Paying employees to quit?
May 1, 2014
By Eric Brown, courtesy of SBAM Approved Partner ASE
In 2008, Zappos, an online footwear and clothing retailer, made headlines for asking its newly hired employees to quit, and offering money to tempt them to do it. Talk about a warm-welcome onboarding experience! Today Amazon, the online retailer that owns Zappos, is also asking its warehouse workers to quit. But not just their new workers; all of them, regardless of their performance level. Every year. And dangling up to $5,000 in front of them to encourage them do it.
When Zappos hires a new employee, that employee partakes of an intensive four-week training program, getting exposed to the culture, strategy and processes of the organization. At about one week into the training, Zappos makes what it calls “The Offer,” saying, “If you quit today, we will pay you for the amount of time you have worked, plus a $2,000 bonus.” According to CEO Tony Hsieh. About 2% to 3% accept the offer, leaving the other 97% choosing to continue working for the company instead.
Amazon has put together a similar package, offering up to $5,000 for warehouse workers to quit. CEO Jeff Bezos announced the “Pay to Quit” program recently in an effort that he hopes will result eventually in a population comprised of only those employees who want to be with Amazon.
“The goal is to encourage folks to take a moment and think about what they really want,” he wrote in a letter to shareholders. “In the long-run, an employee staying somewhere they don’t want to be isn’t healthy for the employee or the company.”
Amazon rolled out the program in January to the company’s 40,000 warehouse employees. Newer employees are offered $2,000 to quit, with the ante increasing each year by $1,000 until it maxes at a $5,000. According to the company, fewer than 10% of the employees who got the offer took it and left the organization.
This program is not about right-sizing the organization, which some cynics believe. Amazon is currently in the process of adding employees and locations. The decision to offer such a program comes down to trying to create a culture of employees who really want to be at their job and employer.
Bezos knows he needs to do something about Amazon’s work culture. Amazon’s business model would not be viable without the advanced technology that enables it to stock, pick, pack and ship incredible volumes and varieties of consumer products globally. But regardless of technology, the work is physically hard, the pace relentless, the pay not high. And the sheer size and complexity of everything they do is such that individual workers find it basically impossible to express their individuality and creativity. Under even the most enlightened management practices it is difficult to find much meaning in the work. The price Amazon pays for that efficiency is a reputation for how it treats its employees that may be the most negative one anywhere this side of WalMart.
Harvard Business Review blogger Bill Taylor makes the valid point that all work is personal—employees need to feel personally engaged in what they do in order to do their best. In a huge organization like Amazon, the individual needs to feel that he contributes to a system that performs spectacular, best-in-the-world feats of efficiency and low cost.
Bezos’ idea seems to be that if you invite people to leave every year and offer them money to make it easier to do it, then whoever chooses to reject the offer is freely renewing her commitment to the organization. As long as she has other viable economic options, then Pay to Quit could have the effect Bezos wants it to have. It will benefit both the employee and the company. It will be the beginning of the kind of culture he, and Amazon’s stockholders, hope to eventually have.