Should You Pay Your Staff to Quit?

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Smiling Man With Few Houndred Dollars BillsDo you remember back in 2007 when Zappos announced that it was going to start paying its employees $1,000 to quit on their 90 day anniversary? Yes, for those that missed it the first time round, I repeat, they payed them to quit. This is, of course, quite a radical talent management strategy, as they could have simply ended up with a perpetually empty office, but there was certainly method in their seeming madness.

For starters, they were cautious to begin with. They didn’t just start chucking $1,000 anti-incentives at new hires who they had spent months training; they started at $100 and then went to $500 and I have seen reports that the incentive has reached around $4,000 in 2012, but don’t quote me on that.

It was also part of their longer term talent management strategy, because in offering the incentive they were testing the employee’s level of commitment to the organization and sense of fit with the culture, having been there for 90 days. The more committed, culture correct employees stay and the less committed leave, meaning that Zappos is hiring more committed and engaged employees than they would otherwise be without this approach. It seems that around 10 percent of the employees take the incentive and run.

It seems like a fascinating talent management strategy and it is, therefore, interesting that it hasn’t really caught on, particularly since Zappos links much of its success to this radical hiring strategy.

So, why hasn’t it caught on? Is it because it’s perceived as a high-risk strategy?  I mean, if you have a negative employee culture and brand, then cynical employees could arguably take advantage of it, i.e. work for you for three months and walk away with a bonus. Your 3-month employee turnover levels could go through the roof and become unsustainable.

But, the level of premeditation it would take to do this would be a deterrent considering the relatively small return, wouldn’t it? I mean, who in their right mind would quit their job to apply to Zappos with a view to resigning in a few weeks for a nice but not life changing bonus, which would render you jobless and with a resume black spot? Taking a premeditated approach to try and scam Zappos for the bonus just doesn’t make sense.

Of those who were premeditated, they couldn’t guarantee they would get an interview or job with Zappos anyway. And they also couldn’t guarantee they wouldn’t like it in the end and choose to stay, which just underlines how nonsensical it would be to try and scam this bonus.

So, in reality, I think there is very little chance of it being scammed, and most people who apply to Zappos I think are doing so in good faith, probably because they have built such a great brand. In fact, as I said before, only around 10 percent of people take the bonus, which doesn’t sound like abuse or that Zappos has a major or employer branding or hiring issue. It seems like healthy pruning.

So, the question is, should you pay your staff to quit? Well, in theory, this anti-incentive could lead to a more committed workforce as the less committed have been filtered out.

I think it’s an innovative talent management scheme worth trying, but it does come with a health warning in that you need to screen employees very effectively so most do fit your culture, and you need to have great onboarding process and a positive brand and culture or you could find yourself with unsustainably high level of turnover at your 90-day period.

Also, be conservative with the incentives initially, like Zappos was, and build the incentives gradually until you reach that ideal level of 90-day voluntary turnover, possibly around 10 percent or whatever you decide is acceptable.

By Kazim Ladimeji