The first (and stated) effect of this policy is to weed out the unmotivated employees.
However, Dan Ariely has explained that the secondary effect is potentially more powerful. For those that choose to stay, they will forever live with their past action of having turned down lots of money to work there. So, when they're having a crappy day and hating their job, they're probably thinking "why didn't I take the money and quit?!". The only way to reconcile their thoughts and actions is to explain that, in fact, they must really love this job and therefore should work hard at it. This effect is known as ‘Cognitive Dissonance’[1] and is fascinating.
Here's a link to a video of Dan explaining this[2] and a really excellent Coursera course he does on Irrational behaviour[3].
>The first (and stated) effect of this policy is to weed out the unmotivated employees.
I would argue the opposite. This policy is going to get rid of the most ambitious of your lower-paid folks, leaving you with people who have loyalty - and those who don't feel they have other options. the "lifers" who want to stay with your company long-term, even at the cost of their long-term career. I mean, those people can be good employees to have, but I wouldn't call them more motivated than the folks who will switch jobs for a 20% bonus. (oh god, do you remember when you went from $20/hr to $25/hr? you feel it in a way that you don't feel going from $40/hr to $50/hr)
I mean, I'm not going to switch jobs for five grand, unless I was going to switch jobs otherwise... but that's because it's a very small portion of my yearly income as a percentage. If amazon is offering this to warehouse workers who presumably make around $25K/yr, that's 20% of a yearly salary.
For a 20% bonus? Yeah, I'd probably switch jobs. Or just take a nice long vacation. But, I'm also not the sort to stick with a company if I don't think it's furthering my own career goals.
From the literature, Amazon contracts out it's warehouse duties to fulfillment companies. I'd be interested if anyone knew if Amazon had any direct employees (other than Sr. Management) that worked in the warehouses.
Huh. What about call centers? Thinking of it that way, the whole thing starts to make a little more sense. It is /hard/ to run a good low-end support organization, and it's one of those rare situations where attitude matters to the point where you want to get rid of the bad attitudes even if they are otherwise competent.
If you are making $25k a year working in a warehouse, another five grand is absolutely huge.
I agree that if you are giving this to people making $100K+ per year, it doesn't really have the same impact. Five grand is about what I'd expect for a "hey, you are doing okay but not stellar" annual raise within the company.
My big point, though, was that ambition and loyalty are often conflicting motivations.
I recall hearing about that for Zappos, but here the offer is repeated every year. Doesn't that ruin the effect - you know you can get (potentially even more) by quitting in a few months? And if it's only offered at certain times of the year, then there'll be a bunch of people hanging on until the offer comes around again.
You're missing the point that every pretty much every organization has people hanging on because they need the money, this is incentive to get some of those people to move on, not to eliminate the possibility of employees ever hanging on for a little bit more money.
Actually that was the other point (the one made in the article), which I wasn't missing but was simply not commenting on. The post above mine brought up a second point, which is the one I was questioning as the circumstances between Zappos and Amazon seem significantly different.
Well, I suspect there will be people postponing quitting for a few months just so they can cash out with the offer. That's undesirable for Amazon.
But I doubt you'd have people staying in a job they dislike for another year just to get an extra $1k when they do quit. Also you'll have compounded another year of turning down cash to work there so the cognitive dissonance might be even stronger.
There are lots of pragmatic reasons you might want to work at Amazon for a while and then leave for example, someone who's studying and wants to move into some other line of work after graduation. Waiting tables is the stereotypical student support job (partly because of lectures during the day and people preferring to attend restaurants in the evening), but my understanding is that Amazon warehouses run more or less 24-7.
Another way to look at this that doesn't require any cognitive dissonance is that Amazon lets hourly employees accumulate up to 2-3 months of severance pay (I'm not sure how much time that represents because I don't know their hourly rates, but I'm guessing it averages out to something like $12/hour).
I think it's a great program. Besides offering a friendly incentive for unmotivated workers to leave; it improves the confidence of those working there and provides useful transitional assistance to those moving on for career reasons; lower-paid workers often suffer economic disruption even when moving to a better job because they may miss a pay cycle or have to take on new expenses (new work equipment, different clothes, a car or moving to another town), so a cash cushion for such things is a big plus. It's good cheap publicity for Amazon, not to mention they probably retain their ex-employees and their associates as future customers.
If the offer is annual and they add an extra $1000 per year then on average the disgruntled employee has to wait 6 months to quit and get a higher severance, not 1 year. Which means that 1/4 of those employees only have to churn through 3 more months to get an extra $1000, hardly something nobody would do.
The obvious solution to fix this flaw in the system would be to raise the offer daily instead of annually, be approximately $1000/365 =~ $2.74 per day. Or more simply by $20 per week, which comes out to about the same per year ($1040).
I think you misunderstood jordn's comment. When he said "staying in a job they dislike for another year just to get an extra $1k when they do quit." I think he was talking about a hypothetical situation were an employee has been working for Amazon for, say 2 years, and got offered the $2k. They'd be unlikely to wait another full year, just to be able to get $3k when they quit. In other words, if they want to quit, they will do so at the closest offer (e.g. $2k) rather than waiting another year AFTER that offer to get a larger one (e.g. $3k).
Of course it's likely employees would wait e.g. 3 months to get the "quitting bonus". In fact, jordn quite clearly stated that also, in the first line of his comment.
Right, I'm just elaborating and pointing out that this caveat only happens as long as the offer is structured in such a way that you have a massive increase to it at a specified time once a year.
Then if you hate your job and you're close to that specified time it's in your interest to wait, even though the point of the policy is that Amazon would rather that you quit.
If they just increased the offer with more granularity they wouldn't create that conflict of interest. You'd only get more money as a function of the time you stayed on the job, so you might as well quit right away instead of waiting a few months for a much larger payout.
But that defeats the Conginitive Dissonance side of the things. If the offer is available daily (or even weekly), then the employee can just quit the very day (or next week) he feels crappy about his job.
How is it a problem that people who have such a tenuous attachment to their work that they'd quit next week for a bit of cash as soon as they're feeling down do so?
Seems like a great outcome for both the employee and the employer.
It also means that people will quit at a predictable moment, rather than in the middle of the christmas season. I think it is a very clever policy from Amazon at several levels.
> ...then there'll be a bunch of people hanging on until the offer comes around again.
This might be the most important aspect of the program. An employee abruptly putting in his or her notice can cause continuity issues for the business, especially if they don't give them the customary 2 weeks of notice. If $5000 can buy employees leaving at predictable times during the year, the business can take steps to ensure that the employee's job functions are covered. That predictability alone may be worth $5k.
"The only way to reconcile their thoughts and actions is to explain that, in fact, they must really love this job and therefore should work hard at it."
Is my mind supposed to work like that? I'd think "I should've taken the money, oh well, I had my reasons at the time, they've turned out to be wrong, nevermind, time to go."
Your mind almost certainly works like that whether you like it or not, unless you're a substantial outlier. There's tons of research that attacks this effect from various angles, and pretty consistently it finds that we have an exceedingly strong drive towards consistency between thoughts and emotions and actual physical behaviour.
Of course this is not an absolute: It will not work on everyone all the time. But that is not the point.
There's a multitude of effects that conspire to make us easy to manipulate in this way. I'd recommend Ciadini's book "Influence" as a good introduction to this topic - it's popularised, but full of references to the actual studies, and covers a long range of effects.
I'm aware of cognitive biases, and know they get me, I just find this use really feeble. Individuals and all that. When I make bad decisions I don't reconcile anything, I swear and grumble and cut my losses and tell myself to forget about it and move on, and sooner or later I usually do forget about it. New day, new situation, new factors, new decisions. New opportunities to make new bad decisions! I'll take a look at that book, thanks.
In very obvious cases, yes, people act like you've described. What this effect manipulates is the judgment of whether something was a bad decision in the first place. People can get disgruntled at a job that is objectively quite good, and can convince themselves that they're satisfied with a situation that's actually not that great.
That's why they're common fallacies. Not everyone has them, and not all the time, but they're common. There's also a fallacy for thinking you're not susceptible to them, and one for being too hard on yourself.
You can trigger compliance effects with a can of soda. Of course there needs to be a correspondence in magnitude, but it's not really about the absolute amounts.
Rents have been skewing much higher than mortgage costs for some time. I'd guess it's 2-3 mo. of rent, max. In silicon valley it might be 1-2mo.
But people often don't think rationally that way (and definitely not all the time). A large lump sum may seem bigger than it actually is. Which is why sales folks often try to peanut butter the costs over a range ("it's the cost of one coffee a day for a month!")
$2500 a month is 30K. The average warehouse worker at Amazon is around $25K (1), so the temptation might be there for them. For engineers, that amount is not likely to be considered.
Your theory might explain why the offer is only made once a year. Most likely, your bad day isn't going to line up with the availability of the offer. If it was always on offer, you might be more inclined to jump ship impulsively.
I'm curious about the opposite -- I'm assuming it likely keeps dead weight around longer too; someone who isn't happy or motivated, waiting around for a few months for the 5k bonus for leaving.
This might actually be desirable for amazon as it likely helps them keep their employees through the rough holiday season where they probably see a larger than average quit rate. I'd be willing to bet that the choice to quit and receive compensation comes shortly after the holiday season ends, thus dangling a carrot in front of the employees to muscle through.
For a company like Amazon a few months probably isn't significant in the grand scheme of things. They don't operate like a startup that is constantly a few months away from failure. Plus they have a lot more employees to fill in the gaps.
"The only way to reconcile their thoughts and actions is to explain that, in fact, they must really love this job and therefore should work hard at it"
That is not the only other way to reconcile their thoughts and actions. They can beat themselves up for not taking the money / regret their choice ('I am so stupid for not taking that money, I hate this job'). I know plenty of people who beat themselves up on a regular day to day basis about all sorts of life choices they wish they had made differently.
From what I've heard this is really offered to employees deemed "under developed" which basically means they're shitty at their job. It's a clever way not to pay severance.
That thinking is completely stupid, because even if no where else will offer money for quitting, they are being offered it to quit in their current job. That offer is of zero benefit if they DON'T take it. Staying BECAUSE there's an incentive to quit is perhaps one of the most ridiculous thoughts I've heard. Then again, some people are very stupid.
I also don't think that's "classic reverse psychology". (Although I'm not a psychologist).
However, Dan Ariely has explained that the secondary effect is potentially more powerful. For those that choose to stay, they will forever live with their past action of having turned down lots of money to work there. So, when they're having a crappy day and hating their job, they're probably thinking "why didn't I take the money and quit?!". The only way to reconcile their thoughts and actions is to explain that, in fact, they must really love this job and therefore should work hard at it. This effect is known as ‘Cognitive Dissonance’[1] and is fascinating.
Here's a link to a video of Dan explaining this[2] and a really excellent Coursera course he does on Irrational behaviour[3].
[1] http://en.wikipedia.org/wiki/Cognitive_dissonance
[2] http://bigthink.com/videos/dan-ariely-zappos-and-the-offer
[3] https://www.coursera.org/course/behavioralecon