John Boudreau ColumnistYou may have heard that Amazon is offering to pay its hourly employees $5,000 to quit their jobs. The company says that when someone doesn’t really want to be there, it’s not healthy for the company or the employee.

CEO Jeff Bezos told of the program in a letter to shareholders. The offer comes once a year. The first year it’s made to a particular employee, it’s for $2,000. Then it goes up $1,000 a year until it reaches $5,000. It’s a real offer. But the headline on it is, “Please Don’t Take This Offer.”

“We want them to stay,” Bezos wrote. “The goal is to encourage folks to take a moment and think about what they really want.”

I imagine more than a few CFOs are asking questions just now. First and foremost: Is there an ROI? But also, on the assumption that the concept may well be sound because Amazon does a lot of things right, they may be asking: Is $5,000 the right amount to get the job done, or should we, like Netflix, give generous severance packages to merely adequate performers? And, should the offer go to all employees, or only the ones you want to leave?

Those may be interesting questions, but they don’t get at the real reason a pay-to-quit offer might have solid value.

It might save your organization the cost of a long process of documenting poor performance before firing people. In that case, it may be a very good investment indeed. On the other hand, research shows that the  best performers, who probably have the best alternative job opportunities, likely will react to such an offer by pausing and considering whether they should stay or go — even if they hadn’t actually been thinking of moving.

That sounds like a bad thing, but it really isn’t. That is, the offer may well spur high performers to talk with their managers about how they see their jobs. The conversations could encompass things like employee fit and performance, how Amazon competes in the market for the best performers, and what really gets great performers to stay (and poor performers to go). That’s the real payoff. Absent the pay-to-quit offer, managers might just keep on with their uninformed or unsystematic habits about employee turnover and retention.

The fact is, many organizational leaders and managers are fairly clueless about what employer turnover rates mean. Indeed, turnover rate is a dangerous statistic without the knowledge to understand it. We’ve all heard that “what gets measured gets done,” but organizational measures of turnover get scant attention or are widely misunderstood. What ends up “getting done” is reducing employee turnover. Yet research shows that reducing turnover may not improve productivity.

The point is not whether $5,000 is the right number. A better saying is, “what gets monetized gets analyzed.” A financial transaction focuses attention in a way that HR turnover reports probably never would. How would your managers respond if their best employees asked, “Why shouldn’t I just take the $5,000 and go?” I suspect that if they got that question every year, they’d be a lot savvier about their talent pipeline.

Turnover rate is really only one vital element in your talent pipeline for getting and keeping the people you need, and correcting mistakes when you get it wrong. Leaders should approach employee turnover more like inventory management, quality control and supply chain — that is, optimize their talent pipeline with a balance of things like probationary periods for new hires, severance packages, targeted layoffs, performance management and, yes, pay-to-quit.

The bottom line on pay-to-quit? It may be an investment you should consider — but not for the reasons you suspected.

John Boudreau is professor and research director at the University of Southern California’s Marshall School of Business and Center for Effective Organizations, and author of Retooling HR: Using Proven Business Tools to Make Better Decisions About Talent.

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9 responses to “Should You Pay Your Employees to Quit?”

  1. Amazon has the best business model I have ever seen. The share price recently dropped that means it’s time to buy. I quote the oracle of Omaha “when people panic, get greedy. When people get greedy, panic.” Rome wasn’t built in a day. Bezos isn’t running some get rich quick Ponzi scam, he’s building an empire that one day rival that of Alexander the Great. That’s what walstreet doesn’t seem to understand. Hopefully he has people who share his vision ready to take over when he retires. Because this company will be around for a very long time, unless its founding philosophy is one day compromised by new executives.

  2. brilliant idea, I’m all for it, plus there is an unintended benefit they have not thought of: – they can track by resignation, the department heads that prompt the most resignations, thereby weeding out the rocket-heads that are abusing their most valuable employees. These “studies” never mention loser middle managers who give their best Capt Quig on the job, screwing up most department employees in the process. Witness increasing “Postal” behavior by mid-level workers psychologically broken who return to the workplace exacting revenge. Is it not reasonable that systems in place like Mr Bezos’ could ferret out the ferrets who cause such bad results in the workplace??

  3. Wow! It is a good thing Amazon has plenty of money. Let’s say Employee is not doing so well. Of course, counsel him/her about how to improve. If he/she still doesn’t make appropriate progress, so much that you want him/her to leave, why wait for up to 4 years? A responsible company can offer severance pay and/or outplacement guidance, but I don’t see the point of bribing someone to make your decisions for you. Worse is offering the $5K to everyone. The better workers might just take it, and go to the competition.

  4. According to a recent Gallop survey – about 70% of employed Americans are not engaged at work.

    “Were they dead when you hired them? Or did you kill them?” W. Edwards Deming.

    In most organizations, there are processes for documenting poor performance and terminating employment of non-producers, but very little for developing and helping people improve.

  5. Companies sometimes pay referral bonuses to get good employees – whether through an internal referral program or via headhunter fees. Companies spend significant time and money to train and develop good employees. Sometimes it is difficult to spot a bad attitude that may be a cancer waiting to spread.
    Simply stated – we don’t want employees working here who don’t want to be here or who would rather be elsewhere. The “Pay to Quit” allows for a proactive funneling out of employees who don’t want to be there, perhaps BEFORE their cancer starts to spread throughout their department or the organization in general.
    It seems like a small price to pay, in my opinion, to keep the desired culture intact and to weed out those that will be future subtractions from what you are trying to accomplish as an organization.

  6. So firstly, that’s a way to get past Unemployment laws. If you end up paying $6-9k in unemployment expenses, paying them $5k to simply quit is a cost-shifting endeavor and is both morally reprehensible and probably illegal.

    Say for the sake of argument we were paying 6 months full wages.

    Most companies turn profits by producing real or intrinsic value; real value expresses itself by increasing throughput through innovation thus reducing labor expense as all tangible products and services are a function of labor expense. Intrinsic value manifests itself as some argument of the intrinsic value of the or product service sold; for example, the service of prostitution, much like product cocaine, demonstrably produces no tangible value and quite to the contrary are arguably destructive, but both possess intrinsic entertainment value.

    Financialized models; companies that are effected by market forces produced by substantial ingress and egress aggregate market cashflows; tend to produce companies which operate as a cargo cult. Because their aggregate value is not expressed in terms of units shipped or hours sold but rather net profit, in terms of their sale value to investors, they tend to de-couple from the normal model of incentivizing the production of useful services and products. They subsist entirely on imaginary capital; These companies, and they can be any company after a hostile or not so hostile takeover but generally they are public companies, have two peculiar tendencies.

    First, they tend to tend grow to unbelievable proportions, and thus tend to institute labor models which force employee’s into specialized pigeonhole tasks or generalized tasks that many individuals do. Because the expense of training is substantial, they therefor consume talent on tasks which have little relevance to producing useful products, and tend to poach from the SMB Sector which does produce tangible and intrinsic value.

    Slavery is suicide, because a well-designed machine can always do it cheaper, and the net-result of engaging your entire workforce; not segregating into innovators and mouth-breathers; by encouraging organic growth, something these large financilaized “shell” companies can’t do. To the contrary, they exist to demoralize and consume, silently, the weakest companies they can find.

    The all has a fundamental impact on employee’s; a fully demoralized employee is one who thinks what they are doing produces no real or intrinsic value, does not serve a customer, causes them to commit career suicide, is not in their or a companies long-term interest, or simply forces them into slavery (defined as a workload or pay grade which inhibits educational pursuit and professional benefits, and does not facilitate the satisfaction of reasonable appetites).

    If you, as a manager, cannot read that last paragraph and trace the issues back to their source in your organization, you are by definition, incompetent.

    Good Luck.

  7. As a variation on this theme, I’d like to see the $5,000 penalty.

    Impose this fine on me and my fellow hiring managers. If a person you refused to hire who you originally thought was bad turns out fantastic at your competitor’s place, pay up!

    This is one area of hiring we are hardly ever assessed on. Nor do we have many tools for improving. We can say there’s nobody good out there, that there’s talent shortages, and we’re not challenged. Rarely is there some mechanism that questions just how good of a judge we are. (It’s really scary because a poor hiring manager can make a career of letting good people slip away.)

    The biggest fear I have isn’t that somebody won’t work out. Instead, it’s that I prematurely wrote off somebody with potential. If I didn’t land that talent when it was mine and some other hiring manager scores big, it means I failed.

    Many times the only way to correct failing behavior is through harsh penalties.

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