Why Zappos Pays New Employees to Quit—And You Should Too(discussionleader.hbsp.com)
discussionleader.hbsp.com
Why Zappos Pays New Employees to Quit—And You Should Too
http://discussionleader.hbsp.com/taylor/2008/05/wy_zappos_pays_new_employees_t.html
37 comments
Quite a smart strategy. I wouild love to impliment this and infact, I think I could come up with a very good business case for it. As with most of you I suspect, I at first thought about the angle of "it's a quick $1k, I'll just quit in a week and be better off for it".
But of course - Zappos has already weeded out unsuitable candidates in interview/tests. That 10% figure is highly realistic because Zappos have a good idea that the vast majority of their new hires ARE right for the job, before they even start their training.
Plus they're probably running Bayesian statistics on all the data they have on the interview/test results of the candidates, so they can get better on hiring those that are less likely to quit. (And if they're not, they should be.)
In addition to the filtering element, this strategy probably has a long term benefit. Those who reject the offer and join are likely to stay committed and enthusiastic in order to be consistent with their original decision. The desire to be consistent is a hugely powerful force - read Influence by Robert Cialdini if you're interested.
I wonder is Zappos backs up all this "enthusiasm" for the company with actual money paid. Typically these "fun" organizations expect total commitment from their employees but shy away from actually giving them a tangible 'interest' in the org.
You'd be surprised though at how much cash people are willing to sacrifice just to be able to enjoy coming to work each day.
As long as they're ballpark, they'll always have people beating down their door.
As long as they're ballpark, they'll always have people beating down their door.
Think its a great idea it separates the employees that have already thought about quitting. It also gives an easy exit without any anxiety...
I seriously question the economics of Zappos. I mean, I've ordered shoes there 4 times, and I've probably got a record of something like 6 returns total and 2 shoes purchased. They had to eat a ton on that.
I don't really see their ratio being high enough. I'm rooting for them, but I really feel like any day their prices are going to go up to MSRP and they're going straight out of business.
And I'd love to know what % of people take them up on the $1k.
I don't really see their ratio being high enough. I'm rooting for them, but I really feel like any day their prices are going to go up to MSRP and they're going straight out of business.
And I'd love to know what % of people take them up on the $1k.
The prices at Zappos are very close to MSRP... at least for current sneakers. I've been tangentially involved with the action sports industry for years. My friends own shops and apparel companies and I've done web and video work for them. Zappos gets stuff for lower cost than the shops because they do so much volume. They also cut out the distributor and don't have to pay for retail space, which are the two points where other retailers lose. Even with returns they are making a killing. An $80 sneaker probably only costs them $20.
Well, if their markup is that high, then I suppose even a couple $15 shipping labels still leaves a profit.
I'd love to know the ratio of returned shoes to ones kept. I bet it's greater than 1:1.
I'd love to know the ratio of returned shoes to ones kept. I bet it's greater than 1:1.
Does shipping a pair of shoes really cost them $15 each way? I kind of doubt that, too.
When they can walk the packages over to the UPS hub and they have such a large volume in shipping, UPS probably cut them a pretty good deal also.
You do actually get discounts (regardless of volume) for being near certain UPS locations. About 20 minutes from where I live, there are shit tons of trucking and mail order catalog fulfillment warehouses because it's next to Rt. 80 and almost halfway in between NYC and Chicago. UPS rates from there are ridiculously low.
They probably did eat a bit on that, however:
1) Most customer's don't return stuff anywhere close to the rate you do (they usually get it right the first time. It's also a hassle to return stuff, even if it's free).
2) I can imagine with your atrocious rate ratio of returns, you'd be far more inclined to pay a few more dollars to make that experience better via Zappos then stinge out and deal with paying for the return shipping and poor customer service issues elsewhere. (i.e. if they raise their prices, who cares? Everyone knows Zappos was built on their excellent customer service and selection, not their prices)
(Note: I personally haven't used Zappos myself, but I've heard Tony talk about his customer service oriented culture in person and they sure seem to be doing just fine with it).
1) Most customer's don't return stuff anywhere close to the rate you do (they usually get it right the first time. It's also a hassle to return stuff, even if it's free).
2) I can imagine with your atrocious rate ratio of returns, you'd be far more inclined to pay a few more dollars to make that experience better via Zappos then stinge out and deal with paying for the return shipping and poor customer service issues elsewhere. (i.e. if they raise their prices, who cares? Everyone knows Zappos was built on their excellent customer service and selection, not their prices)
(Note: I personally haven't used Zappos myself, but I've heard Tony talk about his customer service oriented culture in person and they sure seem to be doing just fine with it).
Well, I bet they return shoes a lot. Not as much as I did (and that was only due to 2 different brands having odd sizes) but I'd not be surprised if half of their orders end up returned.
It's not a hassle at all with Zappos, it's trivial. I'm the kind of guy who would just eat the $50-$100 if it required more than 10 minutes of my time. I've got boxes full of crap to prove that.
It's not a hassle at all with Zappos, it's trivial. I'm the kind of guy who would just eat the $50-$100 if it required more than 10 minutes of my time. I've got boxes full of crap to prove that.
You value your free time at a rate of 300-600 dollars an hour? Wow.
Post-tax! Must be a patent attorney. Yet somehow he's posting on Hacker News...
I think you're missing my point.
> I seriously question the economics of Zappos... I really feel like any day their prices are going to go up to MSRP and they're going straight out of business.
>> It's not a hassle at all with Zappos, it's trivial. I'm the kind of guy who would just eat the $50-$100 if it required more than 10 minutes of my time.
> I seriously question the economics of Zappos... I really feel like any day their prices are going to go up to MSRP and they're going straight out of business.
>> It's not a hassle at all with Zappos, it's trivial. I'm the kind of guy who would just eat the $50-$100 if it required more than 10 minutes of my time.
> I can imagine with your atrocious rate ratio of returns
Or, another perspective: Imagine you go to a shoe shop, and you try on three or four pairs before you buy. For Zappos, that would be a return rate of 3:1, reduced only by the inconvenience for the customer to return the shoes.
Or, another perspective: Imagine you go to a shoe shop, and you try on three or four pairs before you buy. For Zappos, that would be a return rate of 3:1, reduced only by the inconvenience for the customer to return the shoes.
Perhaps. Though for me, trying on a pair of shoes in the store and putting them back on the shelf is a much different experience then ordering them online, waiting a few days, trying them on, and then re-packing them up and going to the post office to ship them back. When I buy stuff online, I usually want to keep it.
For people who love to shop for shoes, all they need is one experience with Zappos and they never want to shop anywhere again. That's worth the price of some return labels.
Article says 10% take the money and run.
Whoops, what I meant to say was how many regret not.
"I seriously question the economics of Zappos"
This is a pure numbers game. They know long before you do what percentage of orders will be returned. I imagine they stay competitive in such a touch market because of their economies of scale.
This is a pure numbers game. They know long before you do what percentage of orders will be returned. I imagine they stay competitive in such a touch market because of their economies of scale.
you should ask tony...he'll probably answer you
This reminds me of an innovation by another company known for its excellent customer service, Southwest Airlines.
They would put all of the current applicants in a room and have each one present themselves to the others. The recruiters never observed the presenter. Instead, they observed the audience. Those paying attention would be more likely to care about their customers, and were invited to interview.
They would put all of the current applicants in a room and have each one present themselves to the others. The recruiters never observed the presenter. Instead, they observed the audience. Those paying attention would be more likely to care about their customers, and were invited to interview.
If I were a people person, Southwest would be the company I would work for. I love their reality show because it shows you how people can remain calm in a storm.
Nordstrom's is a department store known around here for extraordinary customer service. I walked into a Nordstrom's the other day. I felt out of place because the marble floors reflected the well-heeled patrons. I went in just to see if it was true that they never ask "Can I help you?". Because if you are asked that - you'll probably say "No, thank you." At Nordstrom's, they asked me "Have you shopped here before?" It's a tricky question - because it's not really a closed-ended question. "No" "No? How can I.."
Nordstrom's is a department store known around here for extraordinary customer service. I walked into a Nordstrom's the other day. I felt out of place because the marble floors reflected the well-heeled patrons. I went in just to see if it was true that they never ask "Can I help you?". Because if you are asked that - you'll probably say "No, thank you." At Nordstrom's, they asked me "Have you shopped here before?" It's a tricky question - because it's not really a closed-ended question. "No" "No? How can I.."
You are a people person. And you can hack. May be better to stay right where you're at. :)
If you didn't follow the link inside the story: http://www.zazlamarr.com/blog/?p=240. That's how you make raving fans - and a corporate environment where your employee is free to do something like that is just going to out-service everyone else.
A bunch of the Twitter employees inexplicably began following me on Twitter last week, at first I was like "huh"? but then I just chalked it up to Zappos having a corporate culture that creates a lot of really savvy web people.
I can see this being more efficient if it's a surprise.
Now that the tactic is public, some may apply and go through the training just for the buyout, making the filter much more expensive.
Now that the tactic is public, some may apply and go through the training just for the buyout, making the filter much more expensive.
I think they think about this the same way they think about their returns policy: They just assume that most people will be reasonable, and not go out of their way to abuse the system.
On a tangential note, I seem to notice more and more how this pattern of just trusting people seems to win out in all kinds of fields, even though it seems non-intuitive. Wikipedia is another example and in a sense the whole open source phenomenon is based on this. Both of these would have been considered preposterous until they succeeded and completely changed the world.
On a tangential note, I seem to notice more and more how this pattern of just trusting people seems to win out in all kinds of fields, even though it seems non-intuitive. Wikipedia is another example and in a sense the whole open source phenomenon is based on this. Both of these would have been considered preposterous until they succeeded and completely changed the world.
That's what I thought. Either they do not care, have a back-up plan or they had hoped to rely on security by obscurity.
Incidentally I just read "Built To Last" and they also talk about tightness of (cultural) fit.
Incidentally I just read "Built To Last" and they also talk about tightness of (cultural) fit.
What will prevent someone who knows about the deal from trying to get a job at Zappos with no intention of staying, grabbing the $1000 after a week, and leaving?
Hopefully those kind of people will be caught by the interview process, but I'm sure they slip through the cracks every once in awhile. In that case, they eat $1000. Oh well... it would appear that most people are honest enough that it doesn't happen very often, and doesn't make much of a difference to their overall business.
How about bribing employees to quit so they don't vest?
you get the boot even before you start :-)
http://www.slideshare.net/zappos/zappos-sxsw-presentation-to...