Why Zappos Pays New Employees to Quit

Why Zappos Pays New Employees to Quit—And You Should Too

Posted by Bill Taylor / HarvardBusiness
May 19, 2008 10:06 AM

I
spend a lot of time visiting with companies and figuring out what ideas
they represent and what lessons we can learn from them. I usually leave
these visits underwhelmed. There are plenty of companies with a hot
product, a hip style, or a fast-rising stock price that are,
essentially, one-trick ponies—they deliver great short-term results,
but they don’t stand for anything big or important for the long-term.


Every so often, though, I spend time with a company that is so
original in its strategy, so determined in its execution, and so
transparent in its thinking, that it makes my head spin. Zappos is one
of those companies. Two weeks ago, I paid a visit to Zappos
headquarters in Henderson, Nevada, just outside Las Vegas, and spent
time with CEO Tony Hsieh
and his colleagues. I could write a whole series of posts (and just
might) about what I learned from this incredible operation. But I want
to focus this post on one small practice that offers big lessons for
leaders who are serious about changing the game in their field—and
filling their organization with people who are just as committed as
they are.

First, some background. As most of you know, Zappos sells shoes—lots
of them—over the Internet. The company expects to generate sales of
more than $1 billion this year, up from just $70 million five years
ago. Part of the reason for Zappos’s meteoric success is that it got
the economics and operations right. It offers customers a huge
selection—four million pairs of shoes (and other items, such as
handbags and apparel) in a warehouse in Kentucky next to a UPS hub. (If
Imelda Marcos weren’t already dead, she’d visit that warehouse and have
a coronary on the spot.)
It also offers free delivery and free returns—if you don’t like the
shoes, you box them up and send them back to Zappos for no charge.

So the value proposition is a winner. But it’s the emotional
connection that seals the deal. This company is fanatical about great
service—not just satisfying customers, but amazing them. The company
promises free, four-day delivery. That’s pretty good. But most of the
time it delivers next-day service, a surprise that leaves a lasting
impression on customers: "You said four days, but I got them the next
morning."

Zappos has also mastered the art of telephone service—a black hole
for most Internet retailers. Zappos publishes its 1-800 number on every
singe page of the site—and its smart and entertaining call-center
employees are free to do whatever it takes to make you happy. There are
no scripts, no time limits on calls, no robotic behavior, and plenty of legendary stories about Zappos and its customers.

This is a company that’s bursting with personality, to the point where a huge number of its 1,600 employees are power users of Twitter so
that their friends, colleagues, and customers no what they’re up to at
any moment in time. But here’s what’s really interesting. It’s a hard
job, answering phones and talking to customers for hours at a time. So
when Zappos hires new employees, it provides a four-week training
period that immerses them in the company’s strategy, culture, and
obsession with customers. People get paid their full salary during this
period.

After a week or so in this immersive experience, though, it’s time
for what Zappos calls "The Offer." The fast-growing company, which
works hard to recruit people to join, says to its newest employees: "If
you quit today, we will pay you for the amount of time you’ve worked,
plus we will offer you a $1,000 bonus." Zappos actually bribes its new
employees to quit!

Why? Because if you’re willing to take the company up on the offer,
you obviously don’t have the sense of commitment they are looking for.
It’s hard to describe the level of energy in the Zappos culture—which
means, by definition, it’s not for everybody. Zappos wants to learn if
there’s a bad fit between what makes the organization tick and what
makes individual employees tick—and it’s willing to pay to learn sooner
rather than later. (About ten percent of new call-center employees take
the money and run.)

Indeed, CEO Tony Hsieh and his colleagues keep raising the size of
the quit-now bonus. It started at $100, went to $500, and may well go
higher than $1,000 as the company gets bigger (and it becomes even more
difficult to maintain the all-important culture and obsession with
customers.)

It’s a small practice with big implications: Companies don’t engage
emotionally with their customers—people do. If you want to create a
memorable company, you have to fill your company with memorable people.
How are you making sure that you’re filling your organization with the
right people? And how much are you willing to pay to find out?

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