Recognition and Rewards – The zappos Way Part II of III

Continuing my thoughts on the conversation I had with Jamie Naughton – “Cruise Ship Captain” at zappos… See intro post here.

Doing it Different – Almost Wrong?

The net-net for me after listening to Jamie talk about the engagement initiatives at zappos is this…

A strong culture, recognized regularly, decreases the need for specific performance-based incentives.

Again – I’ll caution all who read this site – zappos is an outlier – a positive deviant.  We should learn from them but don’t get up next Monday and implement everything they do without the proper foundation.  What zappos has done is different because it started different.  But, we can learn a lot from their approach.

First of all – they do have incentives…and they have recognition… and they have merchandise awards.

Incentives, Recognition, Zollars and Swag (Oh My)

At zappos they have created a reward currency called “zollars” (not sure the exchange rate with Shrutebucks) that is redeemable for logo-identified merchandise from their company store.  Yep – you heard me right – logo-identified merchandise.  I know I’ve gone on the record saying that you shouldn’t use logo-id’d stuff and to make sure you expand your award choice for participants (assuming you help with the decision architecture – too much is as bad as too little.)  But remember, zappos is an anomaly – you’re probably not.  Zappos is in the press and in the minds of consumers (think Apple, think Starbucks) they have a brand people WANT to be associate with and therefore logo-identified awards make a lot of sense.  Bragging about your company is great.  The fact that there are too few companies to brag about isn’t.

So zappos uses “zollars” as their award currency redeemable for logo-identified merchandise.  That’s their main platform.

Zollars are distributed by Managers and employees.  They choose.  No real written rules for how those zollars are distributed.  Or should I say no ADDITIONAL rules outside the 10 core values.  Each employee, each manager knows those core values and issues rewards to those that demonstrate behaviors that reinforce those values.  It’s pretty simple to do this stuff when you have a strong foundation no?

I asked if the CEO Tony Hsuieh was eligible to receive zollars.  Jamie said of course – he’s an employee too.

After The Fact – Not Before (Most of the time)

99% of the time employees are rewarded after that fact – meaning there is no “do x get y” mentality.  There is no expectation of reward.  In other words – it’s a Dan Pink world at zappos…  

Except when it’s not.

Lest we think that zappos is superhuman they do have some “traditional” style programs and some traditional style rewards.  

Specifically…

Time Card Incentive

Jamie mentioned that they had a need to increase the accuracy of their time-card stamping – people weren’t clocking in and out and it was causing problems.  So they ran an incentive – clock in on time and get some zollars.  Pretty much the “do x get y” thing – but tied to a specific, short-term, repeatable and “non-creative” behaviors (again, you’d know this if you were reading this blog all along.)

So there are some “normal" incentives running around zappos world. 

Employee Bonuses

In a world where cash bonuses have been listed with spam, pyramid schemes and other duplicitous business practices (and all that is wrong with the economy) again zappos does it different.

They do use cash bonuses.  

They don’t however, give them to just Senior Execs and they don’t need board approvals or SEC oversight.

EVERY employee at zappos has the ability to give a cash bonus to ANY employee based on what they see as exemplary behavior in support of the company’s core values.  Can you image that?  Every employee… cash bonuses… to other employees.  It’s almost inconceivable (and I do know what that word means.)  Each employee gets $600 per year to distribute to fellow employees.  They can dole it out piece-meal to various employees or go lump-sum to one person.  Their choice.

Just some side math for those like me… 1,900 employees times $600 = $1.4 MILLION in cash in the hands of their employees – and distributed based on their recommendation.  I know a lot of companies that wouldn’t trust their employees with $10 in petty cash for paperclips let alone allow them to give cash bonuses.

Now, being the rather cynical guy I am, I did ask Jamie if this gets out of hand?  Do employees simply start rewarding each other willy-nilly in order to take advantage of zappos’ largess?  The answer was no.  The employees at zappos don’t want to devalue the awards so they actually have fairly high standards for how one can earn these bonuses.  It goes back to their values.  

You can’t live the values if you rip off the company with non-earned cash awards.  Just not possible.  And although it wasn’t addressed in our talk, I’m sure the managers and other rank and file employees would put a stop to it if they saw it happening.

Service Anniversary Program

Yep… the traditional program rewarding time at the company is alive and well at zappos.  I was actually a little surprise that it was.  They, as you would expect by now, do it a bit differently.

First, there is no “award” per se – no crystal bowls.  Service anniversaries are celebrated loudly and publicly and with special “license plates” – yep.  License plates.  Jamie told me that each employee get’s a “paper license” plate that hangs from the ceiling over their cube when they start (EVERY employee has cube – no mahogany office doors at zappos.)  At their first year they graduate to “metal” and then different stickers (not unlike your car registration stickers) are used to signify additional years of service.  

Think about it for a minute – when you walk the halls of zappos you can readily see who has experience and tenure with the company.  Does that happen at your company?  It is rare to see any outward sign of tenure at any company.  Here each employee can see who has been in the trenches and been around the block.  I’m guessing those with the most tenure also get the most requests for help.  It’s only natural to seek out experience and wisdom for help – and their service anniversary program would seem to contribute to that need.

To Net This Out…

Because zappos has a strong culture they can…

•    Run primarily on recognition with few “incentive” programs

•    Can use cash-based and non-cash-based programs without worrying about creating mercenaries

•    Use logo-identified awards versus standard “award catalogs”

•    Eschew traditional programs in favor of what works for “them.”

Zappos invested in their foundation which reduces their need to invest in transient programs and incentives du jour.

Now – how did that affect the way I look at incentives and rewards?  Three words – “Where Are You.”

That will be explained in my next post.