A Blog by Jonathan Low


Mar 20, 2015

Why Is Amazon Copying Zappos and Paying Employees to Quit?

How to keep a workforce engaged has generally followed two schools of thought based on fairly basic principles: fear or fun.

The first was epitomized by former GE CEO 'Neutron' Jack Welch (so nicknamed because after making a new acquisition he was said to keep the buildings but eliminate the people). He advocated forcing the bottom 10% of employees to leave the company. Annually. This, he said, assured that those who stayed worked hard and really wanted to be there.

The second is personified by the public image of Silicon Valley companies with cool offices, foosball rooms, beer blasts and the opportunity to get really rich if the product or service hits.

Neither stereotype is particularly fair or accurate. Welch asserted that his primary responsibility was to make sure the corporation recruited and kept the best people it could find. GE invested heavily in training at all levels and is to this day known as one of the foremost companies to raid if you are looking for top-flight management talent. Silicon Valley companies, meanwhile, in addition to all that fun, are known to be places where people work incredibly hard and assume great risk since the payoff is never guaranteed.

Offering to pay people to quit has elements of both styles: get out before you're pushed and/or find your bliss. The reality is that Amazon acquired Zappos, so the fact that it is willing to learn from subsidiaries is evidence of an openness to new ideas from wherever they originate. All organizations must guard against complacency in how they view the world - inside as well as outside. JL

Bill Taylor comments in Harvard Business Review:

The most successful companies care more than everyone else — about customers, about colleagues, about how the organization conducts itself in a world with endless opportunities to cut corners and compromise on values.  You can’t be special, distinctive, compelling in the marketplace unless you’ve built something special, distinctive, compelling in the workplace.
Last week, Amazon founder and CEO Jeff Bezos released his annual letter to shareholders. As is the case every year, it is a tour de force of ideas and initiatives about the customer experience (Amazon Prime), disruptive technology (Fire TV), fast-growing product initiatives (Amazon Web Services), and strategic consistency. (As he does every year, Bezos attached his first letter to shareholders from back in 1997 to underscore the company’s long-term commitments.)
Still, for all these big, cutting-edge innovations, it was a small, pre-existing idea, something that Amazon borrowed from one its subsidiaries, that generated the most public attention. Bezos’s letter unveiled his well-named Pay to Quit program, in which the company offers fulfillment-center employees one-time payments to leave Amazon. Each employee gets the offer once a year. The first time, it’s for $2,000. The offer increases by $1,000 each year after that up to a maximum of $5,000.
If Pay to Quit sounds familiar, there’s a reason. The idea was invented several years ago at Zappos, the online retailer based in Las Vegas that has become iconic for its zeal about customer service. Tony Hsieh and his colleagues call their program The Offer, and it’s made as new recruits experience the company’s deep-dive training program. The Offer, which applies to all new Zappos employees, not just front-line service people, started at $100, went to $500, then $1,000, and now stands at one-month’s salary. Amazon bought Zappos back in 2009, and now Jeff Bezos is shipping some of this upstart’s ideas into his behemoth organization.
So what to make of this pay-to-quit boomlet? Why are high-profile innovators like Tony Hsieh and Jeff Bezos making it easy, even attractive, for employees they worked hard to recruit to leave their companies and move on to the next thing?
The first (and most obvious) answer is that unhappy people make for unsuccessful companies. As Bezos notes in his letter, “In the long run, an employee staying somewhere they don’t want to be isn’t healthy for the employee or the company.” This is not, it should be stressed, an indictment of the organization or people who choose to leave. Great companies are great precisely because they stand for something special, different, distinctive. That means, almost by definition, that they are not for everybody. It takes a certain personality type to thrive in the extroverted, almost theatrical, culture of Zappos, or the driven, no-nonsense culture at Amazon. If there isn’t the right fit, it makes perfect sense to quit.
But the more valuable role of these offers may be their impact on the employees who choose to stay. Once a year at Amazon, front-line employees, whose jobs are anything but glamorous, get a chance to sit back, reflect, and choose whether to re-commit to the company and their colleagues. In a sense, Pay to Quit is an annual performance review of the company by its employees: Can I imagine not working in this department, with these people, for this company? It is they who are making the call, they who are choosing not to take the money and run — which creates a deeper sense of engagement and affiliation.
Who can forget the memorable scene in The Godfather, when Michael Corleone explains to his older brother, “It’s not personal, Sonny. It’s strictly business.” (The Corleone’s, of course, had different techniques for persuading colleagues to, ahem, leave the organization.)  The spirit of enterprise today, the energy that makes great companies tick, is precisely the opposite of that much-quoted piece of management wisdom.
Work is personal. That’s the driving force behind the truly great companies I’ve gotten to know, an unshakable sense that a company’s capacity to create economic value for its customers connects directly to its ability to create a sense of meaning and camaraderie for its people at every level of the organization.
And that, I’d argue, is the real takeaway of these programs for leaders in other companies, whether they choose to implement some version of them or not. With all the threats and challenges and competitors in the world, so many of the business leaders I meet focus on the age-old question: What keeps you up at night? What are the problems and worries that nag at you? But the much more powerful question, especially for people on the front-lines of business is: What gets you up in the morning? What keeps everyone more committed than ever, more engaged than ever, more excited than ever, even as the competitive environment gets tougher than ever?
Sure, the most successful innovators think differently from everyone else — Hsieh and Bezos personify that mindset. But the most successful companies care more than everyone else — about customers, about colleagues, about how the organization conducts itself in a world with endless opportunities to cut corners and compromise on values.  You can’t be special, distinctive, compelling in the marketplace unless you’ve built something special, distinctive, compelling in the workplace. Your strategy is your culture, your culture is your strategy.
Here are the questions that matter: How engaged are people at every level of the organization in the company and their work — how personally do they take things? How much money would it take to persuade them to leave the organization? And, in the spirit of The Godfather, what are you doing to make sure Pay to Quit is an offer they can refuse?


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