Zappos pays new employees after 4 weeks, if they quit. Yeah, yeah, I know it sounds crazy at first. But it’s actually brilliant.
Tony Hsieh, head of Zappos, will offer any new employee in the Las Vegas headquarters $1500 if they leave their positions after a 4 month introductory period. This won’t work for many companies but here’s what I think )because I know nothing more than what is in the video) makes Zappos successful with this strategy:
1) Strong employment brand. First, I believe that people want to work at Zappos (come on, there are all those shoes!) and I would suspect that their employment brand and their interview process give a clear understanding of their culture and values. New employees likely have clear expectations of what life at Zappos is like. If there were a bunch of negative surprises, this definitely would not work. I imagine that some research was done with new employees showing high satisfaction during the first few months. So this is a calculated risk for Zappos.
2) Strong customer service culture. Look, this is going to be true of the big online retailers. In an environment where people can just open another web page to shop at your competitor, user experience and customer service rule. Ever dealt with a cranky customer service rep? The ones where you can tell they would rather not be there? Yeah, you get it.
3) An understanding of the link between job satisfaction/cultural fit and performance. Obviously, they had to understand that job satisfaction has a direct impact on how customers are engaged and that has a direct impact on revenue. You know how they say you gotta spend money to make money? That totally applies here. Spend the $1500 to get rid of the people you don’t want on the phone with your customers anyway. Because if you feel you made a bad job choice, it’s really hard to muster a customer service attitude (I can just tell you from past experience…..sooo hard to fake it!).
4) I’m guessing low turnover, in general. I see a couple of things here. First, I think low turnover is a signal that the risk of offering the quitting bonus is a safe one. Obviously, there’s something going on there that compels people to stay. And I imagine that people see that in the first 4 weeks. The other thing that I think of is the new employees experience with other employees. So a new person joins the company and is surrounded by others that are happy in their job. It’s like a free advertisement for staying.
5) Also guessing, low cost-per-hire. There’s a trade-off, obviously, between customer acquisition costs and cost-per-hire. Does it cost you more to hire a new person to replace an employee with limited engagement/motivation; or does it cost you more to replace the customers that are potentially lost through unsatisfying interactions with that customer service person? You also have to take into account word-of-mouth; oh so hard to put a price on but you know if someone has a bad experience, they will tell ten friends and maybe even blog about it (not me, I’m innocent!). So you may not just lose that initial customer but the others in his/her network.
6) Significant availability of replacement talent in the marketplace. Some may argue that it’s better to leave roles unfilled than have a bad customer service person, but I am guessing that some of these people that are leaving (2-3%, according to Zappos) may not have necessarily been “bad” based on their motivations, just “OK.” So if talent in the marketplace was limited, it may be better to keep the “OK” person than leave the role unfilled. I’m guessing here that Zappos has a steady stream of qualified applicants (and going on national TV to talk about something like this should keep the resumes coming in).
7) Increased applications for positions because people know they have a safety net. If you knew you had an “out”, might you be more inclined to apply for positions you may not have otherwise? If you have 2 options and one has an out clause, which one do you choose. In a competitive talent market, this gives Zappos the edge over their competitors.
8) Knowing the right dollar amount to motivate unsatisfied employees, but not a dollar more. You pay too much, you’ll lose people that may have been good employees. You’d also probably get people that weren’t interested in staying in the first place. The $1500 is just to get people through to their next position.
Now they offer this pay-out regardless of position, but I assume many of their positions are customer facing (even marketing, if you think about it). This absolutely will not work for every company, but I think Zappos has the right formula to make this not only a recruiting tool (“hey, look, if you don’t like the job after 4 weeks, we will pay you to leave”) but a performance management tool (identifying less motivated employees early before the company invests in them further). Brilliant!
Thanks to Mark and Gerry for the link and inspiration.