Zappos Pays $1,000 for New Employees to Quit

A company trains its employees rigorously and before the training is complete, it offers the new employees a cash payment of $1,000 if they are willing to quit including their salary paid.

When we hear the first time that a company wants to pay you to quit, we wonder logically “is the company insane”. But Zappos, a successful shoe company is doing this for a long time and are highly successful.

Bill Taylor from Harvard Business Publishing interviewed Zappos’ CEO Tony Hsieh and his colleagues and found out the reason why Zappos offers this cash incentive called “The Offer” to its new employees.

Zappos is an online store that sells shoes primarily but also sells other items such as electronics, handbags, apparel and more. They generate sales more than $1 billion last year up from $70 million about five years ago.

The main reason for their success is they offer a wide variety of shoes and have an excellent customer service even better than Amazon.com. It carries nearly four million pairs of shoes in a Kentucky warehouse and ships shoes nationwide. It also has an online store in Canada. It offers free shipping and free returns if customers are not satisfied with the item (the costs include free return shipping).

Bill Taylor points out that Zappos does an incredible shipping job, Zappos promises four day delivery but in many cases customers get the items within a few days or in some case the next day. Unlike other internet companies which hides its customer service phone number, Zappos prominently displays its number all across the site. And it has great customer support to back that service.

In order to make their employees do a great customer service job, all the new employees are trained for a four week period and trains them how to respond to customers, to reflect the company’s strategy and culture. All the new employees are paid in full despite not doing any real work during this training period.

After a week or two training is over, Zappos then provides “The Offer” and tells the new trainees: “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.”

So, one would think many employees will accept it and take the money and run, but surprisingly only a few take “The Offer” because they know that remaining in the company will give them more benefits than a mere “$1,000”.

Zappos uses this method to see whether they have a committed employee in the long run. According to Taylor, Zappos wants to learn if there’s a bad fit between them and the employee and is willing to pay for this cost in advance than having them for a year or two and only to lose more money later.