational Differences in Work ValuesJean Twenge found that Millennials to Baby Boomers are all motivated by the same thing—Making Meaning. A recent survey also found that people who are focused on the size of the paycheck are less motivated.

Semco is a billion dollar company with 3,000 Stakeholders. They require people to determine their own pay. Every six months you go to a computer and plug it in. You would think chaos would ensue. But the company regularly has to adjust pay UP as people fall behind the industry average. Why? Because Semco leadership is focused on ensuring everyone finds their work extremely meaningful. For the last 30 years, Semco’s retention has hovered around an unheard of 99% per year. And almost no one makes more than the industry average. Meaning trumps money every time.

Another study by Sylvia Ann Hewlett, on attracting and keeping the best people, shows that at least three things motivate people more than money; flexible work schedules, praise and recognition, and breaking up the work day with walks, bike rides, swims or other non-work activities. A simplistic $70,000 pay raise addresses none of these more important meaning-oriented motivations.

Reason #2—Meaningful Work is Results-Based, not Time-based This $70k minimum wage is a throwback to an archaic system.

For thousands of years people got paid for how many shoes they made, and how well they were made. The better the shoe, and the faster they made it, the more money they made. They were solving problems and Making Meaning, and money came to them as proof.

Along came the Industrial Age Factory System and all that changed. For the last 175 years, and for the first time in human history, we have paid people simply for time spent working. How dumb is that? Gravity Payments fell victim to the Industrialist’s mindset—paying people without regard to production.

In an interview with the New York Times, Price said, “I want to fight for the idea that if someone is intelligent, hard-working and does a good job, then they are entitled to live a middle-class lifestyle.” Interesting quote, because his solution does not reward people for that hard work or for doing a good job.

Alan Wyngarden owns a mortgage company and went results-based. He reduced his loan processor’s base pay from $55,000 to $24,000, then incentivized her for how many high-quality mortgages she produced each month. Within a year she was producing three times as many mortgages at a higher quality, and making $135,000 or more per year. When pay is disconnected from results, people find it hard to be motivated to do great work. It’s basic capitalism.

You can see the angst creeping in. People know that getting paid without regard to performance is a bad idea. Stephanie Brooks, an administrative assistant, said, “Am I doing my job well enough to deserve this? I didn’t earn it.”

Reason #3—Raising Everyone’s Pay to $70,000 is LCD Management Lowest Common Denominator Management levels everyone with broad, sweeping policies that ignore individual performance and team contributions. Everyone “gets an A” (or an F) no matter how they perform.

Marisa Mayer, CEO of Yahoo, found some people not working well from home. So she just herded everyone back into the office day care center to be supervised. In this case, she gave everyone an “F”, even those who deserved an “A”. Motivated people got the same “reward” as the lowest common denominator.

Dan Price at Payment Systems has given everyone a de facto “A”, which treats lazy people the same as top performers. Grant Moran, a web developer who got a $20,000 pay raise but quit after the $70k minimum wage was enacted said, “Now the people who are just clocking in and out are making the same as me, It shackles high performers to less motivated team members.” LCD Management—the great leveler.

Maisey McMaster quit because, as she put it, “He gave raises to people who have the least skills and are the least equipped to do the job, and the ones who were taking on the most didn’t get much of a bump.” Everyone gets an “A”.

How to Fix This People are motivated differently, and one size does not fit all. Great incentives include a variety of rewards and take into account individual motivations. Bad incentives are simplistic, focused solely on money, and imposed by a top-down hierarchy (Industrial Age LCD management) which assumes it knows better what you need, without including you in the solution.

Tying income directly to production helps people love their jobs. At our company, nobody will ever get a pay raise because they hung around another year. They get them because they add more value than they used to—a very capitalist idea. As a result, people are more motivated to work, create, solve, and innovate, and get pay raises that reflect those results. We’ve had zero voluntary turnover in nine years. Why would people leave a results-based system that focuses on making meaning, and doesn’t shackle them to people who aren’t as motivated?

Great companies focus first on:

a) building meaning into their work,

b) tying pay to results, and

c) creating a Highest Common Denominator workplace that celebrates great contributions and reaching for the stars.

People will raise themselves to our lowest expectation of them. The most motivated achievers with brains are leaving Price’s company, and over time, only the least motivated will stay. Play a game that motivated adults want to play, and great achievers will rise to your greatest expectations of them.

Making meaning, and results-based incentives always attract great people. LCDManagement makes them leave. Your choice.

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Riding a Bike In Tuscany Taught Me Why People Don’t Set Goals

I learn a lot riding my bike. We’re in Tuscany for a month and today was the sixth day of riding. Twenty glorious days to go. The first day, and every day since, I simply decided which direction I was going (north, south, toward the hills, away from them, etc.), then got on my bike and went.

Living For The Moment I have spent hours each day blissfully unaware of where I am, just riding through the countryside, impulsively going left, right or straight as it seemed right for the moment. The future and the past don’t play into the decision. I’m just “living for the moment.” But each day I have to find my way back to our fairly remote, countryside villa south of Lucca. The first day it took an hour to find home on these winding roads (even with a digital map), where I could easily have done it in 20 minutes if I knew the area. Each day since it has gotten easier.

“I Just Don’t Know Where I Am” Every day my wife, Diane, and daughter, Laura have asked me, “Were you lost?”, to which I always reply, “I’m never lost, I just don’t know where I am.” Today, I was going through the process of finding my way home, and on an unusually straight stretch of road with time to think, I realized that I get a little perturbed right around this time in every ride, because now I’m actually trying to get somewhere.

That’s when I figured out why people don’t set goals. Because they answer the question the way I did—“I’m not lost, I just don’t know where I am.” On that same late stretch today where I was now trying to hone in on the villa, I realized that I actually do get lost, and I do it once on every ride; when I’m trying to get home; when I finally have a goal.

Measuring Progress Requires a Goal In Alice in Wonderland, Alice asks the Cheshire Cat which direction she should go. He responds wisely with the question, “Where are you going?” Alice says, “I don’t know”, to which the Cat replies, “Then either road will do.” And off she goes, enjoying her adventure.

When I have nowhere I need to be, I’m simply on a glorious adventure with no constraints, no rules, no timelines, and no pressure to perform. Nothing to measure in the long run. I truly am not lost, I just don’t know where I am. But that’s okay, because I have nowhere I need to be.

But as soon as I ask, “Where is home?”, I’m immediately lost, because now I have somewhere I need to be, and at first I don’t know how to get there. My stress level goes up a bit, and I start getting frustrated that I missed a turn, or have to backtrack, when minutes before, I would not have seen any of those activities as missteps. I’m now “failing” (we should call it practice or learning) where I used to have no measure of such a thing.

Too often we see that kind of pressure as negative stuff. But something else comes into focus as soon as I ask, “Where is home?” Instead of just wandering around, for the first time, I’m immediately measuring progress toward some potentially positive future goal.

Living On Purpose All six bike rides getting home have come with a big sense of accomplishment by just finding our remote villa. The same is true on a grander scale with chasing my own personal Big Why, which is To Live Well By Doing Good. Things worth accomplishing always involve a challenge, some stress, and clear measurement of progress.

But utter clarity on where you are going and what it looks like when you get there, makes all that worth it. We can live reactively and any road will do, or we can live on purpose, design our future, and become intentional about getting somewhere. We get what we intend, not what we hope for.

“Where Are You Going?” Nobody’s lost until they have a destination in mind. We shouldn’t ask people if they are lost. It’s a negative question that assumes incompetence. We should instead ask them if they know where they are going; where they want to end up. That’s an interesting challenge that just might change their lives.

Some people work hard at being confused because when they are confused, they are not responsible. “There are so many good choices of where I could end up, I just don’t know which road to take.” The ability to measure progress is sometimes threatening, but a man still finds his destiny on the path he chose to avoid it. You will end up somewhere, the question is whether by default or by choice.

He who aims at nothing, hits it every time.

Off to bed before a big ride tomorrow. Getting home is the biggest challenge I expect to face.

Where are you going?

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