The New Yorker has a fantastic story on Zappos. I’ve written about Zappos several times previously and I have to say this is one of the best profiles I’ve seen.
“Tony Hsieh, has earned a zealous following by imposing an ethos of live human connection on the chilly, anonymous bazaar of the Internet. He talks about being the architect of a movement to spread happiness, or “Zappiness,” via three “C”s: clothing, customer service, and company culture.
“Eventually, we’ll figure out a way of spreading that knowledge to the world in general, and that has nothing to do with selling shoes online.”
There has been much talk about what will happen to the Zappos culture and its all important focus on happy since it was acquired by Amazon. The culture was even considered important enough that the issue was addressed in an SEC filing—”Amazon vowed to leave Zappos’s management structure intact.”
Hsieh was already rich when he joined Zappos after selling his first company to Microsoft; he had a simple focus…
“What kind of company can we create where we all want to be there, including me? How can we create such a great environment, where employees get so much out of it that they would do it for free?”
Anyone who has seen Hsieh knows he isn’t a fashion icon; everything he wears is no name, moreover he has no interest, “I much prefer experiences to stuff.”
And that is what Zappos really sells, the intimate experience of a leisurely conversation on the phone with a person who is happy to hear from you, doesn’t multitask while talking or rush you because she has to do something else (the current record-holding call went on for five hours, twenty-five minutes, and thirty-one seconds) and, by the way, you get a pair or more of shoes with it.
The article is a fascinating and intimate look at Hsieh and Zappos; I hope you’ll take time to read it.
Amidst all the doomsayers and layoffs stands 34 year-old Tony Hsieh, CEO of billion dollar Zappos and as far from an imperial CEO as it’s possible to get. (I wrote about Zappos last spring with a link to an excellent interview.)
Hsieh sold LinkExchange, his first company, in 1999 to Microsoft for $265 million and then founded Zappos, a company known for its astronomically high quality customer experience and some of the happiest employees on Earth.
And the downturn isn’t changing that.
From the start, he chose to spend the marketing and advertising money on the customer experience, fostering repeat business and word of mouth advertising.
For his customers:
“Unconventional for an online retailer, Zappos offers free shipping both ways and a 365-day return policy. Customers can order 10 pairs of shoes, try them on, and send nine back. Or 10. Free.
Where other companies duck customers and hide their contact information…Zappos’ 800 telephone number is prominently displayed at the top of its Web page. At the Zappos call center, representatives work without scripts and are under no pressure to quickly dispatch with customers. … Shipping is promised in five to six days. But the company’s little secret is that most orders are automatically upgraded to free overnight shipping. The warehouse operates 24/7… The goal is building a lifelong relationship.”
For employees:
Hsieh says, “The number one focus and priority for the company, even though we want the brand to be about customer service, is company culture … Our belief is that if you get the culture right, most of the other stuff, like great customer service, will just happen naturally.”
When asked why more companies don’t do as Zappos does, Hsieh says. “Patience. Most corporations don’t want to put in the time to build customer service and a company culture. … Chase the vision, not the money. The money will follow.”
Let us start with a question. Do you read Schumpeter in The Economist? Most of the time I really like what he says, but every now and then I disagree.
A good example of this is The cult of the faceless boss; I don’t agree that a CEO has to be flamboyant, maniacal, egotisticical and overbearing to be brilliant.
I’m thinking of titling my new management tome: “How I Learned My Five Most Effective Management Habits in Kindergarten, While Winning Friends and Influencing People by Using a Twelve Step Program, and All Inspired by Sun Tzu and Genghis Khan.”
Speaking of overbearing and egotistical what do you think of this CEO? One can only hope that he’s been canned—better yet, he should become a patient in his own facility.
Finally, Peter Schutz, former CEO of Porsche, sums up the two necessities for success, “People buy other people and corporate culture,” something that made Zappos what it is, but that many executives forget.
Leadership Turn is ending; its last day is December 29. I’ve enjoyed writing it and our interaction since August 16, 2007; LT may end, but I’ll keep going at my other blog.
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If today has any unifying theme it’s a focus on management being smart, instead of the opposite.
Let’s start with my favorite customer service example, and one I’ve written about often, Zappos. CEO Tony Hsieh has a fierce focus on his customers that he fosters with a culture of fun for his people.
Michigan’s Dan Mulhern focuses on the importance of good corporate culture, especially in a downturn. He says that now is not the time to ignore culture even with the extra-challenging circumstances that Michigan faces.
Can a large corporation learn from its mistakes? Many don’t, but BMW did. It botched it’s acquisition of Land Rover by trying to impose it’s own culture on a totally different product, but avoided making the same mistake with the Mini Cooper.
Finally, can the people who built mint.com find happiness inside the large corporation that acquired them? They seem to think so.
Way back in the late seventies I was telling clients that their company culture was important. I didn’t use the term, because it was considered ‘smoke and mirrors’; but culture has always been the deciding factor when a person joins a company or leaves and also the bedrock of innovation and productivity.
From tiny Elk River, MN, where a local president says, “Sportech’s culture is one of the company’s top competitive advantages,” to Canada where “Canada’s most-admired corporate cultures are outperforming the rest — despite the economic downturn” to Internet powerhouses like Amazon and Zappos to Southwest Air Lines all credit their strong performance to their cultures.
Yum Brands is hitting its current marks and laying the foundation for the future with a massive cultural overhaul.
Yum! Brands, the owner of chains such as KFC, Pizza Hut and Taco Bell, Dave Novak, the chief executive, is presiding over a training programme that he says is the “biggest culture-change initiative in the world today”, affecting all of the firm’s 1.4m workers spread across 112 countries.
Culture drives the success of the Ritz-Carlton according to its president Simon F. Cooper.
A culture is built on trust. And if leadership doesn’t live the values that it requires of the organization, that is the swiftest way to undermine the culture. No culture sticks if it’s not lived at the highest levels of the organization.
From the start, right along with the marketing and financial plans, Administaff co-founder Paul J. Sarvadi focused on a culture that would empower employees.
…very few people spend the amount of time and effort to develop their people plan,” says Sarvadi, co-founder, chairman and CEO of Administaff Inc. “What’s their people strategy? What is the culture they want in their company? What is their organization and leadership philosophy for the company? How do they want to award people?
Once upon a time Covidien was Tyco Healthcare (yes, that Tyco), a company going no where. It agitated to be spun off, dropped a toxic name, changed its culture and is now a $10 billion 41,000 employee global innovation powerhouse.
Covidien had to make changes to everything from its product development process to its employee evaluation and compensation program.
Whether you’re part of a giant enterprise or an individual out on your own reading stories about how other companies embedded the right combination of hard practices and the right MAP in their culture will show you what to do.
Sure, you’ll have to tweak the idea to fit your needs, but you’ll be surprised how similar the basics are once you strip away the trappings.
Honing “CEO skills” isn’t just for CEOs—it’s for every manager who wants to do a better job and every employee who wants to be promoted.
Sure, you may not know as much, or have access to, the same information as the boss, but don’t let that stop you.
It’s similar to managing a fantasy sports team, you know all the easy information and a little research usually gives you a lot more with which to work.
You can make it even more interesting and fun by recruiting colleagues to choose other companies to shadow and compete.
Whatever level you’re at, you may know a lot about your company already and a lot more is in the public domain.
What’s most important in running a company? Obviously, the list below isn’t everything, but it does offer ten of the most important things to get you started running the fantasy version of the company you choose.
You may not be a CFO, but you better know your numbers: where they come from, how they interact, and where they’re going. This includes knowing/learning to read financial statements, annual reports, etc.
No matter what your career path, know about your company’s market (no matter how cool and cutting-edge your service, product or e-concept is) so you can understand who buys it and why, what the competition offers and how your company products or services differ.
Every successful company must have a competitive edge, whether it’s unique products/services, pricing advantages, company culture (think Zappos), etc. Learn how to define your company’s competitive edge and understand how to communicate it clearly to the whole company so that everyone is focused on making it happen.
Clearly identify the goals of the company, then work to turn them into specifics. Assure buy-in by making sure employees understand the interaction among their goals, the company’s goals, and those of other people.
Hire the smartest people available and give them an environment that enables them to produce; then watch your company’s strengths increase in direct proportion to your people’s growth. Remember, people are most productive if they know, and help determine, their work and the range of their control.
Make sure that there’s an obvious and direct relationship between the rewards people receives—salary, stock, bonuses, medals, whatever—and the success of the company. The biggest rewards should go to those who understand the company’s goals and ethically do whatever it takes to achieve them.
Create a culture in which the messenger is never shot; that way you’ll always get the earliest possible warning of potential problems.
You set the tone of the organization. If you’re political, secretive, nitpicking, or querulous, then that’s how your organization will be, because, no matter what, employees will always do as you do, not as you say.
Never criticize an employee in the presence of others. Praise in public, criticize in private.
Companies are like tripods, with customers, investors, and employees each representing a leg. If you don’t pay equal attention to each the company will tip over.
Track your choices, decisions and actions against the reality. Give yourself a high five when your ideas pan out, and learn when they don’t.
You’ll be amazed at how fast the learning from your fantasy business pays off in your real work!
More from Business Week’s Innovation on why now is a great time to juice your innovation efforts and what a number of companies are doing. Whether you run a large company, are a micropreneur or working for the man, but dream of doing more you’ll find ideas and encouragement in the stories. Don’t hesitate to click around on other topics. Innovation offers up amazing stuff.
Another BW story sounds a cautionary warning on the recession’s potential effects on a generation of workers, similar to what happened in Japan a decade ago.
On a lighter note, here is an update on how Zappos is using social media (why are we not surprised) to further connect their culture and their customers. Think about how your company could benefit and back your suggestions up with this and other articles, especially if their about your competition.
Finally, Have some fun and read through the winners of this year’s Ig Nobel Awards. The Ig Nobels are given by Improbable Research, “Improbable research is research that makes people laugh and then think. We collect (and sometimes conduct) improbable research. We publish a magazine called the Annals of Improbable Research, and we administer the Ig Nobel Prizes.” I love the Ig Nobels; they demonstrate the amazing creative spark found in the human race.
I hope you enjoy my picks and find both information and inspiration in them.
Southwest Airlines, like Zappos, has a corporate culture that is head and shoulders above most and is the envy of their competitors.
Southwest’s culture is so important that the company walked away from a deal to buy Frontier Air Lines.
It is that culture has helped Southwest weather the current financial storm and it zealously guards that culture because it knows it is the true foundation of its strength..
As Gary C. Kelly, Chairman, President and CEO, said in the during the Q2 Earnings Call,
“Excluding special items, we reported a second quarter profit of $59 million and that was $0.08 a share. And I would say given the deep recession that that is a very solid performance and, of course, I’m very proud of our people on every front. We continue to manage through the economic crisis with a lot of change and all the while our folks are delivering a very high-quality operation and outstanding customer service, so I’m very, very proud of them.”
The call was primarily with analysts, although many investors probably joined it, and the introduction included the following statement,
“This call will also include references to non-GAAP results; therefore, please see our earnings press release in the Investor Relations section of our website at Southwest.com for further information regarding our forward-looking statements and for a reconciliation of our non-GAAP results to our GAAP results.”
So if you’re Southwest and known for a fun culture, how do you incorporate that into something as eye-glazing as explaining GAAP, AKA Generally Accepted Accounting Principles, at your annual meeting?
Easily. You just ask David Holmes, known as the Rapping Flight Attendant, to explain it.
By now, anybody who reads or watches the news knows that Amazon acquired Zappos, even if they don’t know about Zappos (a man asked me what a zappos was because it seemed very expensive).
Jeanne Bliss quoted a line from Tony Hsieh’s internal email (emphasis mine), “Over the next few days, you will probably read headlines that say “Amazon acquires Zappos” or “Zappos sells to Amazon”. While those headlines are technically correct, they don’t really properly convey the spirit of the transaction. (I personally would prefer the headline “Zappos and Amazon sitting in a tree…”)”
I agree that it’s a marriage made in heaven.
Both companies boast management that is passionately focused on customer experience, are long-term thinkers, know how to plan and are talented at executing.
Some pundits are focusing on the cultural compatibility and whether Zappos will be forced to change because it’s now part of a public company.
People tend to forget that Jeff Bezos is the CEO that Wall Street loves to hate.
They hated it when he expanded out of books; they predicted Amazon’s demise when it used its expertise to do fulfillment for other companies and again when Amazon jumped into cloud computing.
Bezos’ attitude is encapsulated in this short interview ending with a perfect wrap when asked if he feels vindicated by the company’s success.
‘No. I’ve taken plenty of criticism, but it’s always been about our stock price and never about our customer experience. After the bubble burst, I would sit down with our harshest critics, and at the end of the meeting they would say, “I’m a huge customer.” You know that when your harshest critics are among your best customers, you can’t be doing that badly.”
What do you do with a slightly-below-mediocre company that keeps its business going by staying in small markets where its dominance is assured by an almost total lack of competition; a company with little regard for its employees and less for the communities in which it operates?
You bring in a CEO who has a passionate belief that the interaction between customers and frontline associates has the greatest influence on success and that the greatest impact on that is the way their leaders/managers treat them.
In other words, employees at every level do unto customers as their bosses do unto them.
Jack Rooney is as far from a rock star CEO as you can get, but he understands that real leadership must permeate the entire company and knows that while true cultural change is neither fast nor cheap it works and therefore is worth the effort.
Rooney calls his approach the Dynamic Organization; he developed it under challenging conditions at Ameritech and brought it to full fruition at US Cellular, which he joined in 1999.
The Pursuit of Something Better tells both stories, Rooney’s and US Cellular’s; they are told by Dave Esler and Myra Kruger, the culture consultants who worked with him at USC and his previous company.
Both stories are the culmination of a man who believed in doing the right thing and a company that was changed accordingly.
“Jack Rooney and his slowly-expanding team of believers challenged the long-prevailing assumptions that business is a blood sport, that the advantage inevitably goes to the ruthless and the greed, that the only way to win is to hold your nose and leave your values at the door. He has proved beyond question, once and for all, regardless of what happens from her on, that a values-based model works, that it can raids both a company and the individuals who are part of it to undreamed-of-heights, to peak experiences that will last a lifetime and change the way those lives are lived.”
And while the authors do a great job of telling the story, the real leadership that Rooney provided, along with his concept of the Dynamic Organization, aren’t broken down or spelled out as a set of lessons and how-to’s separated for you to memorize.
It’s your responsibility to learn from what was done, drawing out those lessons that are most in synch with your MAP, because if they aren’t in synch there’s no way you’ll be able to implement them.
And in case you’re tempted to shrug it off as a fluke, I suggest that you give some long hard thought to Zappos and its ilk.
I highly recommend The Pursuit of Something Better. It’s fun, it’s fascinating. You might even start to believe that you don’t have to leave your ethics at the door; at the very least you’ll know what to look for in your next interview.
Entrepreneurs face difficulties that are hard for most people to imagine, let alone understand. You can find anonymous help and connections that do understand at 7 cups of tea.
Crises never end.
$10 really does make a difference and you’ll never miss it,
“Tony Hsieh, has earned a zealous following by imposing an ethos of live human connection on the chilly, anonymous bazaar of the Internet. He talks about being the architect of a movement to spread happiness, or “Zappiness,” via three “C”s: clothing, customer service, and company culture.
Let us start with a question. Do you read 
If today has any unifying theme it’s a focus on management being smart, instead of the opposite.
Honing “CEO skills” isn’t just for CEOs—it’s for every manager who wants to do a better job and every employee who wants to be promoted.
What do you do with a slightly-below-mediocre company that keeps its business going by staying in small markets where its dominance is assured by an almost total lack of competition; a company with little regard for its employees and less for the communities in which it operates?
