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Thousands of Reasons to Leave

Amazon CEO Jeff Bezos made recent headlines by offering certain groups of employees up to $5,000 to resign, in part to help weed out disengaged workers. Will we see more companies following the "pay to quit" path?

Wednesday, May 14, 2014
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In an April 14 letter to shareholders, Amazon CEO Jeff Bezos offered to take the Seattle-based online retailer’s team members on "a tour that samples a small subset of our various initiatives."

Among those initiatives is a program that offers financial rewards to certain Amazon associates as an incentive to leave their jobs. Experts say such a program has a very real upside, but could also have unintended consequences that employers should be aware of should they choose to tread the "pay-to-quit" path.

In the letter, Bezos outlined how the "Pay-to-Quit" policy works: Amazon makes the offer once annually, exclusively to workers in Amazon’s fulfillment centers, where orders are packed and shipped. For employees in their first year of work with the company, the offer is $2,000, and increases by $1,000 each year until the number reaches $5,000.

The point of the proposition -- which comes with the special message "please don’t take this offer" -- is to "encourage folks to take a moment and think about what they really want," explained Bezos in the letter. "In the long run, an employee staying somewhere they don’t want to be isn’t healthy for the employee or the company."

It’s worth noting, however, that Amazon employees taking the offer wouldn’t be sent off into an uncertain professional future without some preparation. Amazon also avails workers of resources to help them train for their next career steps.

In the aforementioned memo, Bezos highlighted Career Choice, a program in which Amazon offers tuition reimbursement up to 95 percent for warehouse workers wishing to take classes to further their education in fields such as nursing or airplane mechanics, even if the training isn’t applicable to their jobs at Amazon.

According to the memo, the pay-to-quit concept was "invented by the clever people at Zappos, and the Amazon fulfillment centers have been iterating on it." (Amazon acquired the online shoe and clothing shop in 2009.)

While Amazon isn’t the first to adopt this type of policy, it likely won’t be the last, says Bill Grob, a Tampa, Fla.-based shareholder with Ogletree, Deakins, Nash, Smoak & Stewart.

"Amazon’s program is not the first of its kind, but [this type of incentive] appears to be attractive to successful companies vying for high-quality employees who value companies that value them," says Grob.

"Attracting and retaining the best, most dedicated employees starts with the perception that a company is so confident in its employee satisfaction rate that it can initiate a pay-to-quit program that will result in little to no [employee] interest in taking advantage of the program," he says.

Rita McGrath, associate professor of management at the Columbia Business School in New York, agrees that more large employers are likely to incentivize disengaged workers to move on – to the benefit of employers and employees alike.

"Since the great recession began, there are many employees who are hanging on to jobs they are not engaged with, don’t like, and don’t contribute much to, simply because they are worried about being able to obtain another position with equivalent pay and benefits," says McGrath.

"Additionally, a lot of people are stuck in jobs they don’t enjoy, because they are trapped in homes that are underwater with respect to their mortgages [and] can’t be sold. Therefore, [the employee] can’t move to where the opportunities are."

Rebecca Ray, executive vice president of the knowledge organization and human capital practice lead at the New York-based Conference Board, isn’t so sure that pay-to-quit incentives will gain traction.

"Given the talent shortage in so many parts of the world, I doubt companies that are not already seeing large numbers of quality applicants will offer these kinds of programs," says Ray.

While there is much to be said for providing departing employees with a bit of a financial cushion as they transition to their next job, “most companies will not risk further talent shortages” by offering pay-to-quit programs, she says.

Still, such programs aren’t without their advantages, says Ray.

"Certainly there is the ‘cool’ factor [in being seen as] a company that is interested in the well-being of employees," says Ray. "And companies may well find that workplaces with remaining employees are more engaged and productive when those who are not a ‘good fit’ are not in the workplace and have gone elsewhere to contribute."

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When they stick around, detached workers "can create malaise in entire working units, dampen productivity and create the conditions for poor customer service," says McGrath. "But, employers have to provide some incentive beyond the normal pay to persuade them to make a move. So, as competition gets more pressing, companies need to try to create the best human capital they can. If they can get the least-engaged people to move on, that helps."

Implementing a pay-to-quit program can encourage employee buy-in, loyalty and engagement in the company culture as well, adds Grob.

"In many cases, the cost of retaining an unhappy, unproductive employee is far greater than offering the pay-to-quit incentive. Although it may appear counterintuitive to offer the program, doing so forces the organization to continually review and respond to employee satisfaction levels."

Of course, there is a potential downside as well. Offering a pay-to-quit incentive can send mixed messages to the workforce, and even spur good people to leave in search of greener pastures, albeit inadvertently.

"On the one hand, [such programs say] ‘We want to keep and develop you as part of our talent pool,’" says McGrath. "On the other hand, [the policy says] ‘We’re happy to pay to see you go.’"

"Blanket offers run the risk that the very employees you should have tried to engage and retain take the offer," says Ray, "[making the program] more of a carpet-bombing mission versus a surgical strike."

At organizations considering pay-to-quit incentives, Grob suggests HR leaders "make sure it makes sense for the organization, and [for what] employee classifications. Look at the attrition rate at each anniversary level of employment. Also consider requiring a general release of claims in tandem with acceptance of the incentive."

Amazon’s program, for example, is "based on a calculated risk-reward analysis," he says.

"Knowing the traditional attrition rate for employees who have reached or exceeded their initial anniversary of employment, a company can more accurately forecast the percentage of employees likely to be eligible for the program after each year passes."

Pay-to-quit initiatives "also need to be framed as fair," adds McGrath. "I particularly like the idea that Amazon would pay for people to build skills suitable for other careers. That way people can feel they aren’t trapped in a dead-end career."

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