Could Paying Employees to Quit Save Amazon?

In recent months, Amazon.com (NASDAQ: AMZN  ) has faced scrutiny about employee treatment. Increasing numbers of investors have been wondering if Amazon is too uncomfortable a stock for their portfolios due to this criticism. But founder and CEO Jeff Bezos' most recent shareholder letter revealed a new, unorthodox "benefit" for warehouse employees: Amazon will give them a lump sum of cash to tell it to take their job and shove it.

For all that Amazon has recently been gaining a reputation for treating employees poorly, the policy takes a page from Zappos. Exemplary employee culture is a factor that sets Zappos apart in the corporate landscape. There's no shortage of media coverage of CEO and founder Tony Hsieh's unorthodox methods, creating a zany, fun place to work.

Amazon's copycatting makes sense for a lot of reasons -- of all companies, it's more than allowed to copy Zappos: The Internet giant bought the online shoe peddler in 2009.

Given increasing awareness of how important it is for successful, growing businesses to have happy employees -- and one of its own business units' success in that area -- is Bezos starting to "get it" more than many may think?

Please don't go
Bezos' letter certainly sounds as if he's concerned with having satisfied employees. In his words:

We hope [employees] 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.

The idea segues into one that is increasingly recognized as an intangible asset to companies: happy workers. If employees aren't happy, they won't perform well, customers will revolt, and that all feeds directly into companies' long-term financial standing.

The unorthodox idea of paying unhappy people to leave certainly can give some literal get up and go to those who want to get up and quit.

Another Internet giant, Netflix (NASDAQ: NFLX  ) , also gives employees the option of receiving a lump sum to leave. But that program is limited to those working in its corporate layer, so warehouse workers aren't included in the program.

Still, big Internet companies often know the value of happy employees. Many of the best benefits emanate from innovators like Google (NASDAQ: GOOG  ) and Facebook (NASDAQ: FB  ) , after all.

The law of attraction
Rejecting industry norms and treating employees well shouldn't be underestimated as a competitive advantage. Making sure customers' positive feelings about a product or service doesn't erode is a real foundational strength.

Pro-stakeholder investing recognizes many operational aspects that take a decision beyond simply price-to-earnings ratios and complex number crunching, both of which can hide future business strength and weakness. Employee treatment and happiness is one of them.

Employees who aren't happy -- or "engaged" -- are actually profit drains. According to Gallup, "actively disengaged" employees represent $450 billion to $550 billion in squandered productivity every year.

Layoff-happy organizations suffer from beat-down morale as survivors wonder when their time will come, or simply feel guilty about their pink-slipped comrades. Meanwhile, high turnover of any kind is a financial weaknesses: Retraining new employees constantly is a real cost, not a bottom-line benefit, as conventional wisdom often claims.

When it comes to happy employees, Gallup points out companies that can boast 9.3 "engaged" employees for every one "disengaged" worker enjoyed 147% higher earnings per share compared to comparable companies in the 2011-2012 time frame. Sounds good, right?

Love versus the lottery
Here's some food for thought. When it comes to people who love their jobs, millions in cash might not budge them from their life's work. In a poll revealed last December, Gallup revealed that if engaged employees won the lottery, they'd keep their current jobs even with a massive windfall.

Just about two-thirds of "engaged" respondents said $10 million in lottery winnings wouldn't convince them to quit their current jobs. That's some strong human capital that isn't likely to disappear into thin air one day.

Of "actively disengaged" employees, just 20% would keep their current jobs. Perhaps more interesting, 41% of those would seek a different job if they won such a sum. That's pretty insulting to whatever job they currently hold, and certainly shows the level of disloyalty brewing in disengaged employees.

Amazon and investors: Give us everything, from A to Z
Personally, I think Amazon is an amazing stock for investors to hold in their portfolios. Its business strength is awe-inspiring given the wide variety of services it provides even beyond its more obvious e-commerce base. (How many people are even aware it owns Zappos?) I wouldn't actually blame anyone for holding it in their portfolios for the long haul, and at times I've even recommended it.

But I'd love to love it more. I absolutely I do think that its employee treatment is revealing itself to be weak link in its otherwise powerful chain.

A company this innovative certainly can find ways to add a little more joy for rank-and-file employees. Meanwhile, investors know that Amazon isn't too concerned about profits as it pushes for volume. And what makes one important component of sales volume, volume, volume? Warehouse workers. Why not invest in this area as well as robots and drones?

Maybe paying disengaged workers to quit is the first step for Amazon to improve the benefits and culture for all of its workers, making them happy to stay and achieve. And maybe Jeff Bezos will start to shore up what is increasingly looking like a PR -- and business -- weakness.

Treating people well is the right thing to do. More and more, though, it's revealing itself to be a profitable thing to do, too.

Innovation and disruption hits your living room
You know cable's going away. But do you know how to profit? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last, and the great innovators the likes of Amazon are ready to tackle this war. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, and Apple. 


Read/Post Comments (16) | Recommend This Article (18)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 17, 2014, at 11:40 AM, gskinner75006 wrote:

    Seeing as there are a lot of fools willing to pay $325.37 with a PE near 600, I would say Amazon could throw their package in the trash and they would still buy more. This stock is well North of the Bennie Baby/Cabbage Patch Doll craze line.

  • Report this Comment On April 17, 2014, at 11:51 AM, Mathman6577 wrote:

    A lot of companies offer "packages" to employees to leave (including lump sums, salaries, and benefits for up to a year). It is usually in times of impending doom. Maybe the drones can save Amazon.

    I agree with gskinner75006 -- $AMZN is way overvalued (and it seems to get a pass from most analysts -- in the meantime Apple gets trashed and makes > $35B in profit every year and has a P/E of 13).

  • Report this Comment On April 17, 2014, at 12:15 PM, TMFLomax wrote:

    Yes, straight-up layoffs generally include severance packages, but giving employees the decision to leave AND get some money to do so isn't something I've heard about other than these examples.

    FWIW, I think Apple is a good stock as well, and definitely feel like it's cheap and that bearishness about it in recent memory has been ridiculous. I've bought it several times for my real-money portfolio for that reason (last time in February, precisely because of the negative psychology surrounding it when it's still a super strong company). But, Apple is another discussion for another day.

    Alyce

  • Report this Comment On April 17, 2014, at 12:35 PM, TMFLomax wrote:

    FYI, for those who want more details as to fulfillment center practices: An Amazon spokeswoman sent this explanation of benefits etc.:

    http://www.amazon.com/gp/help/customer/display.html?nodeId=2...

    Alyce

  • Report this Comment On April 17, 2014, at 1:47 PM, TheCommonTulip wrote:

    I think this is a publicity stunt. This company wants to replace workers with drones, their warehouses are abusive, and all the sudden they are willing to fork out $5k. Why not focus on safe working conditions before trying "big idea" stuff like this.

  • Report this Comment On April 17, 2014, at 3:15 PM, damilkman wrote:

    I disagree with the statement that this is innovative. Auto companies have been doing it for years. I do not disagree that companies should treat their employees well but Cisco and GE regularly cycled through their bottom 10% and GE especially under Welch did very well. So killing off your under performing employees can work.

    Another challenge in the tech field is it is a buyers market. In example in my industry the attrition rate is 10%. Is has nothing about happy or unhappy employees but a buyers market. So if you want to keep your employees, employers have to be innovative beyond just money and responsibility as not everyone can be the principle architect.

  • Report this Comment On April 18, 2014, at 7:21 PM, cmalek wrote:

    Bezos is not paying his workers to leave out of the goodness of his stone cold heart. Once he gets rid of them, he will hire new workers at minimum wage or he'll replace most of the workers with machines, contributing to unemployment.

    Paying workers to leave has nothing to do with wanting to treat them well. It is a cold, hard, calculated buisness decision. It costs a company much less to pay an employee to quit, than to keep him/her employed and maybe even pay them benefits.

    Companies have been offering retirement incentives to their oldest (highest paid) employees for years. Ever since free agency became a fact of life in professional sports, teams have been buying out their athletes. They would rather pay the athlete 1, 2, 3 million dollars to leave the team than to pay him $10-$15 million per year that his contract calls for.

    I and 250 other workers were incentivized by our company to retire by being credited with two extra years of employment. Those two extra years made a noticable difference in our retirement checks. By replacing 250 highly paid employees with 30+ years of seniority and benefits, with young kids at one quarter the salary and almost no benefits, the company will save itself millions of dollars annualy.

  • Report this Comment On April 18, 2014, at 8:56 PM, DukeMontrose wrote:

    If this fool's memory serves, a new Ford CEO's publicly announced motto was "Love" = treating all with love = like a generation ago. Hard to beat, methinks.

    The other most important folks Bezos should keep happy, is the stake-holdres. Thin earnings + lack of dividends won't cut it.

    Finally, the third category is composed of customers. Recently I had two rather unhappy experiences with Amazon, as a customer. Per chance, mine were isolated incidents.

    Most unhappy I'm about AMZN's stratospheric 550+ PER. Un happy, as it is evidence of the extraordinary delusions + madness of the crowds. Is that a crew fools love to cavort with?

    Seriously but still foolishly this is my sovereign remedy. Own some put options.

    Getting ready for a sharp kick in my rear.

  • Report this Comment On April 20, 2014, at 1:46 AM, FrankoJames wrote:

    What would you like to save AMZN from in the future? I hope you are not thinking about a bankrupt Jeffery working for a paycheck by writing articles at the Washington Post. Fool on...

  • Report this Comment On April 20, 2014, at 7:58 AM, mooonguy wrote:

    I worked there for about 3 months as a consultant. The focus is rightly on the fulfillment centers, which have the most backwards health and safety programs I've ever seen. Seriously out of the 1940's.

    But the other piece that is overlooked is their tech people. The model is college strip mining. They hire kids out of college, who are thrilled to get a great starting job, then harvest their ideas. Then that's it. No real future employee value proposition. Two percent move up to decent jobs. Another bunch is delusional or to lazy to move. And the remainder flee.

    It is an abusive company and Bezos has outlived his usefulness. The company will not become a real company until he goes. Don't know if the post Jeff company will succeed nor am I disrespectful of what he's done. But it's not sustainable as is.

  • Report this Comment On April 20, 2014, at 3:50 PM, CraigWPowell wrote:

    Amazon: The Good, The Bad And The Algorithm

    http://seekingalpha.com/article/2065983-amazon-the-good-the-...

  • Report this Comment On April 21, 2014, at 12:24 PM, CaddyKen wrote:

    Quoting the article;

    <i>Just about two-thirds of "engaged" respondents said $10 million in lottery winnings wouldn't convince them to quit their current jobs. That's some strong human capital that isn't likely to disappear into thin air one day.</i>

    So I find the survey results interesting- a simple extension of this applied to CEOs is that they must be particularly disengaged if it takes $10+ million to retain them. maybe their loss is not such a big deal.

    food for thought...

  • Report this Comment On April 23, 2014, at 10:46 AM, TMFLomax wrote:

    CaddyKen,

    Great point! REALLY great point. (I originally had another section in this article, about how companies/shareholders end up paying CEOs millions to be fired... it was going to detract from the main article but it was like you say -- CEOs really are an interesting tiny segment of the "worker class." Like Bizarro world or something.)

    Alyce

  • Report this Comment On April 23, 2014, at 10:51 AM, Mathman6577 wrote:

    I agree w/ ,TheCommonTulip. On the surface it seems like a publicity stunt that won't move the needle all that much either way. It is much like the announcement that AMZN will use drones to deliever packages -- not gonna happen anytime soon.

  • Report this Comment On April 23, 2014, at 12:59 PM, TMFLomax wrote:

    blesto posted this on the discussion board for my real-money portfolio pointing out some other interesting benefits Amazon is coming up with, it's REALLY interesting:

    http://boards.fool.com/amzn-employee-benefits-31219531.aspx

    ...Such as pre-paying for 95% in tuition costs for training in areas that are not related to Amazon's own business, i.e., mechanic or nurse - that's actually pretty amazing in its industry.

    Alyce

  • Report this Comment On April 24, 2014, at 12:10 PM, SkepikI wrote:

    Alyce: So did the survey test the proposition it asked for opinions on with reality? People say a lot of things, but their actual behavior when handed $10 million by the lottery is something else.

    Drawing conclusions for real life from surveys is fraught with risk. You would be well advised to not only check the statistics and methodology of the survey but be suspicious of its sample as well. Then there is the whole question of the above- where people say one thing and in real life do another....

    I am not a Bezos fan nor an Amazon investor for many of the critical issues identified in the commentary. I am an occasional Amazon customer. If Bezos and Amazon would just start paying customers not to buy, and shareholders not to own, he would have a Grand Slam!!! ;-)

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2917966, ~/Articles/ArticleHandler.aspx, 10/25/2014 11:20:09 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement