Is this risky business for lingerie e-retailer Adore Me?
December 30, 2015 06:00 AM
(Bloomberg)—After three years working at a startup, Julie Tracy wanted to leave her company so she could travel. Her employer, online lingerie retailer Adore Me, gamely threw her a going away party at a bar across the street—a pretty standard affair until this happened: "This enormous foam check starts coming at me through the crowd," she recalls.
It was followed by an actual check—for $10,000. It was from Adore Me's CEO. "I burst into tears," Tracy says. "There's probably 1,000 pictures of me sobbing. I was totally blown out of the water. It was amazing."
Adore Me offers a highly unusual benefit to departing employees: a fat check. This month, the New York-based company gave another $10,000 check to a longtime worker who was quitting to move across the country. The benefit comes with no strings, but it's also not guaranteed. The metrics for who gets it, and how much, seem to be pretty vague: "We would do it for anyone that has put in a lot of hard work and effort at Adore Me," said CEO Morgan Hermand-Waiche.
Like many popular benefits these days, the generous parting gift is an attempt to signal the existence of a positive company culture, both to employees who stay behind and those yet to come. The type of organization that gives loyal, hard-working employees a pile of money is, in theory, a desirable place to work.
"It's great for someone inside the company. It makes them more willing to stay," says Hermand-Waiche. Then again, one reason to leave would be to get $10,000. Adore Me, No. 634 in the Internet Retailer 2015 Second 500 Guide, avoids that by only offering the benefit selectively, which has the opposite effect, argues Hermand-Waiche: Why would an employee want to leave a place that treats its workers well?
Still, there are a lot of potential problems with this kind of benefit. "Why would you pay somebody you want to keep to go?" asks Bruce Elliott, the Society of Human Resource Management's manager of compensation and benefits. The money might motivate a high performing employee to leave, potentially for a competitor. "Startup companies have done a lot of innovation around benefits, and have kind of focused on their culture, to make it an engaging workplace so that employees would want to come," concedes Elliott. "But as a compensation professional I can find all kinds of reasons why a company wouldn't want to do this."
Multiple surveys say recruiting and retention are top issues for employers. For startups in particular, benefits can be a way to make up for low salaries and long hours. Adore Me wouldn't disclose how much it pays employees, but touted its other perks, including Monday morning breakfast, in-office yoga, and free cab rides home for employees who stay late. Adore Me's goodbye-payout isn't that different from generous parental leave policies or plush health care plans, says Hermand-Waiche.
"It's just a way to say thank you," he said. "Maybe one day they will come back, maybe they will tell their friends about it and it will get us some great leads."
The lump-sum may be an extreme way to hit those notes, however. "I've never seen anything like this before," said Elliott. Unlike a gold watch for a lifetime of service, this benefit isn't reserved for retiring employees. Julie Tracy is only 23. A few companies, like Amazon and its subsidiary Zappos, have offered “Pay to Quit” deals, but those are aimed at unhappy employees, whom companies want to buy out because they tend to be bad workers. Amazon in No. 1 in the Internet Retailer 2015 Top 500 Guide.
The Adore Me offer has the opposite logic. Instead of using money to weed out bad workers, the benefit has the psychology of a slot machine. It offers the promise of potential money to motivate certain behaviors: The harder I work, the more likely that, when the time comes, I'll get a payout.
A more common way for startups to reward the hard work of loyal, longtime employees is equity, but Hermand-Waiche is dismissive of that option, which doesn't always pay off. "We don't like to have our team members needing to wait for the day we sell and IPO to get the reward of their work," he says. Adore Me's way, however, means that only chosen employees get the reward. That said, Adore Me also says it gives annual bonuses and regular promotions for high performing employees.
Adore Me, which has raised $12 million in venture capital funding since its founding in 2011, boosted sales 189.3% in 2014, to $16.2 million from $5.6 million in 2013. But the growth didn’t come cheap, as Hermand-Waiche earlier this year told Internet Retailer that the merchant is not yet profitable. The cash has allowed the women’s lingerie retailer to invest heavily in multiple marketing channels to acquire customers.
Of course, those that get the goodbye money are the most grateful. Tracy says "it's not an exaggeration to say that I love Adore Me." The $10,000 check has more than doubled her budget, helping to buy gear and visas for her trip. She plans on spending at least 8 months visiting every country in central and South America.
There is also a long game to Adore Me's benefit. Even after they've left, an employee's feelings about a company matter: More than ever, workers sometimes circle back, returning to their old jobs. These so-called boomerang employees are easier to train and integrate into a company's culture.
Plus, a rehire can boost morale. Hermand-Waiche has extended an open invitation for Tracy to come back after her sojourn. For her part, Tracy says she will continue to do consulting work for Adore Me—and as of now, is open to returning full time.
But even with the current benefits arms-race, Elliott doesn't expect Adore Me’s unique approach to catch on. "Are you kidding me?," he says, laughing. "Organizations don't give away money like this to be nice. There's got to be an end game here. There's got to be some sort of objective. How will it benefit the business?"
There are much cheaper, more effective ways to keep people happy and around, he says.