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At Zappos, Culture Pays

At Zappos, Culture Pays

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From Strategy + Business, Issue 60
From Strategy + Business, Issue 60

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Published by: Christine Rogers Patten on May 23, 2011
Copyright:Attribution Non-commercial


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 At Zappos, Culture Pays
The thriving Internet shoe retailerhas made its name and a lot of money by being eccentric.
service.” In fact, Zappos describesitself as a service company that hap-pens to sell shoes and other prod-ucts. This value is reflected in suchniceties as a 365-day return policy  with free shipping both ways, 24/7customer phone lines, live onlinehelp, and customer product ratings— none of which is all that weird.But things do become, if not weirder, then at least different, whenseen from the perspective of AaronMagness, Zappos’ director of busi-ness development and brand mar-keting. He told me, “I read abouthow Zappos is focused on customerservice. It isn’t. It’s focused on com-pany culture, which leads to cus-
 c  omm ent   
l      e a d  i     n   gi      d   e a s 
pany culture — has provided a surepath to business success.Zappos began selling shoes andother products online in 1999, be-came profitable four years later (thebeginning of a still-unbroken run of annual earnings gains) and reachedmore than US$1 billion in sales by 2009. That was a big year for Zap-pos in other ways as well. The com-pany was rewarded with
Business Week 
s Customer Service Champdesignation, inclusion on
slist of the 100 Best Companies to Work For, and an A+ rating by theBetter Business Bureau. Also in2009, Amazon purchased Zapposfor 10 million Amazon shares, worth almost $928 million at thetime. Zappos’ employees divvied up$40 million in cash and restrictedstock and were given assurances thatthe Zappos management would re-main in place. At the top of the list of Zappos’values is “Deliver WOW through
The thriving Internet shoe retailer has made itsname and a lot of money by being eccentric.
ne clue that something a lit-tle weird is happening atZappos can be found nearthe bottom of the home page of thecompany’s website, where you’ll findlists with headings such as “Shop withUsand“CustomerService,be-neath pictures of Anne Klein, Rock-port, and Nike footwear; New Bal-ance shirts; and Tommy Bahamashorts. Buried in one list is a link ad-vising, “Don’t ever click here.” I did,of course, and the link opened a YouTube video of the Muppet rock band performing, as lead singerBeaker lip-syncs, “Never gonna giveyou up. Never gonna let you down.”It is a not-so-subtle message to Zap-poscustomers and perhaps to itsemployees as well. Another link opened a com-pany-produced video in which em-ployeestalkabouttheirfavoriteZap-pos values — there are 10 values intotal — with the same convictionand enthusiasm that the Muppetband brings to its musical antics. Aclearwinner:“Createfunandalit-tle weirdness.” Weirdness may not be the firstthing that comes to mind when youthink of shoe retailing, but thenagain neither are things like innova-tion, massive growth, or a large pay-off from a huge acquisition. All of those apply to Zappos, however, where a little weirdness — combined with faith that putting extraordinary effort into building a desirable com-
     I    m    a    g    e    s    c    o    u    r     t    e    s    y    o     f     Z    a    p    p    o    s
Corporate communications, Zappos-style.
 c  omm ent   
l      e a d  i     n   gi      d   e a s 
tomer service. We don’t talk aboutcustomer service; we allow it tohappen on its own by having theright people.”The right people are rare. Only about one out of 100 applicantspasses a hiring process that is weighted 50 percent on job skillsand 50 percent on the potential tomesh with Zappos’ culture. Indeed,if you want to get a job at Zappos,the value to emblematize most is“be humble” — avoid using
infavor of 
“Humbleness allows forgreater collaboration,” says Mag-ness, sounding more and more like aself-help manual all the time. Acing the interview process isntenough to guarantee continued em-ployment. Every new hire under-goes four weeks of training, during which the company culture must becommitted to memory. The second week includes dealing with cus-tomers by working the telephones.One newly hired senior personthought this task beneath him. He was treated like the apostate that he was. “We sent him home,” Magnessoffers bluntly.The architect of Zappos’ deter-mination to build a culture thatapplauds such things as weirdnessand humility is Tony Hsieh (pro-nounced
), who became CEOin 2000. He would stand out as alittle weird himself in a room full of CEOs: He shaves his head, spendsat least 10 percent of his time study-ing what he calls the science of hap-piness, and speaks of becoming lessfocused on “me.” As an April Fools’Day prank this year, Hsieh put out apress release announcing that Zap-pos was suing Walt Disney Com-pany in a class action claiming thatDisneywasmisleadingthepublicby saying that Disneyland is “the hap-piest place on Earth”; clearly, Hsiehargued, Zappos is. As cofounder of the Internetadvertising network LinkExchangeand of an incubator firm that in-vested in Web startups, Hsieh saw firsthand the dysfunction that canarise from building a company in which technical skill is all that mat-ters. He reached a point of not wanting to go to work because of allthe backstabbing and ladder climb-inghesawandthiswasatstartupcompanies, blank slates emergingfrom revolutionary new technolo-gies. Many of these companiesdidnt get very far. When he joined Zappos, Hsieh wasdeterminedthatitwouldbedif-ferent — that its success would beinformed primarily by an unortho-dox and comparatively benign cul-ture. He invited Zappos’ 300 em-ployees to list the core values thatthe culture should be based upon.That exercise, which involvedgrouping like-minded suggestionstogether, readily yielded the 10 val-ues that continue to drive the orga-nization, now numbering about1,800 people. A far more difficult challengethan defining these values has beenkeeping them in the foreground of employeesattention and makingcertain that abstract qualities such as weirdness and humility are givenconcrete reality. Hsieh and his man-agement teammeet that test inmyr-iad ways. For example, the value“Pursue growth and learning” issupported by a company library andan in-house life coach.But non-management employ-ees must do their part as well; theirperformance reviews are based inlarge part on how well they partici-pate in the culture. “That doesn’tmean you have to be at every [com-pany] happy hour,” Magness says.“But are you living the brand prom-ise? Are you organizing team events? What is your relationship like withoutside vendors? How are your rela-tionships with other members of your team?”Corporate culture is more thana set of values, and it is maintainedbyacomplexwebofhumaninterac-tions. At Zappos, the liberal use of social media facilitates the network that links employees with one an-other and with the company’s cus-
“What is the Zappos culture? It’shaving faith that if we do the rightthing, then in the long run we willsucceed and build something great.”

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