Why Zappos Pays New Employees to Quit—And You Should Too

I spend a lot of time visiting with companies and figuring out what ideas they represent and what lessons we can learn from them. I usually leave these visits underwhelmed. There are plenty of companies with a hot product, a hip style, or a fast-rising stock price that are, essentially, one-trick ponies—they deliver great short-term results, but they don’t stand for anything big or important for the long-term.

Every so often, though, I spend time with a company that is so original in its strategy, so determined in its execution, and so transparent in its thinking, that it makes my head spin. Zappos is one of those companies. Two weeks ago, I paid a visit to Zappos headquarters in Henderson, Nevada, just outside Las Vegas, and spent time with CEO Tony Hsieh and his colleagues. I could write a whole series of posts (and just might) about what I learned from this incredible operation. But I want to focus this post on one small practice that offers big lessons for leaders who are serious about changing the game in their field—and filling their organization with people who are just as committed as they are.

First, some background. As most of you know, Zappos sells shoes—lots of them—over the Internet. The company expects to generate sales of more than $1 billion this year, up from just $70 million five years ago. Part of the reason for Zappos’s meteoric success is that it got the economics and operations right. It offers customers a huge selection—four million pairs of shoes (and other items, such as handbags and apparel) in a warehouse in Kentucky next to a UPS hub. (If Imelda Marcos visited that warehouse she'd likely have a coronary on the spot.) It also offers free delivery and free returns—if you don’t like the shoes, you box them up and send them back to Zappos for no charge.

So the value proposition is a winner. But it’s the emotional connection that seals the deal. This company is fanatical about great service—not just satisfying customers, but amazing them. The company promises free, four-day delivery. That’s pretty good. But most of the time it delivers next-day service, a surprise that leaves a lasting impression on customers: “You said four days, but I got them the next morning.”

Zappos has also mastered the art of telephone service—a black hole for most Internet retailers. Zappos publishes its 1-800 number on every single page of the site—and its smart and entertaining call-center employees are free to do whatever it takes to make you happy. There are no scripts, no time limits on calls, no robotic behavior, and plenty of legendary stories about Zappos and its customers.

This is a company that’s bursting with personality, to the point where a huge number of its 1,600 employees are power users of Twitter so that their friends, colleagues, and customers know what they’re up to at any moment in time. But here’s what’s really interesting. It’s a hard job, answering phones and talking to customers for hours at a time. So when Zappos hires new employees, it provides a four-week training period that immerses them in the company’s strategy, culture, and obsession with customers. People get paid their full salary during this period.

After a week or so in this immersive experience, though, it’s time for what Zappos calls “The Offer.” The fast-growing company, which works hard to recruit people to join, says to its newest employees: “If you quit today, we will pay you for the amount of time you’ve worked, plus we will offer you a $1,000 bonus.” Zappos actually bribes its new employees to quit!

Why? Because if you’re willing to take the company up on the offer, you obviously don’t have the sense of commitment they are looking for. It’s hard to describe the level of energy in the Zappos culture—which means, by definition, it’s not for everybody. Zappos wants to learn if there’s a bad fit between what makes the organization tick and what makes individual employees tick—and it’s willing to pay to learn sooner rather than later. (About ten percent of new call-center employees take the money and run.)

Indeed, CEO Tony Hsieh and his colleagues keep raising the size of the quit-now bonus. It started at $100, went to $500, and may well go higher than $1,000 as the company gets bigger (and it becomes even more difficult to maintain the all-important culture and obsession with customers.)

It’s a small practice with big implications: Companies don’t engage emotionally with their customers—people do. If you want to create a memorable company, you have to fill your company with memorable people. How are you making sure that you’re filling your organization with the right people? And how much are you willing to pay to find out?

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"2084" -Is China Building the Next-Generation Police State?

Thirty years ago the new Chinese city of Shenzhen did not exist. Today, with the help of U.S. defense contractors, the booming city is a model for a high-tech police state 2.0. And, according to some authorities, it's ready for export.

In fact, China's massive new surveillance infrastructure efforts leads one to wonder if the recent press surrounding a suspected Beijing Olympic terror plot wasn't a ruse to pre-empt and head off potential world opinion and criticism. China reported that it had uncovered terror plot to kidnap athletes at Beijing Olympic Games. 35 people were arrested for plotting to kidnap athletes, journalists, other visitors. "Violent terror gang" based in Xinjiang region behind plot, Ministry of Public Security Spokesman Wu Heping told a news conference.

Rem Koolhaas, Prada's favorite architect, is building a stock exchange in Shenzhen that looks like it floats — a design intended, he says, to "suggest and illustrate the process of the market." The Koolhaas design captures the dynamic boom and energy of this new economic engine driving the growth of post-Mao capitalistic China. A China epitomized by Shenzhen's transition from an agrarian backwater to megacity in 30 years that represents "a new and potent hybrid of the most powerful political tools of authoritarian communism — central planning, merciless repression, constant surveillance — harnessed to advance the goals of global capitalism, or as it's sometimes called "market Stalinism."

Today, Shenzhen situated on the Pearl River Delta, is a city of 12.4 million people and now houses roughly 100,000 factories. As Naomi Klein writes in her brilliant first-person memoir in the current issue of Rolling Stone, "there is a good chance that at least half of everything you own was made here: iPods, laptops, sneakers, flatscreen TVs, cellphones, jeans, maybe your desk chair, possibly your car and almost certainly your printer. Hundreds of luxury condominiums tower over the city; many are more than 40 stories high, topped with three-story penthouses. Newer neighborhoods like Keji Yuan are packed with ostentatiously modern corporate campuses and decadent shopping malls."

As China prepares to showcase its economic advances during the upcoming Olympics in Beijing, Shenzhen, Klein continues, "is once again serving as a laboratory, a testing ground for the next phase of a vast social experiment. Over the past two years, some 200,000 surveillance cameras have been installed throughout the city. Many are in public spaces, disguised as lampposts. The closed-circuit TV cameras will soon be connected to a single, nationwide network, an all-seeing system that will be capable of tracking and identifying anyone who comes within its range — a project driven in part by U.S. technology and investment. Over the next three years, Chinese security executives predict they will install as many as 2 million CCTVs in Shenzhen, which would make it the most watched city in the world."

Security cameras are part of a much broader high-tech surveillance and censorship program known as the "Golden Shield" adopting the latest people-tracking technology — generously supplied with the latest American "homeland security" technologies from giants like IBM, Honeywell and General Electric — to create Klein observes: an "airtight consumer cocoon: a place where Visa cards, Adidas sneakers, China Mobile cellphones, McDonald's Happy Meals, Tsingtao beer and UPS delivery (to name just a few of the official sponsors of the Beijing Olympics) can be enjoyed under the unblinking eye of the state, without the threat of democracy breaking out."

In Shenzhen one night, Klein has dinner with a U.S. business consultant named Stephen Herrington. Before he started lecturing at Chinese business schools, Klein writes Herrington taught students concepts like brand management. Herrington was a military-intelligence officer, ascending to the rank of lieutenant colonel. What he is seeing in the Pearl River Delta, Klein relates, "is scaring the hell out of him — and not for what it means to China."

"I can guarantee you that there are people in the Bush administration who are studying the use of surveillance technologies being developed here and have at least skeletal plans to implement them at home," he says. "We can already see it in New York with CCTV cameras. Once you have the cameras in place, you have the infrastructure for a powerful tracking system. I'm worried about what this will mean if the U.S. government goes totalitarian and starts employing these technologies more than they are already. I'm worried about the threat this poses to American democracy."

Herrington pauses. "George W. Bush," he adds, "would do what they are doing here in a heartbeat if he could."

A few months earlier, in Davos, Switzerland, Klein reports that the CEO of China Mobile bragged to a crowd of communications executives that "we not only know who you are, we also know where you are." Asked about customer privacy, he replied that his company only gives "this kind of data to government authorities."

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