Zappos Pays Employees to Quit
By Tom Ryan
Zappos has launched a program that pays new employees $1,500 to quit the company during initial training sessions. The policy is designed to make sure new employees are committed to working at the online retailer beyond just a paycheck.
Known to Zappos’ veterans as “the offer,” the quitting bonus offer typically comes a week or two into Zappos four-week indoctrination period that immerses new employees in the company’s strategy, culture, and obsession with customers. Typically, at some point in the training session, the training class leader leaves the room and designated employees enter to have a frank discussion with the new hire.
“They say: ‘Off the record, really, how is everything going? Does it seem like the right fit for you? Is this really where you think you want to be?,’” Rachel Brown, training manager at Zappos, told Internet Retailer. “Then we say if this isn’t the place for you we want to let you know about an early resignation offer that you can take advantage of.”
The quit-now incentive, which started with offers of $100, was instituted by Zappos’ CEO Tony Hsieh as an experiment two-and-half years ago. The quitting bounty was raised to $1,000 in January this year, and recently hiked to $1,500 because Mr. Hsieh didn’t feel enough people were taking the company up on its offer at $1,000.
Only about three percent have so far taken the money since the program was initiated, Ms. Brown told Internet Retailer. She attributes the small number taking the cash to a careful screening process. Interviews are aimed at getting a feel for the applicant’s personality, such as: ‘On a scale of one to 10, how lucky do you think you are?’ and ‘When is the last time you went above and beyond for a customer?’
In an online interview with CEOshowonline.com, Mr. Hsieh said part of the secret of Zappos’ success is around the “need to be truly passionate about whatever you’re in the business of doing … it should not just be about making money.” Later, Mr. Hsieh explained how Zappos’ success is directly connected with its unique “two-step” hiring process that in its second-step concentrates on Zappos’ corporate culture and core values. Mr. Hsieh said, “We make sure the people we hire have similar values. We won’t hire them if they are not a “culture-fit even if they are technically strong.”
Discussion Questions: What do you think of Zappos pay-to-quit offer? Do you see value in such a practice become more widespread across retailing?
Imagine this happening at Wal-Mart? There wouldn’t be anyone left. Zappos is a pretty classy organization. I’ve dealt with them before and have called to praise them.
Paying someone a $1,500 to quit sounds like PR stunt. Wegmans, Publix, Hy-Vee and others could do the same thing and have the same good results. Zappos and other good employers don’t have anything to worry about. In fact, most people would not quit their jobs for $1,500, even if they hate their jobs.
Two things surprise me about the responses to this discussion. First, how few cynics there are who suspect that now word is out, more applicants will try to get hired in order to quit. Secondly, why no one suggested that if other companies copy this revolutionary idea, the cost of letting people buy themselves out will start to escalate. Actually, I wonder how many people will start making a career out of being paid to not take a job, moving from one company to another.
Zappos is not a company I had heard of until today. I’ve just had a superquick look at their website and have to admit that I am puzzled by the enthusiasm. It looks as if they have a huge range of items but browsing and choosing could take hours. It also looked, at a quick glance, as if the prices are pretty high especially for products that were not well presented and did not look, to me, as if they are top of the range.
It’s good, of course, that the company wants staff who are fully committed and enthusiastic but the other thing that struck me as odd is having so many newly hired people at once that they can run a four week training/induction course. If someone would like to enlighten me privately, feel free. But my first impressions of this company are pretty puzzling.
I had the pleasure and wonderful opportunity once to hear Norman Mane of Dorothy Lane Supermarkets in Ohio speak about his experience in the industry, related to people. His talk was focused on hiring people with a passion for food and positioning people where they can flourish rather than fail…providing the opportunity to excel with passion.
In doing so with great success, I doubt that he ever paid anyone to quit. Hiring and developing people requires passion as well. If you view them as your most important asset, there are ways to inspire passion and at the same time instill loyalty to your mission. His passion was food. Zappo’s should likely be shoes, yet it doesn’t appear that way.
Personally, from my view, what Zappo’s is doing is a bad idea and states much about who they are and their view of both those they hire and those they don’t hire.
It costs retailers thousands of dollars to put someone through training…they likely end up on the upside with this. This is also a specialty retailer in an enormously competitive category. This approach is a brilliant way to get a competitive edge and earn allegiance with both employees and customers–and don’t they go hand in glove? I’m a Zappos shopper and let me tell you, they are stellar.
On another note, I saw Zappos featured on 60 Minutes last week talking about how they’ve created a culture to attract and retain the jaded “Millennium Generation” of 20-somethings coming into the work force. They’ve found that they put quality of life before work and mentally supporting them is critical to retaining them. I’m sure this method is also in place to ensure that they tap into their psychological needs in a positive manner and keep them for the long haul.
I agree that I might have wanted to keep this as an insider secret. I do think it’s a great idea to cut your losses early and find the person who wants to be your employee.
That said, I’ve worked at my local Disney Store since 1993 and trust me…none of us are getting rich working there! Why do we stay? We love Disney. It’s not always about money and Zappos clearly knows that. Good for them!
If it’s been working this long, then good for them. Personally, I would have kept my mouth shut about this program, if it were up to me and if it were working. Once word gets out on a widespread basis, and it looks like it’s going to, a whole new element enters the process and could well undermine its success.
WOW: A company that has figured it out and is now doing something about it. Very simple and very cost effective. Look at the 3 step process that they have put together.
1. They know exactly the type of people that fit into their organization.
2. They’ve developed a screening method to insure that they don’t only hire a warm body or someone just looking for a job.
3. They’ve learned to fail fast and save a lot of money. (A study over 5 years old funded by Coke put the cost of hiring and training a grocery store cashier at over $4,500.) I wonder what the cost would be today.
Great companies could make this offer and come out winners. Those companies that say they are great to work for but really aren’t would find out quickly what the truth is.
As expressed in this space previously–and as a recidivist Marcosian–I shop online at Zappos frequently. I’m a well-shod, happy customer. But, I’m also reminded of my stint as Corporate Advertising VP for 7-Eleven when the average employment time for store clerks was 32 days. “When you hire them you start to fire them.” True story.
Is profiling a bad thing? The ACLU would have us believe that forming initial impressions of folks by their appearance, language, and clothing is shameful. And yet, every member and employee of the ACLU does exactly that on a daily, minute-to-minute basis. It’s human nature, which can’t be successfully outlawed. Now Zappos has added a wrinkle: “We’ll pay you to leave.” How is this different from the buyout packages offered by major corporations to unwanted employees when they decide to downsize?
I love this Zappos practice. And, I would challenge any naysayer with this question: “Do you have a better, more productive, more successful idea?” If not, shut up.
All I’m thinking about while reading this article is how much money could be put back into hours and training. This pay to quit idea is awful and will eventually demoralize the frontline staff. If managers cannot motivate or get rid of non producing employees, they aren’t really managing the business!
Think what a great TV episode this would make…”Twilight Zone” or maybe even “Star Trek”: Kirk: “Let me get this straight! They want to PAY me to quit! During training!” Spock: “It doesn’t seem logical, Captain.”
I’m really not sure what to make of this: as a final check in a long evaluation process–a crucial “detail” that subsequent retellings will leave out–and as an inducement for prospective employees to give Zappos a look, this has much going for it; and yet…some ideas just seem too weird; while thinking outside the box can lead to innovation, it can also lead to disaster; and, unfortunately, many who have happened upon the former can’t leave well enough alone and end up with the latter. I wish them well.
It’s a genius idea!…as long as Zappos makes it hard to get hired. As long as they put the right hurdles in place to make it difficult to take on new employees, they’ve got a great plan!
Certainly a bold and creative idea! If companies examined the cost of training and the up time of the average new associate more would be interested in such a program. It is very costly to invest in a new person only to find out one year later the fit was wrong. This is definitely thinking out of the box and not getting bent on the “corporate America does it this way” world. Kudos!
Maybe I am too jaded by years of hiring employees, but now that the “cat is out of the bag” so to speak, I would think there is a risk of people hiring on to Zappos only to “quit” in order to get the quick money.
Next time I have a couple of weeks to spare, I’m going to “apply” for a job at Zappos. I can only wonder if this program has effectively resulted in the hiring of staff that share this passion for customer service.
I have to admit, when I read this on Internet Retailer the other day, it really made me smile, and really hit home. I have been quoting this story for the last couple of days to anyone who is willing to listen. I think it is a great idea. We have all had employees or co-workers who are in it only for the money, and wonder why they stay. This is a great way to weed those people out, before they take too much of management’s time, both in training and hand-holding.
This is a great idea, and the $1500 seems like the right amount that will actually get uninterested workers to actually leave. In the long-run, it will save the company a tremendous amount of money. Pretty smart thinking!
I’ve always said the body should go when the mind goes. The Zappos $1500 gives employees who are unsure if they are happy a bit of a safety net to find something else. Less dead wood. Less paperwork. Less write-ups. Brilliant
Offering buyouts to new hires isn’t the only Zappos innovation. They transformed the online shoe industry by offering the broadest selection anywhere, free freight both ways, and a 365 day return policy. If you’re going to buy shoes online, there aren’t many reasons to go elsewhere.
Retailers are notorious for poor screening and high staff turnover. Many retailers don’t give their new hires a clear picture of what it’s like to work at their shops. The staff turnover Doom Loop: recruitment and screening is sloppy, so many folks quit, so it “isn’t worth” training people, so we’re desperate to hire anyone, so anyone who stays is stressed working in a place with green coworkers, so high staff turnover becomes the norm.
Zappos needn’t fear that other retailers will copy their new recruit buyout offer. Over half a century of high staff turnover, most retailers assume employees come and go, that’s just part of the business, nothing you can do about it.