Zappos Company Culture Case Study

Case Study: Zappos’ Company Culture Delivers Happiness

Written by: Filip Matouson  February 13, 2012

Interview with Jenn Lim, the CEO of Delivering Happiness, a company that she and Tony Hsieh (CEO of Zappos) co-created in 2010 to inspire happiness in work, community and everyday life.

We caught up with Jenn to ask what some tangible results of a enviable company culture can be and why they offer 4,000 USD to their new hires to quit:

Why is company culture so important?

Company culture is such an intangible thing, like how do you improve a culture? What we’ve found through trial and error is that coming back to your core values, as corporate or hokey as it sounds, really matters. For Zappos at least, it’s the underpinnings of what company culture is all about. Because of those ten core values at Zappos, that allows the company to scale at the rate it has. Having a company under a hundred employees is a bit different than when you’re at a few thousand. By having those values you allow your employees to make decisions on their own, because in the end you have that trust because they’re making those decisions based on a shared set of values.

How do you give employee feedback to improve productivity?

Again, I don’t want to be harping on these core values too much but it really goes back to that. The performance reviews, at Zappos are culture reviews, and the whole idea is that you shouldn’t have them once a year or once a quarter, it should be everyday. The culture review reviews the ten core values and these are the ones that you are actually doing really well and these are the ones you can improve in.

If you make your employees more happy and are aligned with the culture and the values then they are more productive and better at what they do.

Do you still offer new hires $2,000 to quit?

It’s actually increased to $4,000 USD. Basically 4,000 to anyone who wants to quit at the end of a five week training program. Everyone’s offered that. The main reason it’s 4,000 is because not enough people are taking it (2,000). The thought behind that is it really pushes people, I mean 4,000 dollars is not a tiny sum of money, it really makes people think, is this the right role for me?Is this the right culture for me? Are these the core values I’m actually going to live by? It’s proven to be pretty successful at weeding out the people that are not necessarily aligned.

How do you check your company culture promotes productivity?

Let me start with this. If you’ve ever had a chance to see a video or take a tour of Zappos, it’s a wonder how work gets done. Because you’re looking around and there’s cow bells going off and people with Nerf guns and you think it’s a circus. But at the same time everything is getting done. It’s this whole idea of making your employees more happy and they’ll be more productive. There’s the common surveys and managers supervising to make sure that at the end of the day these things are getting done.

A look inside Zappos Office life (video created by the staff):

By letting go and seeing people be true to who they are… people ask, how do you hire so many people that are smiling? How do you get them to smile? And at the end of the day you hire the people that are smiling and not the ones that you have to train to smile because that’s an untrainable thing to do.

You can connect with Jenn and the Delivering Happiness Team on their website or on their Facebook or Twitter.

ARTICLE TAGGED AS:Zappos Delivering Happiness

Clarity: Know Where You’re Going

Zappos will take an order as late as midnight and deliver it to the customer’s doorstep before breakfast. It has the world’s largest selection of shoes, and its service includes free returns. If it doesn’t have the shoe you want in stock or in your size, a Zappos call center employee will go to three competitors’ sites to try to help you locate what you want to buy. Seventy-five percent of its business comes from repeat customers, despite the fact that its prices are far from the lowest. (Price is an area where Zappos has made a conscious trade-off in its service model in order to deliver exceptional service.)

It’s not surprising, then, that managers from other companies—including many from service and quality leaders like Southwest and Toyota—make regular pilgrimages to Zappos facilities to learn how the company pulls it off. Everyone wants to know what the heck is going on. A quick look around reveals that part of its success is the company’s IT strategy, including a real-time inventory management system that is 99 percent accurate, compared with accuracy rates as low as 40 percent in other areas of retail. But what gets visitors every time are the clues to Zappos’s true competitive advantage: its culture. And no one inside the company is surprised.

The most visible champion of Zappos’s culture, naturally enough, is president and CEO Tony Hsieh (pronounced “Shay”). Hsieh is crystal clear on the culture he needs to make the company thrive, and he and his team have broken it down into ten core company 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.

Hsieh embodies these values. He is passionate, positive, fun, humble. And a little weird. As the fearless leader of a high-profile shoe company, Hsieh unapologetically wore the same pair of shoes every single day for two years. He then replaced them with the exact same pair. Hsieh’s definition of weird, however, is closer to authentic or real. He’s betting that the “real you” will be more valuable to Zappos than the safe, watered-down version that usually shows up in a work environment. So go ahead, be a little weird.

Early in his career, Hsieh had a breakthrough about how much culture mattered to the performance and motivation of employees. He sold a software company he had founded when he realized that even he no longer wanted to come to work, primarily because of the culture. Now Hsieh does many things you’d expect from an enlightened CEO, like taking calls at the call center on holidays to give his employees a break and staying in direct touch with his customers.

But what really sets Hsieh and his team apart is their deep awareness that culture is the company’s most important asset. “Service is a by-product of culture,” says former chief financial officer Alfred Lin, as are things like supplier behavior and employee turnover. In 2005, when the company’s call center moved from the Bay Area to Las Vegas, an astonishing 80 percent of its California employees relocated—for a $13-an-hour job. In 2008, a year in which the average turnover at call centers was 150 percent, turnover at Zappos was 39 percent (including turnover owing to promotions). Managers attribute the loyalty to a culture that cultivates the passion, purpose, and humanity of its employees.

But it’s not just management that gets it. The conviction that culture is key is embraced throughout the ranks at Zappos. It’s so central to the company’s belief system, in fact, that the company publishes the Zappos Culture Book, which is updated regularly and contains hundreds of unscripted comments and essays written by Zappos employees and vendors about the company’s culture, why it matters, and how it affects what they do every day. It was conceived as a training tool for new hires and partners, but consumption of the book has gone way beyond that internal circle. Ringing in at 348 pages in the 2009 edition, it’s a moving and persuasive testament to the power of employee engagement (“happiness” in Zappos-speak), and the role of culture in eliciting it. We recommend buying it and just paging through.

Here’s a taste, from Abbie “Abster” M., an employee who had been working at the company for three-plus years:

The Zappos culture to me is unlike anything I’ve ever experienced before. It’s always fun and weird, we’re all creative and open-minded, passionate and determined, but most of all, we’re humble. I think it’s because most of us have worked in horrible dead-end jobs before and can cherish our Zappos culture for what it is. It’s what makes me want to come to work every day, even my weekends.

 . . . I hear so many horror stories from friends about the places they work and it only makes me feel that much more fortunate to be a part of the Zappos family. I can’t imagine my life without Zappos, and the amazing people that I work with.

The quote that moved us most was from Ryan A.: “At my last job I was afraid to be anything: right, wrong, smarter, dumber . . . At Zappos being yourself is the best thing you can do.” Perhaps the cultural feature we observe most often is unproductive fear, fear of looking bad or doing something wrong. If organizations did nothing else but address that part of their environment, we’re confi dent that the creativity and engagement of their people would have a real chance of being unleashed. Human beings are not at their best in a defensive, self-distracted crouch.

Hsieh named his book on building Zappos Delivering Happiness, but he and his team didn’t just deliver happiness for its own sake. Like IDEO’s relationship with creativity, Zappos understood that the happiness of its employees, partners, and customers was a deadly serious endeavor, the most reliable route to sustaining excellence in the industry in which Zappos chose to compete. Everyone inside Zappos, from the CEO to the front line, understood the link between its culture of happiness and the company’s daily performance. What’s the cultural analog in your own business? What’s your version of happy?

Reprinted by permission of Harvard Business Review Press. Excerpted from Uncommon Service: Hot to Win by Putting Customers at the core of Your Business. Copyright 2012 Frances Frei and Anne Morris. All right reserved.

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