Company Pays New Employees to Quit

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 visited that warehouse she'd likely 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 single 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 know 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.)

[Via Harvard Business Publishing]