Zappos’ Distinctive Corporate Culture

Last Friday, Tony Hsieh, former CEO of the American online shoe and clothing store Zappos, died at the age of 46. During the early years of “online retail”, Hsieh played a crucial role in the growth of e-commerce, focusing primarily on one thing: making people feel comfortable and safe when shopping on the internet. In memory of Hsieh, today I take you on a journey of discovery through the wonderful world of “his” Zappos.

Origin and growth

Hsieh’s entrepreneurial success began before zappos started. He sold his first company LinkExchange, an online advertising network, to Microsoft in 1998 for $265 million. Hsieh then became a venture capitalist and therefore invested in Shoesite.com, a startup focused on online shoe sales. He soon took over as CEO and built the company into an internet giant.

The name Shoesite.com was soon changed to Zappos.com, an adaptation of “zapatos”, the Spanish word for shoes. Hsieh’s initial successes with Zappos stood out because consumers like to try on shoes before they buy them. So pre-eminently not an obvious product category to sell online. This was the reason for the first “disruptive” service: Zappos offered free overnight shipping and free return shipping. As a result, customers often ordered several shoes at the same time.

Zappos was able to quickly multiply its revenue through these types of distinctive services; from $1.6 million in 2000 to $1 billion in 2009. In July 2009, partly due to the crisis and the insistence of his board, Hsieh sold the company to Amazon for $1.2 billion. With the absolute condition that Zappos would remain a separate entity within Amazon, Hsieh stayed on as CEO. He fulfilled that role until August of this year.

Tony Hsieh, co-founder and former CEO of Zappos.

Vision and values

Since its very beginning, Zappos has been a “customer obsessed” company focused on delivering the “wow experience”. Zappos wants to “inspire the world by showing that it is possible to make customers, but also employees, sellers, shareholders and the community, happy in a sustainable way at the same time”. This vision led Zappos to bring happiness through the four C’s: Commerce, Customer Service, Company Culture, Community.

As Zappos continues to transform and scale, they want to ensure that the four C’s remain top priority in day-to-day operations. This means she wants to offer customers more and more clothing styles and variations, come up with new ways to exceed customer expectations and protect her company culture.

Zappos introduced its 10 core values in 2006. As they themselves pretend, these values are more than just words. They are “a way of life”. These beliefs are not only distinctive, but also create a framework for Zappos’ actions. They are leading in everything the organization does; how it interacts with its employees, customers, suppliers and business partners. As the underlying processes and strategies change over time, Zappos sticks to these 10 values:

  1. Deliver WOW Through Service
  2. Embrace and Drive Change
  3. Create Fun and A Little Weirdness
  4. Be Adventurous, Creative, and Open-Minded
  5. Pursue Growth and Learning
  6. Build Open and Honest Relationships With Communication
  7. Build a Positive Team and Family Spirit
  8. Do More With Less
  9. Be Passionate and Determined
  10. Be Humble

A nice translation to the workplace is the instruction for call center employees to speak to customers “as they do with old friends: authentic and hospitable.”

Corporate culture and philosophy

Hsieh, a gentle and self-reflective manager, developed a company philosophy based on the idea that happy employees are the conduit to satisfied customers (who would return again and again). This philosophy was also supported afterwards by Richard Branson, CEO of Virgin. Instead of assumeing that happiness is achieved uncontrollably, he began to read about the various characteristics that made people happy.

“People assume that achieving a certain goal or winning the lottery will bring lasting happiness,” Hsieh said. “But that rarely happens. Most frameworks for happiness conclude that four things are needed: control, progress, connectedness, and being part of something bigger than yourself.”

Employee dedication at Zappos.

Management style

Hsieh has made corporate culture a focal point in his management style. Hsieh hires people who are not based on their experience or expertise, but on whether they fit well into Zappos’ corporate culture.And he clearly shows courageous leadership in his ability to empower others to succeed while inspiring confidence.

In March 2015, Hsieh even “offered” Zappos employees to leave the company with an attractive buyout. He introduced the self-management plan “holacracy” and wanted individuals to excel through their own creativity. While 18 percent of the company’s employees chose the offering, Zappos has since fully embraced its “happiness culture.” This unparalleled company culture is entirely focused on an employee’s crucial “happiness quotient.”

5 characteristics of Hsieh’s leadership style:

1. Communicate openly and honestly with employees

Instead of letting company news slowly trickle down, Hsieh was known for communicating directly with all employees through in-person email updates, meetings with all levels, and organizing informal team meetings. All this to ensure that important company news was conveyed directly and personally.

But didn’t expect one-way traffic, Hsieh also took the time to really listen to his employees. As a result, Zappos employees felt comfortable expressing their opinions and openly discussing their ideas with managers, supervisors, and colleagues alike.

2. Attention to fun

For Hsieh, fun was a priority, and that was evident in the daily lives of his employees. In addition to shoes and clothing, Zappos is known for the corporate events it hosts: costume parades, barbecues, and even an annual New Year’s Eve party. Hsieh also encouraged employees to have fun in the office; through internal events, interactive meetings with all hands and special time for employees to pursue their passion projects. As a result, employees are excited to get to work and spend time with their colleagues.

Zappos headquarters.

3. Raising high standards

Employees are not only required to remember and recite the aforementioned 10 values on command, they are encouraged to embrace and apply them in their daily lives. For example, “doing business with integrity” (one of the core values) means that employees are encouraged to be proud of their work and that they are held accountable for their behavior. At the same time, employees are expected to remain humble (another value), which creates a sense of teamwork and collaboration.

Zappos appears to be extremely picky when applying for a job; even 1 percent of the applicants are hired. When Zappos hires new employees, it offers a four-week training period during which they are immersed in the company’s strategy, culture, and “customer obsession.” People are paid their full salary during this period. But after about a week in this immersive experience, it’s time for what Zappos calls “the offer.” If the employee quits that day, Zappos will pay you an additional $1000 bonus. Zappos wants to achieve the earliest possible filtering and make a commitment to the most dedicated employees. About ten percent of new call center agents take the money and run away.

4. Maintaining a level playing field

In everything he said and did, Hsieh showed that all Zappos employees are equal. In fact, he not only opens his home to employees for company meetings, but also shares his workspace.Even as a CEO, he chooses to work at a desk in the middle of a sea of cubicles instead of locking himself in an office.

Tony Hsieh in his “office”, a workplace like everyone else.

5. Giving in to being wrong

As part of the company’s core values, employees are encouraged to admit their mistakes.In fact, when Zappos suffered a loss of $1.6 million in six short hours, Hsieh took responsibility for the massive blow.Instead of disappointing customers, he chose to honor the big discount for anyone who bought goods during the price outage.As a result, Hsieh built strong customer loyalty, but also showed his company and its stakeholders that honesty is the best policy.

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