Let’s say a company has 600 staff members, with salaries averaging R300 000 per person a year (according to SalaryExplorer. com, the average annual salary in South Africa is R301 392, although there’s considerable variation between the upper-end and the minimum).
If the turnover rate is 10%, 60 staff members are quitting each year.
Factoring in costs such as training, lost productivity, new hire and recruitment costs, at a cost of 150% per employee lost (or R450 000 per annum), this means the company will spend at least R27m a year (ie 60 x R450 000) to replace the lost staff complement.
So Zappos’ strategy of identifying the misfits early – at a cost of only one week’s salary and R36 000 per employee (the rand equivalent of Zappos’ $4 000 offer) – could save the company a sizeable chunk of revenue in the long run.
Surprisingly, the quitting bonus also keeps staff on the job for longer. A mere 3% of Zappos’ new staff members take the $4 000 and quit. (Interestingly, Zappos’ quitting incentive started at $100 and was raised to $1 000, then $2 000 and finally $4 000 because Hsieh didn’t feel enough