Book review: Delivering Happiness by Tony Hsieh, CEO of Zappos

June 1, 2010

Tony HsiehZappos is the online retailer of shoes and clothing that was last year purchased by Amazon for $1.2Bn. They are known for their incredible service and their unique culture.

As a member of the Zappos Insights programme I received an advance copy of their CEO’s new book, aptly named “Delivering Happiness”. I thought as someone who has visited Zappos, met the management team, and read and listened to dozens of articles and presentations I would not have much else to learn; I was wrong.

The initial part of the book focuses on Tony Hsieh‘s childhood and background before Zappos. To understand Zappos you have to understand Tony, and the book certainly gives a greater insight into him as a person. Unlike the stereotype of a what a businessman should be, money is not his prime motivation.

My favourite example comes from when his first business, Internet Link Exchange, was bought by Microsoft for $265M. Tony’s share meant he was due to get $40M, but 20% of that – $8M – relied on staying on for 12 months after the sale. During the few weeks after the sale – sleep walking at Microsoft –  that he realised he would “stop chasing the money, and start chasing the passion” and walked out, and on the $8M golden handcuffs. Why? Simply because the happiest times in his life had never been related to money and he already had more than enough of that.

Another example of new information is the rollercoaster ride of what it was like struggling to grow Zappos. Although it was successful, raising additional venture capital to fund that growth proved impossible after the dot com crash in 2001. Redundancies were made, salaries cut, and Tony personally sold every asset he had, ploughing everything back into Zappos. This was a huge gamble, but underlines the faith and passion he had for this unique business. Looking back it must seem like a distant memory, but it was clearly a difficult time.

The outsider might wonder why all this information, warts and all is shared. The answer is that Tony just wants to help people, when I asked him that question he said, “when you find something really useful and helpful don’t you want to share it with people so they can make use of it too?”

It’s not about content of what they do, it’s more about why they do things that gives Zappos their competitive edge:

“If we want to continue to stay ahead of our competition, we must continually change and keep them guessing. Others can copy our images, our shipping, and the overall look of our website, but they cannot copy our people, our culture, or our service.”

Finally, I found the answer to one of the questions I have been asked most about Zappos, which is what is their policy on using Twitter, which is used by hundreds of their staff. It is very simple: “just be real, and use your best judgement”. That plus the Zappos ten core values keeps everyone aligned.

Delivering Happiness is published on June 7th 2010. For more info visit the Delivering Happiness website.

Meetups are happening all round the world to celebrate the launch so if you want to speak to like-minded Zappos fans, or others who are interested in building amazing company cultures, or want to know more about the path to happiness, then make it happen with other people in your city.

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Culture at Zappos and how everyone benefits

December 8, 2009

Zappos TourI recently spent two days immersed in Zappos at their Las Vegas HQ and this post follows up on my description of Zappos’ world-class customer service. The two day Zappos Insights programme starts with a tour round the office. (This is the same tour that anyone can get for free). On the tour round we met team after team of happy, smiling people. We were greeted by a group of people singing, blowing on whistles or party toys. Everyone has their own, very personalised desk area and there’s all sorts of stuff you wouldn’t expect to see in an office, which makes the whole place feel more like a college dorm room than a place of work. But that’s the point about Zappos, work doesn’t have to be dull!

If you have seen some of the many zany videos available on YouTube you may think that Zappos isn’t serious about anything. They are, it’s just that for obvious reason it’s mainly just the fun and weird stuff that makes it on to the web, it’s more entertaining!

Why the focus on culture?

Tony HsiehBy the time Zappos CEO Tony Hsieh sold his first business to Microsoft in 1998 for $265M he had come to realise something was no longer right with the culture at Link Exchange. Work had ceased to be fun and this he puts down to the type of people they hired, the best for the job but not the best for the atmosphere; many were “assholes”.

Culture and values

Zappos is different, it’s been carefully built over the years by only hiring people with the right cultural fit. Regardless of how much they need staff, if they can’t find the right people with the right attitude, they won’t hire them, no matter how talented that person may be or how badly they need to fill the position. We were given an example from Zappos’ recruitment manager, “right now we would hire 30 software developers if we could find them”. That’s commitment.

These are the ten core 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

These were carefully assembled over the course of about a year when Tony Hsieh emailed everyone in the company asking for a list of their personal core values; it was a truly democratic process. Says Tony, “The individual values are not what is important, but alignment of everyone to the core values”.

Why does culture matter?

As the culture evolves in a company such as Zappos amazing things happen, and the business benefits enormously. Here are some striking examples from Zappos of the benefits of the highly aligned culture:

  • Productivity increases by anywhere from 20% to 100%
  • Staff churn is incredibly low; just 6% voluntary churn within the Customer Loyalty Team (call centre)
  • Ideas are generated from the ground up and this innovation keeps the company ahead of its rivals
  • There is a clear framework for delegated decision making which means that the most junior employees, the call centre reps can do things like spend company money on ad-hoc gifts to customers, (which increases customer loyalty), and, by giving people autonomy, job satisfaction vastly increases too

Culture in action

Graffiti wall at ZapposThe job satisfaction, sense of family and loyalty to the company is evident when visiting, whether it’s the graffiti wall where members of staff have written various glowing comments about Zappos or just the genuine friendly way people in the corridors make eye contact, smile and say “hello” when they pass each other.

The outpouring of employee-love for Zappos is documented every year in a the “culture book“. In the book are unedited responses from all staff explaining what the Zappos’ culture means to them. Here’s one I like:

“We all share the quality of wanting to provide service through excellence in anything that we do. It’s that spirit that continues to allow us to grow to what we are today. In this family, we all strive to develop and improve, not just one person but the entire company as a whole. Our culture here is compiled by all of us sharing beliefs, values, goals, attitudes and practices that characterise us as a family”.

For more real-life examples of company’s with extraordinary cultures and the benefits which accrue I recommend books including Good to Great, Built to Last and Tribal Leadership. (Thanks to Zappos you can download a free audio version of Tribal Leadership here; listen to it and then pass it on!).

[Update: my visit to Zappos Insights was covered by Business Week]

I recently spent two days immersed in Zappos at their Las Vegas HQ and this post follows up on my description of their world-class customer service. The two day Zappos Insights programme starts with a tour round the office; this is the same tour that anyone can get for free, just by emailing tours@zappos.com On the tour round we met team after team of happy, smiling people. Sometimes we were greeted by a group of people singing, blowing on whistles or party toys. Everyone has their own, very personalised desk area and there’s all sorts of stuff you wouldn’t expect to see in an office, which makes the whole place feel more like a college dorm room than a place of work. But that’s the point about Zappos, work doesn’t have to be dull! Those of you who may have seen some of the many zany http://www.youtube.com/watch?v=fUhAEFkbh5I videos available on YouTube may think that Zappos isn’t serious http://www.youtube.com/watch?v=CE00IspxzDY about anything. They are, it’s just that for obvious reason it’s mainly just the fun and weird stuff that makes it on to the web, it’s more entertaining! By the time Zappos CEO Tony Hsieh sold his first business to Microsoft in 1998 for $265M he had come to realise something was no longer right with the culture at Link Exchange. Work had ceased to be fun and this he puts down to the type of people they hired, the best for the job but not the best for the atmosphere; many were “assholes”. Culture and values Zappos is different, it’s been carefully built over the years by only hiring people with the right cultural fit. Regardless of how much they need staff, if they can’t find the right people with the right attitude, they won’t hire them, no matter how talented that person may be or how badly they need to fill the position. An example from Zappos’ recruitment manager, “right now we would hire 30 software developers if we could find them”. These are the ten core 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 These were carefully assembled over the course of about a year when Tony Hsieh emailed everyone in the company asking for a list of their personal core values. It was a truly democratic process. Says Tony, “The individual values are not what is important, but alignment of everyone to the core values”. Why this matters As the culture evolves in a company such as Zappos amazing things happen, and the business benefits enormously. Here are some striking examples from Zappos of the benefits of the highly aligned culture: Productivity increases by as much as 20%-100% Staff churn is incredibly low, just 6% voluntary churn within the CLT – Customer Loyalty Team (call centre) Ideas are generated from the ground up and this innovation keeps the company ahead of its rivals There is a clear framework for delegated decision making which means that the most junior employees, the call centre reps can do things like spend company money on ad-hoc gifts to customers, (which increases customer loyalty), and, by giving people autonomy, job satisfaction vastly increases too The job satisfaction, sense of family and loyalty to the company is evident when visiting, whether it’s the graffiti wall where members of staff have written various glowing comments about Zappos or just the genuine friendly way people in the corridors make eye contact, smile and say “hello” when they pass each other. The outpouring of employee-love for Zappos is documented every year in a the “culture book”. (For a copy email ceo@zappos.com with your mailing address). In the book are unedited responses from all staff explaining what the Zappos’ culture means to them. Alexa F explains in her entry: “We all share the quality of wanting to provide service through excellence in anything that we do. It’s that spirit that continues to allow us to grow to what we are today. In this family, we all strive to develop and improve, not just one person but the entire company as a whole. Our culture here is compiled by all of us sharing beliefs, values, goals, attitudes and practices that characterise us as a family”. For more real-life examples I recommend books including Good to Great, Built to Last and Tribal Leadership. (Thanks to Zappos you can download a free audio version of Tribal Leadership here; listen to it and then pass it on!). Photos: Graffiti wall Tony talking

Zappos: the world’s best customer service?

November 6, 2009

Photo credit: Ad Store

Most companies believe in customer service, right? “It’s at the heart of our business”. Pointy haired bosses nod in agreement. I don’t feel this though when I call a company and get this message which has become the hallmark of poor customer service:

“Thank you for calling. All our representatives are busy right now. Please be assured that your call is important to us”.

I always react in the same way now when I hear this empty phrase: if you really valued me as a customer I wouldn’t have to listen to this; you would ensure that you had enough people answering the phones!

This is exactly what US based Zappos does – they ensure everyone in the company is trained up to take customer service calls, that includes departments such as legal and finance, and in the busiest periods even the CEO will join in. Their call centre is known as the “customer loyalty team” the first clue that things are done differently here.

Zappos is a $1Bn turnover online clothing retailer and has become famous for its quirky style, fantastically loyal staff and customers and most recently its purchase by Amazon for around $1.2Bn.

There’s a whole host of things that set Zappos apart from the competition. First of all, they don’t regard themselves as just a retailer of clothing, shoes, or whatever; one of their core values is to “deliver wow through service”. Above all they are delivering a customer experience. By the way, it’s a customer experience that is rated ridiculously highly, with net promoter scores of 92%.

“Wow” translates into happy, loyal customers who come back again and again. While Zappos does carry out some traditional above the line marketing, they reinvest the millions of dollars saved here by putting it back into the customer experience. The service is market leading, and that provides them with their unique edge. Someone could always spend more on advertising, but Zappos have instead earned the trust and loyalty of their customers and created customers who are “raving fans”, the title of a Ken Blanchard book which is made available to all employees. The transaction cost drops significantly when you have loyal customers seeking you out and buying from you again and again. The protective moat that has been built around the Zappos brand is significant and on a typical day 75% of orders are from repeat customers.

Here’s just a few things Zappos does to create wow for their customers:

  • a free phone number to their customer loyalty team
  • a call centre that’s open 24 hours a day, 7 days a week and 365 days a year
  • free shipping anywhere in the US
  • random surprise upgrades to next day shipping (Something which their VIP customers get all the time)
  • 365 day return policy
  • all calls answered by a human being, usually in well under one minute

Yes these things are expensive, particularly the call centre, but Zappos is seeking to create a “personal and emotional connection” with their customers. The extra expense of all of the above appears as a line item in their marketing spend and it’s paid for by saving money on traditional advertising, which is reinvested to create something remarkable. Consumers don’t buy things any more because you have the most advertising, we’re way too sophisticated now; we’re looking for companies who deliver real value and something special.

Here is the catch though: while you could copy all these tactics, what you can’t copy is what truly sets them apart, and that is their unique DNA, their core values and the culture they have built. That culture is now so important that their CEO, Tony Hsieh considers developing and nurturing that culture as everyone’s number 1 priority.

That culture, and core values means that Zappos empowers the members of its Customer Loyalty Team with unprecendented freedom and autonomy. Once you’ve set the parameters then everyone knows how to behave appropriately. That means staff take it upon themselves to send hand made cards through the mail to their favourite customer of the day. Another often mentioned example was when someone called to return a pair of shoes bought for her now departed husband. The Zappos rep sent a bouquet of flowers to the grieving widow; a story recounted in front of the entire congregation at the funeral. It’s difficult how you could get more personal and emotional than that.

I hope this has left you intrigued to find out more about this unique company. This is the first in a series of posts I will be writing following my two day immersion into Zappos at their headquarters in Las Vegas. I will be writing about their unique culture and what can be learnt from it shortly; if you have questions so far please post comments below and I will address these in future blogs. Thanks, Scott.

Part 2 of my blogs on Zappos: Culture at Zappos and how everyone benefits


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