Why Amazon Is Copying Zappos and Paying Employees to Quit

Why Amazon Is Copying Zappos and Paying Employees to Quit

by Bill Taylor  |   2:05 PM April 14, 2014

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?


About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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