Innovative Thinking at Amazon: Paying Employees $5,000 to Quit

Amazon continues to be innovative not just in technology but with management thinking. Jeff Bezos has rejected the dictates espoused most vociferously by Wall Street mouthpieces and MBAs that encourage short term thinking and financial gimmicks which harm the long term success of companies.

Most CEOs and executives are too fearful or foolish to ignore what they are told they must do because Wall Street demands it. CEO’s and boards often ratchet up the poor management thinking by tying big bonuses to financial measures which are much more easily achieved by gaming the system than by improving the company (so companies get the games there boards encouraged through their financial extrinsic motivation focus).

Amazon does many good things focused on making Amazon a stronger company year after year. These innovative management practices seem to largely be due to the thinking of the strong willed founder and CEO: Jeff Bezos. Jeff was smart enough to see the great things being done at Zappos by Tony Hsieh and bought Zappos.

Jeff Bezos has added his letter to shareholders to Warren Buffett’s (for Berkshire Hathaway) as letters worth reading each year. In the latest Amazon letter he includes many worthwhile ideas including:

Career Choice is a program where we pre-pay 95% of tuition for our employees to take courses for in- demand fields, such as airplane mechanic or nursing, regardless of whether the skills are relevant to a career at Amazon. The goal is to enable choice. We know that for some of our fulfillment center employees, Amazon will be a career. For others, Amazon might be a stepping stone on the way to a job somewhere else – a job that may require new skills. If the right training can make the difference, we want to help.

The second program is called Pay to Quit. It was invented by the clever people at Zappos, and the Amazon fulfillment centers have been iterating on it. Pay to Quit is pretty simple. Once a year, we offer to pay our associates to quit. The first year the offer is made, it’s for $2,000. Then it goes up one thousand dollars a year until it reaches $5,000. The headline on the offer is “Please Don’t Take This Offer.” We hope they don’t take the offer; we want them to stay. Why do we make this offer? The goal is to encourage folks to take a moment and think about what they really want. In the long-run, an employee staying somewhere they don’t want to be isn’t healthy for the employee or the company.

A third inward innovation is our Virtual Contact Center. It’s an idea we started a few years back and have continued to grow with terrific results. Under this program, employees provide customer service support for Amazon and Kindle customers while working from home. This flexibility is ideal for many employees who, perhaps because they have young children or for another reason, either cannot or prefer not to work outside the home.

The first point reinforces Dr. Deming’s words encouraging companies to do exactly that – pay for education even if it wasn’t related to the work the employee was doing or would do for the company. Still quite rare decades after Deming’s advice.

The second point is taken from Zappos and is quite innovative or maybe a word many MBAs would be more likely to use: crazy. It is tweaking the Zappos paying employees to quit idea, which was offered at the end of extensive training with the idea if the person didn’t like the job Zappos didn’t want them to stay (Zappo’s customer focus practices don’t work nearly as well if employees don’t believe in what they are doing).

I must say Amazon’s idea does seem a bit crazy but I like the explanation provided in the report. “In the long-run, an employee staying somewhere they don’t want to be isn’t healthy for the employee or the company.” Putting your money behind the this idea isn’t easy. Especially if you use KPI (and especially if you based incentives off those KPIs) for things like turnover rate. Good for Amazon having the guts to think systemically about what is important and then being willing to take creative steps in support of that vision.

The 3rd point seems fairly tame in comparison but is a good idea.

Read the whole annual report for more incite into the mind of a leader worth listening to.

I would like to see the Amazon stock price decrease so I can buy the stock back. I love the company but the stock price got so high that I sold, but I miss owning such a good company (other than the bit I own through index and mutual funds). I do still have it as a primary component of my 12 stocks for 10 years portfolio (it is up the most, 530% in 9 years).

Related: Enhancing Passion of EmployeesJeff Bezos Spends a Week Working in Amazon’s Kentucky Distribution Center (2009)Amazon Using a Costco Strategy?Amazon Innovation (2006)Bezos on Lean Thinking (2005)

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