The Intended Consequences of Taking HR Risks

I wrote a few months ago about the unintended consequences of HR programs. In this case, it was the decision of a Seattle CEO to make minimum wage $70,000 at his firm. So, some time has passed. What have been the consequences in the six months since the plan was implemented?

The results have been good for the company. Not only are they still in business, but they have thrived. The publicity led to a lot of new customer interest, they increased their already high customer retention rate, turnover is the same, and stories about customers leaving in droves proved to be false. The jury is still out on their long term profitability as the raises have not yet fully kicked in. The negativity around the story  PPSSPP emulator seems to have faded (at least according to my Google searches), but that could be due to a general lack of attention span of the media. I was surprised to even see the Inc./Slate story about it.

The CEO claimed that the reasons behind the raises were altruistic and I am willing to take that at face value. I do wonder whether the higher customer retention rate is due to some people being attracted by what they see as a political statement made by the raises or if the happier/less money stressed employees are providing better service. The former should fade pretty quickly. However, the real test is the latter. If the company continues to have a higher retention rate than before the raises, a large part could be attributed to the higher pay.

My takeaway at this point is that the CEO took a risk, based on a core belief, and it seems to have paid off, at least for now. Sure, he considered the numbers and took a short term pay hit, but it is likely that he’ll continue to profit for years to come if his strategy pays off. More importantly, the risk was one which had immediate benefits for the employees. In other words, he put people first in order to benefit the company. I am thinking that his gamble will pay off.

For more information on increasing employee engagement and retention, please contact Warren Bobrow.

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