In a bold move, one company has deliberately shed 14% of its employees by offering a cash buyout to those unwilling to embrace their CEO’s new direction for the future. “As of 4/30/15, in order to eliminate the legacy management hierarchy, there will be effectively be no more people managers.” THAT warning certainly shook things up!
In an extremely long 5,000 word email memo, Zappos CEO Tony Hsieh issued an ultimatum confirming his commitment towards transforming Zappos into a business that doesn't need managers to grow and fix internal problems. Promising strong steps towards achieving “our desired state of self-organization, self-management, increased autonomy, and increased efficiency,” he declared there would be no place for opponents of self-management and self-organization… and backed it up with a cash incentive for dissenters to leave.
The online retailer, a unit of Amazon, should survive the exit of the few hundred employees who accepted a three-month severance package rather than stay with a company without manager roles or job titles reflecting the traditional organizational hierarchies. Not everything will change, as shown in a parenthetical statement:
(On our backend HRIS system, employees will still have "reporting" relationships solely for the purposes of maintaining compliance (e.g. SOX) requirements because we are part of a public company. This compliance requirement will be largely invisible to most employees and should not be confused with legacy reporting structures which will no longer exist.)
Regardless, the boss termed the action a “rip the bandaid” approach to stimulate faster progress towards his desired objective.
Using compensation incentives to change the nature of an enterprise is not a new idea, but it is uncommon to see it attempted so openly. It is also impressive when the company clearly demonstrates such a commitment to comprehensive restructuring that they will pay cash to encourage dissenters to quit. A few months severance seems an inadequate incentive to induce resignations by itself. Those who opted for the buyout probably had other reasons for leaving, too. But there are always some who consider their management roles so essential to their personal reward package that they would rather depart than remain in a diminished role. That says something about their values, but I’m not sure exactly what.
It will be fascinating to see the end results from the courageous experiment in using compensation incentives to affect behavioral transformation. Words paired with actions carry more powerful impacts. Promises followed by payments are particularly effective reinforcements. There can be no doubt that such dramatic changes in organizational dynamics will have very strong effects on future success. As long as workplaces are populated by human beings, the manner in which they relate to each other will have immense consequences for output results. Here we see intersections of reward systems and contextual structures for human interactions.
Test the accuracy of your crystal ball. What do you think will happen?
E. James (Jim) Brennan was Senior Associate of ERI Economic Research Institute, the premier publisher of interactive pay and living-cost surveys. After over 40 years in HR corporate and consulting roles throughout the U.S. and Canada, he’s pretty much been there done that (articles, books, speeches, seminars, radio/TV, advisory posts, in-trial expert witness stuff, etc.), serves on the Advisory Board of the Compensation and Benefits Review and will express his opinion on almost anything.
Image "Bye Key Shows Departing Or Leaving" courtesy of Stuart Miles/FreeDigitalPhotos.net