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Learn from Zappos: Pay Employees to Quit

Zappos pays employees $4,000 to quit. Yes, the company shells out $4,000 to employees who say just two words: “I quit.”

Here is why it is a great idea.

All Zappos employees must participate in a four-week training program when they are hired. When they complete the four weeks, they are given a choice — they can continue to work for Zappos, or they can quit. Those who quit will be paid a bonus of $4,000. Why does Zappos do this? It wants to get great talent.

In his book Delivering Happiness: A Path to Profits, Passion, and Purpose, Zappos CEO Tony Hsieh says: “Your personal core values define who you are, and a company's core values ultimately define the company's character and brand. For individuals, character is destiny. For organizations, culture is destiny.” In short, Zappos is big on company culture. This focus has made it successful — very successful.

An employee who is not happy after participating in the training program or is not excited about the company and its culture is not a good match. By offering such employees an out, Zappos can quickly and effectively weed out employees who are not a good fit with the company and its culture.

This may seem crazy, but the reality is that, when unhappy employees leave the company within their first four weeks of employment, the financial implications are much, much lower than the cost of unhappy employees who are likely to be uninspired at work and quit in less than a year.

How many people take the money and run? Somewhere between 2% and 3% of people quit and take the $4,000.

Smart or not? What do you think about the idea of paying your employees to quit?

12 comments on “Learn from Zappos: Pay Employees to Quit

  1. Ashu001
    January 31, 2014

    Its really nice to see Zappos not lose its Individual Maverick Culture when it got acquired by a much large Company[Amazon];but here is where I worry for Amazon Shareholders(who are getting hammered bigtime this month).

    Will amazon still continue (and allow this Maverick Practice) at a time when its rapidly losing Margins and Money Hand over Fist?

    I just heard on Bloomberg today that they are planning to raise the Price of their Amazon Prime Service for the first time ever.

    Margins under tremendous Pressure Don't permit such Luxuries.

    I see either Inner-Company Conflict now or a Future Spin-off of Zappos from Amazon.

    Lets see how things go.

     

     

  2. Hailey Lynne McKeefry
    January 31, 2014

    @Tech4People, i've been a long time user of Amazon prime and i find that they deliver a huge amount of value what they provide. When i started, it was just two day shipping. Then it was two-day shipping and also videos to watch. Then it was two-day shipping, videos to watch, and a one book per month for my kindles. The program has changed my consumption habits and made me loyal the company over the long haul. However, i think that they will lose customers if they go up too high. I think it was 79 dollars. anything above $99 and they'll see huge attrition and maybe before that if you don't use all the perks.

  3. Hailey Lynne McKeefry
    January 31, 2014

    I agree, it's smart and innovative. And that $4,000 figure is enough to give someone more breathing room if they are in the category of taking  a job they don't want out of desperation. I'm actually suprised that more people don't take them up on it.

  4. Hailey Lynne McKeefry
    January 31, 2014

    A bad hire can be incredibly expensive. The U.S. Department of Labor says that a bad hiring decision cost as much as  30% of  the annual salary being offered. Do the math. One mistake for someone paid $50,000 a jyear translates to a potential $15,000 loss for the employer. That makes $4,000 seem like a bargain right?

  5. t.alex
    February 3, 2014

    Nice way to get dedicated and inspired talents.

  6. Eldredge
    February 4, 2014

    @Hailey – great point – Offering a $4,000 incentive to 'quit' makes new employees wieigh their desire/commitment to stay with the company against the immediate bonus. At first blush, the incentive seems unconvetional, but I think actually serves the purpose very well.

  7. tfcsd
    February 5, 2014

    Interesting concept. Has anyone figured how much it would benefit the company if they go up the food chain and have those people quit if paid? Several times I have seen that it would be cheaper for everyone if certain people where paid to leave a company.

  8. Eldredge
    February 5, 2014

    Certainly this has been done on professional sports teams. Not really sure how well it has worked as a general rule.

  9. Ariella
    February 6, 2014

    I read Tony Hsieh's book, Delivering Happiness: A Path to Profits, Passion, and Purpose Zappos has a very strongly defined company culture, and they really want to be sure that the employees will fit it and contribute to it. That's why it makes sense to see who would rather take some money no than stick around. 

    At the end of the book, Hsieh shifts his focus to discussing happiness. He says his goal in writing was “to contribute to a happiness movement to make the world a better place” (p. 239). Now that sounds utterly sappy, but the idea of fostering a certain type of culture is that you create a context in which such statements are acceptable. He also said that Zappos is about delivering happiness to the world”  (p. 230). Hsieh believes that happiness can function as an “organizing principle” for businesses. While for an individual, passion and purpose combine to arrive at pleasure, in a business, those two goals combine for profit.  There is something that is undoubtedly appealing in that model, but I do not buy it altogether. There are many businesses that are far more successful than Zappos who developed different models for their own culture of success.

  10. Eldredge
    February 6, 2014

    In other work cultures, I wouldn't characterize the goal as 'happiness', but perhaps more 'satisfaction', derived from striving, performing, and achieving organizational goals.

  11. Ashu001
    February 10, 2014

    Hailey,

    Yes either you will see them lose some consumers or you will see them reduce Discretionary Expenditure elsewhere(like eating out or on their Cellphone Bills).

    We live in a Tight Economy currently;consumers will have to adapt their behavior accordingly.

     

  12. Hailey Lynne McKeefry
    February 12, 2014

    @Ariella, I heard an interview with Starbucks CEO and he was talking about their corporate culture of sustainability and environmetnalism, making a difference in the world. To all: can anyone think of an electronics OEM or OCM that has this sort of corporate culture stated publically?

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