Turning down $3000 requires people to internalize a solid commitment to the company. And engenders a huge sense of camaraderie when you know that everybody else you work with has also turned down the money.
And they get these two massive effects by NOT giving away money. It's worth the $3000 to get rid of employees who aren't that committed, but that's minor compared to the effects on the employees who stay.
I wonder how well this would work were it extended further into employment, too. A $3000 bonus to quit when you've worked somewhere for x years and are still in a job because of habit or fear could be a nice way to get rid of dead weight.
I've always seen this policy as a way to lubricate the quitting process, rather than implicitly instil commitment from those that don't take it (like they're giving up something, so they must like what they're doing).
By paying people that arent committed to leave, you increase the proportion of good, loyal employees. Fewer half-assed people stick around.
Looking from an economic search cost perspective, if $3k > cost of searching for new job with payoff (both implicit and explicit) = working for Zappos, then you take the money and leave. Thus, the only people that stay are those that have higher search costs (and given a constant pay rate and 'hire-ability'[1], the only those with a higher implicit payoff, ie enjoyment) stay .
This only works as long as the pay to quit is less than the search cost for the threshold level of employee that you're trying to keep. It's also reliant on holding the 'hire-ability' of accepted applicants constant. But it means they can pretty much dictate the minimum level of 'enjoyment' that employees get from their jobs by adjusting the pay-to-quit figure.
Pretty cool.
With unemployment so high, search costs go up, which mean that they're probably getting a threshold level of enjoyment that is lower now than it was when unemployment was less. I dont know when the $3000 came into effect, but it could make sense to raise it again.
[1] By this I mean checking the boxes, qualifications, etc. How easy would it be to just find a job without any extra factors. Ie, hiring a non-skilled worker vs highly-skilled worker. If quality of accepted applicants was very low, then it would be relatively harder to find a job, raising the search cost and screwing up the incentive.
It's also minor compared to the amount of money that companies pay recruiters. If they're paying $15k to place a really good engineer, they can afford to build an extra $3k into the cost of hiring to weed out the few who aren't happy there.
I would argue that it's also a smart bet by Zappos in the sense that just such a gesture on the part of management is appreciated by the employees, as well as the public.
And besides, the screening process for new employees probably filters out a decent proportion of the people who actually would be likely to take such a deal.
Yeah... this article is so old that the zappos $3000 dollar thing is written about in detail in one of my college management textbooks (Fundamentals of Management, 7th edition, Pearson Publishing, page 17)
If anything, that would mean that they could offer more. With 10% unemployment, not only would people be less likely to take the money, but it would be easier to find new people.
Yes, they could offer more but the choice of an easy 3k and then a quick stint of unemployment then versus the long stint of unemployment makes 3k a pittance. Having a job is so overwhelmingly important these days that even something as "large" as 3k pails in comparison.
Last year Amazon.com had almost a billion dollars in net income. It's quite likely that they can afford to maintain their hands-off approach with regards to subsidiaries, preserving Zappos' unique culture.
There's clearly a level of money you could offer that would get most people taking it and I sort of agree that $3000 isn't a huge test of loyalty, but at the same time its a really good idea.
The people who are most effected by relatively small amounts of money like this are marginal employees - people who don't really think they'll be happy at Zappos or are just working there until something better comes along. If you're getting rid of people who wouldn't have stuck around that long anyways it seems like a really good deal for Zappos (you don't have to pay the wages of the employee _or the people who were training them_). It seems like a really good and obvious in retrospect idea that many other companies might be wise to adopt.
As far as I know this is offered for $15/hour call center people in Las Vegas (or something like that). Friend of mine told me that is about $2000 in first week and then after training it is $3000.
This is quite significant chunk of money for Las Vegas area.
I have no reference or proof that above is how it works, just information from person who is familiar with Zappos.
At BUDS training, it's just a bell you can walk up and ring to immediately quit; but they still manage to keep only the most dedicated and proficient people.
I'd be really interested to see how well this would scale. There's two problems, as I see it:
1) Larger company with more employees means more applicants, and likely a lower overall quality of applicant. Responsibly maintaining this system would require more HR to conduct more in-depth interviews, etc. I can see them reaching a point where this is no longer profitable for them.
2) Corporate environment changes as companies grow. An expansion of the bureaucracy, though necessary to manage a larger workforce, legal team, client relations, etc, tends to kill the entrepreneurial atmosphere that attracts quality applicants in the first place. The kinds of people who want to join a startup and are willing to turn down a chunk of cash just for the opportunity to work there are likely not the kind of people who are itching to join a large Amazon subsidiary.
I could be grossly mistaken on this last point, and would be quite interested to hear how things have worked out for Zappos in this regard.
$3k or even $10k (as another commenter suggested) to bail out on a company that you just started at, is a way of making the people who really don't like the company not feel bad about leaving. Even at great companies, there are people who join who hate the environment, culture, or whatever. They are miserable. But they stay because they need a job. The walking money of $3k is a matter of getting rid of them, which is a great investment for the company.
For people who like a company, or who really want the job, a quick $3k isn't worthwhile. And in the case of Zappos, I'm sure that they've generally had people stay longer, lower attrition rate, etc., primarily because they've gotten rid of the people who would generally be a drag on the company, because they've already bought them out.
Perhaps this is a late comment but as a new Zappos hire I can attest that Zappos still makes this offer (and now it's $3,000 and is valid for 3 weeks after training). The reason is two fold.
First, Zappos wants to retain employees that want to be here. The culture is unlike anyplace you'll ever work. For some people it's attractive from the outside but overwhelming once you get in the door. Zappos wants to provide an enticement to help you make the decision to leave in case you want to.
More importantly, Zappos realizes that for a lot of people, staying in a job is a matter of finances. I may be miserable but I can't afford to miss a paycheck or two. For a lot of people, $3,000 can provide a few weeks or more of stability to help them find a new job. It makes fiscal sense.
Likely any benefit is a cognitive dissonance type effect. The article says that only 2-3% take the offer (so not much of a filtering effect) and that while you would think people would come in and abuse the offer HR doesn't seem to have a lot of special pre-screening. So likely the idea is to get the new employee to value the position as the internalize the lost value of the money they just turned down to continue the position. Not so much filtering people as attempting to nudge them a bit.
I wonder if this is one of those things that's more effective when no one knows about it in advance. Otherwise it works like marketing to new hires which - at least it seems - might somewhat defeat the purpose.
The money isn't about the sort of person that would leave for $3k.
It's about people who immediately discovered they don't want to work there - but can't leave after a month because they just paid an apartment deposit, or moving costs. These people are going to spend the next 3-6months looking for work while costing you money. That's who you desperately want to get rid of on day 1.
Most companies do exactly the opposite - they hire you in Nowheresville Nev but if you leave after a month you have a big chunk of location/training/recruitment expenses to pay back.
These companies are actively forcing you to stay there - hating them - for 6/9 months while you job hunt. And they somehow think the rules boost 'retention'!
And they get these two massive effects by NOT giving away money. It's worth the $3000 to get rid of employees who aren't that committed, but that's minor compared to the effects on the employees who stay.