Zappos

Zappos is an American company that sells shoes and clothes online. It’s been in business since 1999. Over the last few years it has become famous for its focus on corporate culture. In 2009 it was named in Forbes magazine in their top 25 companies to work for, and in 2010 the CEO, Tony Hsieh (pronounced ‘Shay’) published his autobiography. It’s called Delivering Happiness.

Mother advertising agency

The talk was at Mother advertising agency. (The photos in portrait frames on the wall are of employees’ mothers).

Over the last year or so I kept hearing Zappos being mentioned, so I thought I should get the story from the horses mouth and I bought the book. Actually, I bought the audiobook, because Tony reads it himself, which makes for a great listen. After reading the book I was then lucky enough to be tipped off by Doug Shaw of a talk in London by Tony Hsieh on May 16th. Three of us got tickets, which amazingly were free (they got snapped up like hotcakes). At the talk, Tony came across as a modest and soft-spoken man.

My blog post today is simply a list of the main things I have found interesting and inspiring about the Zappos story. It’s not the full low down: if you are interested to know more, the book covers many more things.

1. The culture is the business strategy

Tony Hsieh had learned from mistakes made with a previous new start up, and he worked out that company culture was the secret to building a really fabulous, successful business that was also an enjoyable place to work. I found his single minded focus on company culture, right from the start, something quite unique for a CEO.

“Our company culture building became the no 1 item on our business strategy. We are more focused on WHO WE ARE rather than what we say or what we do”.

The customer journey starts with buying clothing, then the customer experiences a very unique customer service and finally they realise that they are experiencing a special company culture. An example of the effect of this special culture is that every day of the year, 400 members of the public go on a free tour round the Zappos offices in Las Vegas. Every day. This is just an office and a call centre. It’s not a factory or art studio. It’s not Maclaren’s Forumula One HQ. It’s just a corporate office. Tony said that when people visit, they feel the culture. And see what’s possible for their workplaces. In his opinion, it isn’t about copying Zappos but it is helpful for people to ‘see the magic that can happen when employees are completely passionate about the company and their work.’

2. Tony is the gardener

Zappos have a set of values. So what? Most companies have these. But as Tony Hsieh says, no one pays much attention to them. Instead, the Zappos values are always on Tony’s Hsieh’s mind, and he works year in year out to keep improving the way that the values are lived. At the talk, Tony explained that once the values were developed (when the company was 5 years old), they then managed out 5 to 10% of employees who didn’t fit with the values. And he said that once that happened the vibrant culture really took off. The short term pain was worth the long term gain, in his opinion. After that, he said:

A beautiful garden“Then all I had to do was step back and not do things that would destroy the culture. As CEO I’m more like the maintenance man for the greenhouse. I just have to make sure that it’s heated right, has enough water, and so on. I am not comfortable with the word ‘leader’. Running a company is like gardening. You are never ‘done'”.

Once a year Zappos gather employee feedback – qualitative statements about the culture and what it means to them. All the statements are transcribed into a book which is published and bound, and called ‘The Culture Book’. It’s given to suppliers, employees, etc. Anyone can order a copy. Every year there is a new book. This is their way of checking and making a record of progress. None of the comments are deleted or edited. Quite a contrast with some companies I’ve experienced where it can be a battle just to publish internally the comments written on the employee opinion survey – the very comments that the employees wrote themselves!

3. The telephone is their no.1 branding device

Zappos have a call centre – for customers to phone in and order shoes etc. The call centre is based in the company HQ offices – not overseas. At one point they considered moving it to the Philippines. Why wouldn’t you? Most US companies’ call centres are in the Philippines. But they didn’t. That’s because Tony realised that the customer service and unique culture was their core competency. And what’s the saying? …’Never outsource your core competency’. Zappos actually cut their marketing and advertising budget.

“As unsexy and low-tech as it may sound, our belief is that the telephone is one of the best branding devices out there. You have the customer’s undivided attention for 5 to 10 minutes, and if you get the interaction right, what we’ve found is the customer remembers the experience for a long time and tells his or her friends about it”.

At the talk, Tony said that he views this phone call as even better than social media or any other medium. What is also unusual is that Zappos don’t manage their contact centre employees by measuring their sales performance, or the speed of their calls. The employees don’t read from scripts. They are simply asked to give the customer a great experience whilst on that phone call. This even extends to encouraging their employees to look up and recommend a competitor, if Zappos are out of stock of a product that the customer wanted.

If you view your call centre through a branding lens, you end up doing loads of different stuff.

In order to make this work, Zappos hire and fire based on their company values, so they bring in people who have the ability to thrive in this environment and be passionate about customer service. They also provide 7 weeks of training, along with also having all new hires for other jobs, even senior managers, spend 2 weeks in the call centre. The reduced marketing budget means that they choose to invest instead in delivering the customer experience through their employees. You can read more about the customer service experience in this article.

4. It’s a call centre; not an ad agency

I think that the way Zappos treats its employees is pretty unique. There are loads of really exciting employment practices out there, but more often than not these belong to tech start ups and advertising agencies and the like. Companies who have to compete hard to attract and retain smart people whose skills are in short supply. Thus they are forced to treat them like adults and create really good work environments.

Whereas many older and more traditional organisations are not under this pressure to break out from the parent-child, factory, controlling, low trust, hierarchical methods of management. (Even if they pretend to).

However, a call centre of 500 people is not the same as a company of 200 computer games developers. Call centres are the modern factory. And here’s one that actually is doing things differently.

Another example of just how different: every new start is offered $4,000 if they wish to leave before the end of their fourth week. The thinking behind it is that they want employees to want to be there for more than just the pay check. They want each person to play their part in building the culture, and to be in it for the long haul. The $4,000 payment is only taken up by less than 1% of employees. What would happen if that was offered at the place where you work currently?!

5. Building community

At the talk, Tony Hsieh told us that the company is relocating. They surveyed the employees to find out what features they’d like to see. The assumption was that they’d move to a purpose built campus style workplace, out of town, with all the facilities on site. However, they realised that the main things that employees wanted – cafe’s, a dog creche (that’s America for you), bars for after work, were present in inner cities. And they realised that corporate campuses and business parks are insular and don’t benefit their local community. So they decided to lease a vacant town hall in a neglected part of downtown Las Vegas (a locals area, away from the tourist centre). That has now grown into a big project to revitalise that whole area, and provide a vibrant new area, for both employees and small businesses. Thus Zappos have found a new passion: creating community.

6. Delivering Happiness

‘This is all great but aren’t you just another internet retailer who is destroying the brick and mortar shops by selling stuff more cheaply” …was a question from the floor at the talk I went to. Tony’s answer was that the pricing isn’t more competitive than the brick and mortar stores. He simply concentrates on competing using customer service. Also, he rejected the concept of the ‘kill or be killed’ school of competitive advantage. He said that he had expanded the total market for shoes and clothing, and explained that Zappos are deliberately open about their culture and management methods. For example, they have a website called Zappos Insights which shares their ideas and methods, they speak at lots of conferences, and there’s Tony’s book. Their mission to ‘deliver happiness’ to customers has evolved into a wider one, to encourage people and companies to embrace the delivering happiness concept. To me that seems a whole lot more inspiring than the ‘be the best widget maker’ type of purpose.

12 thoughts on “Zappos

    • Hi Peter, thanks for commenting. I know, there’s a thing aye, TRUST. Glad you liked the post.
      I just read your e-book. Lots of great advice in there. Loved the bit on doing the statutory induction stuff quickly and painlessly, and get on with establishing a healthy psyc contract. Have you read any of Adrian Furnham’s stuff? His ‘Mad, Bad, and Sad Management’ book might be right up your street.

  1. Hi

    I enjoyed this in several ways.

    – It has made me think, yet again about what I am doing. It has challenged me. I am uncomfortable. This is a good thing.

    – It is clear you are really into this, that you really care comes out of this in torrents. 

    – There’s two big things in here. One is that culture is the basis of everything, or that if you get it right and nurture it then much of the rest of what you want to achieve follows more easily. The  other which is important and exciting, is that you can create it. I spent years thinking culture something random that you can at best clumsily steer rather than a foundation you can set and trim. 

    – It got me thinking about the mess we get into when we keep buying companies and reorganising. We end up with a culture either of magnolia emulsion on wood chip wall paper, lumpy, bumpy, bland and rather uninspiring or an explosion in a paint factory. One is a stand off, the other rather stressful. Neither is very productive.

    Anthony

    Ps On a more utilitarian note, I bet there are a few other books you could distill the essence from. Try Good to Great for me.

    • Well I think you already got there ahead of me with Good to Great 🙂
      I agree about the strategy of growth via acquisitions.
      Being uncomfortable is a good thing. At times reading this book I got bloody angry. Not angry with the book, but angry at myself and at some places where I have worked. And that is a good thing.

  2. Thanks for this excellent blog Flora. I heard Tony Hsieh speak at the House of Commons around the same time. I thought he was the essence of humility. Afterwards someone said to me ‘‘well anyone can be humble when you’ve got several $bn in your back pocket!’’, but I think they got it wrong. It isn’t easy – many leaders let (business) success and achievement go to their heads, and this gets in the way of dealing with people as people. I thought he was an inspiration, and a far cry from the usual ‘charismatic’ leaders you often see at the top of big businesses.

    What’s your view on the Zappos policy to hire & fire on values as well as skills? I mentioned it to a UK HR colleague and she visibly winced….

    It’s interesting too that Zappos is happy to give away the ‘secret’ of their success. He knows that replicating their methodology isn’t a guarantee of results – because you have to work it out for yourself with authenticity. If you’re not a company which cares about people, you can’t pretend that you are.

    Warm wishes
    Bridget

    • Hi Bridget. Thank you for commenting. I’ve just checked out your blog and website: you are a positive psychology guru! I agree with your comment about how many leaders let success go to their heads, and attribute that success completely to themselves. The previous comment from Tmof refers to Good to Great – and in fact Jim Collins describes humility as one of the characteristics of truly outstanding leaders. Not that Tony refers to himself as a leader.

      Interesting that an HR person winced about values being used in recruitment and performance management. I don’t think that this is something that is outrageous to aspire to. I’ve certainly seen quite a number of companies and leaders try to do this. Indeed, it is an approach close to the heart of my current CEO. In my opinion, if values and culture are genuinely important to the organisation, then resourcing and talent development are a vital lever. And I know plenty of HR people who think the same way. We’re a mixed bunch!

      I love your comment about ‘working it out for yourself with authenticity’. Couldn’t agree more.

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  4. Hi Flora – apologies, missed this first time around! Excellent write up – well done! Sukh mentioned this post in his latest, when considering the continuous call for “evidence”. I have tried to reference Zappos before in conversation but often get the “yeah but apart from them, they are unique, give me a proper example of where it works…” And so it goes on.

    Zappos are an ordinary retail business, with ordinary people. It is what they value and how they behave that makes the difference. In the constant call for evidence, I find myself asking “what evidence do you want exactly? What data points are you actually looking for?” It feels very much like the whole smoking causes cancer conversation from the last 3 decades. The issue there was that despite the evidence, no one could actually PROVE the link, the hard and fast, direct connection between the ciggie and the cancer cell so we carried on puffing. I came across a similar medical story of denial yesterday in relation to the Helicobacter Pylori bacteria – bear with me! See here for the link:

    http://www.johnshopkinshealthalerts.com/reports/digestive_health/869-1.html

    The denial from this story – 14 years before grudging acceptance in this case – has many parallels with culture and people management in corporate life. And when i see the comment from Bridget re the HR person it just makes my eyes roll! Jamie Priestly nailed it in his blog when he said:

    “HR people revere metrics because they want to be taken seriously in companies where the lingua franca is metrics, but in embracing evidence-based HR as the gold standard they abandon the very thing which could make them invaluable: a firm grasp of the psychosocial – what goes on inside and between people.”

    The link to his post is here for anyone else reading this comment:

    http://writingforleaders.com/?p=67

    Zappos represent a small number of companies right now. The sample size is too small to be statistically relavent or to prove that taking this approach – the adult approach, letting go of controls, trusting etc etc – delivers superior results. But deep down, intuitively, we know it does dont we? 😉

    Your blog is rocking, keep it up!

    • That ‘yeah, but apart from them, they are unique, give me another example…’ argument is interesting. I agree, it is like the smoking thing. And its not to say that the exact method works the same everywhere, but I do think we can learn a lot from the underlying principles. Measurement is fine, in the right place. I’m perfectly happy to work out the ROI of a training programme that originally set out to improve a particular operational issue. I think that it is important to understand numbers and stats. But it is not ok to lost in numbers and elevate metrics to become the be all and end all. I’m sure you’ve seen your fair share of companies have one or two problems that really limit business performance. And those problems are often simply about people – relationships. People not working together.

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