Businesses often struggle to gauge how motivated and engaged their employees are. Because employees know that asserting themselves is against their interests. united nationsmotivated or united nationsInvolved. The solution to this problem is for companies to introduce incentives to encourage employees to reveal their true feelings. In this article, the author, a behavioral economist, describes an incentive scheme that has been successfully introduced for this purpose, the so-called Pay-to-Quit program. This is where companies give their employees large sums of money when they retire.
Companies often have to reduce the size of their workforce. But how do managers decide which employees to fire and which to keep?
One of the often overlooked parameters in the decision-making process is motivation. The math is easy. All else being equal, the more motivated your employees are, the more valuable they are. In short, managers should make it a priority to retain highly motivated employees. The problem is that employees know that companies value motivation, so they have strong incentives to motivate them. appear Even if you don’t, you’re willing to do it. To combat this trend, managers should create incentives that encourage employees to reveal their true motivation levels.
Paid program
One such strategy is the so-called pay-to-quit strategy, which provides employees with money to voluntarily retire. Zappos, an online shoe and clothing retailer, was the first to adopt this strategy, creating what is known as an “offer.” In other words, if a new employee is not satisfied with their job, they will be given a bonus to leave after a four-week training period. The job was perfect for them. Zappos bonuses he started at $100. During his training, few trainees accepted the offer, so he raised it to $4,000, but still very few took. This shows that the company’s employees are highly motivated.
Amazon, which acquired Zappos in 2009, adopted a variation of this strategy.Here’s how Jeff Bezos does it explained it In a letter to shareholders in 2014, the first year Amazon implemented the program, it said:
Pay to Quit is very easy. We propose to pay our employees a severance payment once a year. The first year the offer was made he is $2,000. After that, it increases by $1,000 per year to reach $5,000. The offer headline is “DO NOT ACCEPT THIS OFFER”. I hope they don’t accept the offer. We want them to stay. Why am I making this suggestion? The goal is to get people to take a moment and think about what they really want. In the long run, it’s not healthy for you or your company to stay where your employees don’t want to.
Amazon had offered the program to warehouse workers for years, but in early 2022 the program was no longer available to the company due to a tight labor market. stopped the program Designed for warehouse workers and currently only available to graduates of the Career Choice upskilling program.
As a behavioral economist advising organizations, I have found the Pay-to-Quit strategy to be surprisingly effective. In many organizations, disgruntled employees have no reason to reveal their true feelings, but they can be encouraged to do so by offering severance pay, and if employees misbehave. Higher cost. One of the outcomes of this strategy, of course, is that it motivates those who stay. But a further advantage is that the Remainers feel the need to justify their decision to themselves. Usually they do so by working harder towards their long-term goals. When they turn down Pay to Quit money, they are effectively investing that money in their future with the company. This increases their productivity and commitment.
Everyone wins with this strategy. This allows managers to identify which employees are really motivated and which are not. Unmotivated employees will be able to retire peacefully with money. And empower motivated employees to truly live up to their commitments. And even if no one takes up the offer, that’s a positive outcome, as happened recently with Trainual, a company that offers automated training and onboarding processes. The company ultimately learns important things about new hires and motivates them. price.
Program test
Without conducting controlled studies, it is difficult to judge the success of such incentive-based programs. How can we really know if the right people will leave, or if leaving will improve morally those who remain? I need to run an experiment involving groups. Comparable to groups with incentives offered.
I recently worked with a large consulting firm that conducts such tests. Models are informative. The company has decided to introduce significant technical changes to the way it operates. This change requires senior employees to invest time in learning new technologies and significantly change the way they work. Some of these employees were enthusiastic about the opportunity, some were not, and management could not distinguish between them.
Company leaders recognized the need to understand this, especially in critical situations, when considering which employees to partner with. why? Because when a company chooses a person to promote, it declares that person to be so competent and valuable that it quickly becomes of interest to other companies and often attempts to lure them out. because it begins The company does not want to train an employee or promote to a partner at the expense of another company, only to have that partner take their knowledge and training with them to another company. Additionally, it’s hard to fire your partner if they don’t do a good job or are unwilling to make the necessary changes in how work is done. That’s why the company wanted to know which employees were the most motivated. Before It was decided which of them would be named as partners. If companies can do that, they will be able to make training investments more strategic and cost-effective.
A Pay-to-Quit strategy seemed perfect for this situation. So the company started an experiment. Some of the Company’s offices around the world offer exit bonuses if employees choose to leave prior to the tie-up decision, and then replace those offices with somewhat similar offices where bonuses were not offered (comparison). group). To be considered successful, the office to which the program was offered must have a higher retention rate than the control group.
So far this program has been a success. In offices that offered bonuses, nearly 12% of employees chose to receive them. Clearly, these employees weren’t the worst performers on the team. This suggests that the program required identification of talented employees who did not necessarily feel a strong commitment to the company and who were likely to leave after being appointed as partners. I’m here. Retention of new partners in bonus-provided offices was also higher than in the control group. The program was temporarily suspended due to COVID-19, but the company now plans to resume the program on a larger scale.
How to start the Pay-to-Quit program
If you’re considering implementing a Pay-to-Quit program, make sure you follow these five rules:
1. Be transparent.
When launching a program, explain exactly how the program works and why you chose to launch it. Employees are more responsive to programs when they understand their purpose.
2. Provide the right amount.
The amount you offer should be enough to motivate some employees to accept it, but not as high as many. The amount varies from company to company, so do a pilot to find out what works best for your company.
3. Be selective.
Not all employees are eligible for this offer. Determine which groups or positions are most likely to benefit from it (like the consulting firm above did when targeting potential partners) and limit the offer to those employees .
4. Set a deadline.
The program should not be unlimited. Give employees a relatively short period of time to decide whether to accept the offer, and make it clear that the offer will not be available after that date.
5. Monitoring and Evaluation.
A program will only succeed if you regularly measure its effectiveness and make adjustments as needed. This is only possible if you first clearly define your long-term goals and then monitor and measure your success against them.
Ultimately, the Pay-to-Quit program is a useful example of how companies can harness the power of incentives to learn more about their employees. Remember, the story is cheesy. It may not be clear what you need to know by simply asking employees what they like. But with smart ingenuity and planning, you can learn a lot.
