By Paula Rosenblum, Managing Partner
6/10/2008
Last week I observed a fascinating conversation on RetailWire about Zappos’ “Pay to Quit” policy. In brief, about a week into a new employee’s training period, someone will approach him (or her) in private and ask candidly if he believes the job at Zappos is the right choice and if it’s a place he believes he will be happy. An offer of $1500 to terminate and walk away is made then and there. According to Internet Retailer, only 3% of new employees actually take advantage of the offer. That’s pretty outrageous. That means 97% of new hires are in it for something more than the quick buck.
For those who don’t know the company, Zappos is the preeminent on-line shoe retailer. In interviews, Zappos CEO Tony Hsieh has said his company is passionate about customer service, and he needs his employees to be that way too. Otherwise there is no fit (no pun intended), no matter how technically competent the candidate is. We assume the hiring process at Zappos is very rigorous, given that only 3% of employees take advantage of the “out clause.”
Now this is “Xtreme retailing” for many reasons, not the least of which is Zappos is a pure play eCommerce company. It’s rare that an employee has any direct contact with a customer at all. Contrast this with specialty stores, whose in-store employees are always in contact with customers and who “enjoy” a store employee turnover rate of around 100%. This rate has been consistent for many years, and yet policies continue pretty much as they have for decades. My friend and former colleague, Katherine Jones, now marketing director with Netsuite, was formerly one of the United States’ preeminent human capital management analysts. In a research survey she did on managing hourly employees, she found the most typically used retention tool for managing those employees was “the company picnic.” Ouch. Yet it seems that Zappos is in the forefront of a retailing sea change.
In our most recent benchmark study on the in-store customer experience, The Customer-centric Store, our survey respondents told us it’s important to empower their employees. They finally recognize that their employees are the face of their brand to the world. Strong economy or weak, the customer expects to be treated with respect, by employees who know what they’re doing. In the virtual world, how often have you gone to a “customer-centric retailer’s” web site and vainly looked for a phone number for customer service inquiries? I know I’ve personally resorted to using site maps many times to find a way to contact a human. Not a lot of real customer-centricity there.
Now we’re seeing a retailer quite literally putting its money where its mouth is. The dialog on RetailWire around the $1500 quit bonus was interesting, with a not-insubstantial number of observers saying things like “Now that this is public, we sure do hope Zappos has a rigorous pre-hiring screening. This could be easy picking for the dishonest looking for a quick buck.” The reality is very adequate technology tools are available to facilitate the hiring of the right people for the right job. Retailers must also invest in training tools and yes, retention plans to insure that they hire, train and retain the right people. While Zappos has made its out-clause public, you can be sure there’s a whole set of procedures, tools and technologies covering other parts of the hiring, training and retaining process.
For the cynics among us, we feel obligated to point out that in 2000, Zappos annual revenue was $1.6 million. This year, annual revenue is expected to exceed one billion dollars. A real cynic would call Zappos “share-holder centric.” Call it what you will. You’ve got happy customers and happy shareholders. That’s a hard-to-beat formula. In a down economy, retailers can get their hands on a higher caliber of employees than in a strong economy. And just as we encourage retailers to take advantage of the low cost of money in this economy, we encourage them to take advantage of the improved labor pool: and then give those new employees a reason to stay on when the economy improves.
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