Zappos, the online shoe retailer, is legendary for its employee culture and customer service. Paying employees to quit; offering customers free shipping both ways and a year to make returns; and hiring 24/7 phone reps who are as courteous, kind, and upbeat as Four Seasons concierges are all part of the Zappos formula.
When I caught up with CEO Tony Hsieh in California a few months ago, we spoke about how his company's culture came to be, and about selling the company to Amazon for $850 million last summer (a deal now worth more than $1 billion with the appreciation of Amazon's stock). Here were the four lessons I took away from one of the great serial entrepreneurs of our time:
1. Company culture stems from intrinsic factors and needs to be established early rather than reverse-engineered.
From a cultural perspective, the ultimate goal of a company should be to create a place worth being for its own sake, paycheck aside; a place where you would work for free if you could afford to.
To understand why Tony Hsieh and his team are so maniacally focused on this lofty cultural goal, it is important to understand what they did before Zappos. After college, Hsieh and a friend started LinkExchange, which they sold to Microsoft in 1998 for $265 million.
After the sale, Tony began investing in young companies, including Zappos, and quickly found himself missing the operational and entrepreneurial side of company-building. "I got slowly sucked into Zappos and within a year joined Zappos full time."
Tony shared how he was afraid of making a mistake he'd made at LinkExchange: not focusing on culture until it was too late. He wanted to work with people he liked and respected and to emphasize the company's larger purpose, meaningful roles, and camaraderie. "Take making money out as part of the motivation or equation, and then it's all about working with people that you would enjoy hanging out with even if you weren't working together," said Hsieh.
I am also a big believer in optimizing company performance and driving culture using intrinsic motivators (like meaningful roles with learning and growth) over extrinsic factors (such as compensation). In a prior post I wrote about how to make employees happier. Extrinsic motivations like pay and status are certainly needed (people need to eat, after all), but it is the intrinsic motivation that drives purpose and long-term commitment.
2. Customer service excellence starts from a commitment from the top and must be "lived into" by every employee.
Zappos started off as just a shoe store but always had a bigger aspiration — to be a leader in customer experience. "One day," Tony notes, "We asked ourselves, 'What do we want to be when we grow up? Do we want to be about shoes or do we want to be about something bigger and more meaningful?' That's when we decided that we really wanted to build the Zappos brand and be about the very best customer service and customer experience."
"Hopefully ten years from now people won't even realize that we started out selling shoes online," says Tony Hsieh. Customers have even sent letters asking Zappos to start an airline. It is very clear that in Tony's mind that Zappos is in the customer service business, and it just happened to start with shoes.
Their great customer service flows naturally from the type of people who want to go work at Zappos, and it's further reinforced by the company's central philosophy. As Tony explains, "Would you expect someone who wasn't happy at work to exude and embrace those values on the phone? With the right hiring practices and company culture, you don't need to spend millions on training: Our hope was that if we get the culture right most of the other stuff will just happen naturally on its own."
3. Core values are underutilized tools. Set them collectively, authentically, and make them committable.
"I kind of resisted the idea, just because it seemed like one of those big corporate things to do," Tony says about defining core values. "For us the difference is that we wanted to come up with committable core values, meaning we're actually willing to hire and fire people based on them, regardless of, or independent of, their specific job performance."
The Zappos core values, like # 11: Be Humble and #4: Be Adventurous, Creative, and Open-minded (check out the whole list and a great video about them), are based on input from everyone in the company. They define the company's view of human relationships and philosophy of living, which predispose it to excel at customer service.
4. Ultimately it's all about the people and their own belief in themselves.
Zappos has an unusual hiring process. "One of our interview questions," says Tony, "is 'On a scale of one to ten, how lucky are you?' We want to hire the lucky people that bring more good luck to Zappos." This was inspired by a study in which people who reported themselves as being lucky were more likely to pick up on clues to help solve a task they were given — their disposition helped them outperform a group that perceived itself to be naturally unlucky. Zappos isn't afraid to be quirky. They also aren't afraid to be frank. They offer their new hires $2,000 to quit after the first week. "The original motivation for doing it was to make sure that people were there for reasons beyond a short-term paycheck. " Interestingly, the biggest benefit of this offer was its effect on those people who turn it down: "They still had to go home and, over the weekend, think about it, talk to their friends and family, and ask themselves 'Is this a company I can really commit to? Is it a company I believe in for the long-term,' and when they came back to work on Monday, they were that much more committed and passionate about the company."
For more on the Zappos story, I recommend Tony Hsieh's recently released book, Delivering Happiness.
Source: http://blogs.hbr.org/tjan/2010/07/four-lessons-on-culture-and-cu.html
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