1. What lessons about leading people and managing organizations does Zappos and
ID: 403912 • Letter: 1
Question
1. What lessons about leading people and managing organizations does Zappos and its CEO, Tony Hsieh, provide? Explain your conclusions.
2. Each of the management challenges%u2014globalization; leading a diverse workforce; and ethics, character, and personal integrity%u2014have had an important impact on the evolution of Zappos. How has Zappos CEO Tony Hsieh addressed the management challenges of globalization; leading a diverse workforce; and ethics, character, and personal integrity? Describe the impact and give examples for each of the following challenges.
3. Natalie Zmuda, a reporter for Advertising Age, concludes: %u201CIt seems that Zappos is really the poster child for this new age of consumer companies that truly are customer focused. A lot of companies like to say they are, but none of them is as serious as Zappos.%u201D Do you agree or disagree with Zmuda%u2019s assertion that Zappos is much different than other consumer companies? Explain the reasoning behind your answer.
4. What particular aspects of Zappos would other organizations do well to emulate? Explain your answer.
Explanation / Answer
When your alarm went off this morning, waking you from a deep sleep, what was your initial thought? Was it something like, "Can I hit the snooze button?" Or, "No, it can't be time already." Or maybe it was just "Ugh." Do you remember the last time your alarm went off and you jumped out of bed and thought, "Wow. I can't wait to get to work and serve our members today?" (Don't worry, we won't hold it against you if an exact date doesn't spring to mind.)
But truth is, organizational culture is a huge part of every association's success. You want each member of your team to not only enjoy being at work, but also enjoy serving your members and customers each day. One company that's done just that is Zappos.com. With 2008 sales that topped $1 billion from 10 million customers, Zappos.com has had a customer-centric culture since it started 10 years ago.
Associations Now recently conducted an email interview with Zappos.com CEO Tony Hsieh and HR Director Rebecca Ratner, who both spoke about what it takes to have a culture that truly celebrates both employees and customers. (Shortly after the interview, Zappos.com announced its acquisition by online shopping giant Amazon.com. Read what Associations Now Editor-in-Chief Lisa Junker thinks about the late news and how the culture of Zappos.com will or will not change in the future, in "Inside: Dealing With Change.")
Associations Now: Why do you think Zappos has had so much success over the past 10 years?
Tony Hsieh: I think it really boils down to our focus on company culture. I wrote a blog post titled "Your Culture Is Your Brand" that goes into more detail. Here's an excerpt just to give you an idea:
"So what's a company to do if you can't just buy your way into building the brand you want? What's the best way to build a brand for the long term?
"In a word: culture.
"At Zappos, our belief is that if you get the culture right, most of the other stuff%u2014like great customer service, or building a great long-term brand, or passionate employees and customers%u2014will happen naturally on its own.
"We believe that your company's culture and your company's brand are really just two sides of the same coin. The brand may lag the culture at first, but eventually it will catch up.
"Your culture is your brand."
So how do you continue to build and maintain that culture?
Rebecca Ratner: We truly build and maintain culture one person at a time. Once we hire someone, they immediately enter into four weeks of training, during which they are immersed in learning about who we are, what we do, and how we do it, Zappos style. This means people learn and become part of the culture right away, instead of learning about it over time by watching others. One of the key fundamentals we teach is that every person is responsible for our culture by being the person they are every day, by the things they do and say. When every person is responsible for culture, and held accountable for that, then we have 1,400 people working toward building and maintaining who we are. I think many other places expect managers to be responsible for building culture, but to us, that's not enough people%u2014it has to be everyone for it to grow and thrive.
I read that 50 percent of your employees' performance reviews is how well they live up to Zappos' core values. Besides taking that step, how else do you get each employee to embrace customer service as part of her job description?
Ratner: We live on this stuff%u2014we hire for it, review based on it, and fire for it. Living and breathing customer service makes it something employees don't have to be reminded or trained to do%u2014it's just how we work. By committing to hiring around this idea, the best technical fits for a job don't get hired if they aren't a culture fit also. No exceptions.
This means that only those people who we think will live our values get in the door. And once they're in, by reviewing on these values, people have to be true to these day in and day out.
Then, being willing to fire based on it is another big hurdle. When we will let someone go because they don't live our values, even though they are a star technical performer, is when we know we've really succeeded in putting service first.
On the Inside Zappos blog, I saw videos of employees enjoying snow cones and talking about their favorite Michael Jackson songs. How else do you celebrate and reward employees?
Ratner: We celebrate on a companywide, departmental, and individual-contributor basis. We believe there is so much value in recognizing the things we do well that there are dozens of ways, big and small, that we make sure to constantly reinforce those behaviors, achievements, and actions we want repeated.
On a companywide basis we celebrate through our parties, carnivals, employee bonuses, and thank-you gifts for everyone. We celebrate by sharing all of the news articles and external recognition we get for the things we do, sending them around the company for all to read. We share company goals with every employee and celebrate achieving milestones toward those goals.
Here are some more examples:
Celebrations are fun around Zappos, both the big and the small. We truly feel that celebrating frequently the things we achieve is one of the best motivators around for getting that kind of achievement repeated. While we rack up some pretty big bills for happy hours and parties, we believe that every one of those dollars comes back to us threefold in employee engagement, which to us is really what success is all about.
What's the biggest mistake organizations can make when it comes to organizational culture?
Ratner: I'm not sure that I can talk to what's right or wrong for other organizations, but what I've learned at Zappos is that we have to be totally committed to living our core values, in both good times and bad. If each value is something we're not willing to compromise at any time, for any reason, we're living the right ones. If a company calls something a core value but is in any way willing to sacrifice that value, even just a little bit, then I think that's a huge hit to culture%u2014living something that's just not true. I think the question really is, "Would I live according to this value if revenues were down 40 percent, or if no one was looking, or if no one would find out the outcome, or if I'm running three days behind, and so forth?" If the answer is yes, you'd always stay true to those values despite hard times, then I think that's the strongest start to building and maintaining culture. Not ensuring this level of value commitment is a really big mistake in cultural development, I think.
You've said that the number-one driver of your growth has been repeat customers and word of mouth. Why do you think this is the case?
Hsieh: Our whole philosophy is to take most of the money we would have spent in paid marketing or advertising and put that money into the customer experience instead. Things like free shipping both ways, surprise upgrades to overnight shipping, a 365-day return policy, staffing our call center 24/7, and providing above-and-beyond service (no scripts, no upselling, no call times) are all very expensive, but they also create a lot of customer loyalty and word of mouth.
One of your core values is to embrace and drive change. So many people are quick to say "We've always done it that way" or "It didn't work then, why would it now?" How do you empower staff to drive change?
Ratner: Recognizing and rewarding risk taking. We've worked hard, and still do every day, to build an environment where people are willing to take risks and not afraid to fail. We believe in it so strongly that, as you mention, we made it a core value. We all recognize that times change, trends change, people change, so just because something didn't work before really doesn't dictate that it isn't worth trying now. Generally, the best ideas come from everyone in the company, not specifically top down, and we share those ideas and recognize where they came from to really show people we believe in taking chances. It certainly helps that we're a company that sells products that change constantly, through fashion trends or technology, so we live with change every day in what we do.
This recent post on the Zappos Twitter feed really stood out to me: "If you don't trust your employees to tweet freely, it's an employee or leadership issue, not an employee Twitter policy issue." You have fully embraced social media both as an organization and individually. Why do you think organizations are struggling with this?
Ratner: I think so many places are unable or unwilling to put the time into hiring like we do. We really invest a lot in the beginning of a relationship with a potential employee and then a new employee. We feel like if we hire right, there's no reason not to trust our employees; they're already our friends and quickly becoming our family. Whether it's social media like Twitter or no restrictions on their empowerment to give coupons to customers, when there is trust between a company and its employees, so much more freedom can exist. But, it really only works if we spend the time and effort really getting to know people in the hiring and onboarding process. A courtesy interview to fill a very much needed opening isn't going to cut it
"While we rack up some pretty big bills for happy hours and parties, we believe that every one of those dollars comes back to us threefold in employee engagement, which to us is really what success is all about."
%u2014Rebecca Ratner, HR director, Zappos.com
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