CASE 1.

1 (HR IN SMALL BUSINESS)

ZAPPOS: HOW TO CREATE AN EMPLOYEE FRIENDLY CULTURE AND USE IT AS

A SOURCE OF COMPETITIVE ADVANTAGE

October 26, 2020

 RATIONALE

Nick Swinmurn’s online retail store called Zappos has a different workplace

approach. It serves as an example on how organizations can create an employee friendly

culture and use it as a source of competitive advantage.

BACKGROUND

Zappos.com is an online shoe and clothing retailer based in Las Vegas, Nevada,

United States. Zappos, a short form of the Spanish word “zapatos” meaning “shoes,” is a

company founded in 1999 by Nick Swinmurn when he realized that there was not an

existing major online retailer who specialized in shoes.

Maintaining an effective culture in a workplace is an important strategy. It is

important to hire people who share your company value. A company culture that

facilitates employee happiness means better turnover and better company performance

(Neil Patel, 2012). Zappos’ CEO Tony Hsieh, one of the strongest advocates of culture,

notes that his entire business revolves around happiness. In 2010, Zappos was declared as

“the most employee friendly business out there” by Inc. Magazine.

Despite the few benefits and the low salary that Zappos offer to their employees,

over 1,300 of them still chooses to stay and give their priceless loyalty to the company.

Zappos places a high importance on recruitment so they require all their potential

employees to undergo a four-week customer loyalty training course, which includes at

least two weeks of talking on the phone with customers in the call center at full salary.

After a week of training, the new employees are offered $3,000 as buyout. Knowing all

the small benefits and low salary in the company, over 97% still chooses to turn down

and opted to stay in the company. This entails that people stay for the love of the job and

not for the money. “Employee benefits are perhaps more valuable than a high salary,”

states one of Zappos’ own blog posts.

EVALUATION OF THE CASE

Commitment and passion are the necessary qualities that an individual need in

order to be successful in Zappos. The company ensures that they hire the right people

with their unique four-week customer loyalty training course. “Power generally gets in

the way of learning,” says Mike Lee from Harvard Business School. Zappos adopted a

decentralized system with no job titles, no managers, no hierarchy called “holacracy.”

This type of work environment can really motivate an individual to explore, tend,

and improve their skills and abilities which is vital for the organization’s success. This

helps them become self-managed and self-organized and at the same time, actually feel

like they are part of the company’s decision making process since they are given the

power to innovate, make changes, and have a voice. They have the freedom to personally

connect with their customers since there is no time limit and they are even encouraged to

do so. This is also an advantage to earn the customer’s trust and loyalty since they are

treated as a family rather than just a plain business transaction.

Having no hierarchy may jumpstart to a negative practice and may result to

additional problems within the workforce but Zappos’ employees are different. They

share the same value with their CEO and understand the company values altogether
producing the best organizational performance. The CEO viewed this environment as a

city – he said, “Every time a city doubles in size, productivity per resident goes up to

15%.”

PROPOSED SOLUTION/CHANGES

Human Resource plays a big role in ensuring a company’s success from hiring to

training to maintaining the workforce. Zappos’ holacratic approach empowers employees

which helps drive the business. Creating this type of culture where employees have the

liberty to share their opinions opens a lot of doors and windows of vast resources in

which hierarchal companies often struggle with.

Changing this type of work environment is very tricky. An employee on

Glassdoor suggests that “Zappos might need more rules,” but others would most likely

say otherwise. Evaluation is key with this issue. The company must first assess the

organizational changes that they plan to impose to ensure that the new set of approach

will suit the employees. And they should also consider if the approach that they have

been doing for years is still applicable in today’s state.

RECOMMENDATION

Although Zappos’ workplace approach is empowering, we can never tell what

will happen in the years to come. Diversity is always present and we can never ensure

that the holacratic approach is applicable in the next generation. The company should

assess whether having a structural organization is necessary and if so, they should plan on

how to deliberately implement a careful strategic plan and at the same time how to slowly
make small changes with their culture and practices that will perfectly suit their

organization.

CONCLUSION
Zappos has developed different approach on how it manages, which is they

adopted a decentralized system called “holacracy”. This holacratic model empowers

employees and helps drive business, Zappos places a high level of trust on its team they

create an informal culture where employees will able to speak up and share. However

with Zappos style of management they are still able to focused towards development

which is to deliver satisfaction to the customers.