Here Are 5 Leadership Lessons From Retiring Zappos CEO Tony Hsieh
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Tony Hsieh retired as the CEO of the online shoe company Zappos in August 2020 after 21 years. Hsieh cofounded the Internet advertising network LinkExchange, which he sold to Microsoft in 1998 for $265 million. Then in 1999, he joined Zappos, which Amazon purchased in 2009 for $1.2 billion to become an expert in company culture.
Tony Hsieh, who was one of the first tech icons to humanize the workplace, now has a net worth of U.S. $840 million. He wrote the New York Times Best Seller Delivering Happiness in 2010, and since then, Hsieh has become a supporter of the ROI of company culture.
Tony had a hard time convincing the board of directors at Zappos to maximize profits by focusing on culture in the long term, while they just wanted to focus on the financial performance of the e-commerce business. But he finally scaled the business from nothing to over 1 billion in less than 10 years, affirming that that company culture is what made the difference between success and failure.
Here is how he did it in five leadership lessons:
1) Define Core values:
If you have a strong company culture, formed by people who have a common goal, your company’s core values will develop naturally. Running your business based on culture and core values help create alignment among employees. If the culture is right, excellent customer service will naturally develop from it. Zappos developed ten core values that guide every employee’s decision-making process. With clear values, they don’t need to evaluate team member’s performance in the traditional way. They let the employees reward each other with “Zollars” when they do something unique aligned to the values.
2) Train your Leaders:
Their teams are all trained to be self-organized, based on the Holacracy model. As Holacracy is built to focus on the work, Zappos adapted the system in a way that worked best for them to focus on the people. All employees can access the same training, as anyone can become a leader in any project or circle. They have fewer leaders than traditional companies as they have fewer hierarchy levels. Leaders are called lead links. Their primary role is not to make all the decisions for the team, but to provide resources to help and engage employees, and trust they will find the way to do their job. Every employee has the authority to make changes to the company and their work.
3) Drive Employee engagement:
Zappos’ most important asset is their people. Their offices and policies are made to make them happy. I visited the headquarters in Vegas and could see it by myself. They even had a ball pit for adults. That’s how they think they will make their customers happy too. They hire only people who are aligned with their core values. They’ve learned that if they identify company’s core values, hire by them, onboard team members by them, and truly live them; the team will do the best job and provide the best customer experience. They hire slowly for culture and fire quickly for culture.
PHOTO BY LUCIANA PAULISE
They offer to all employees, no matter their role, a four weeks customer service training that includes topics such as the company purpose, the core values and the history of Zappos. Afterwards, the company offers the new hires $2000 to quit. If employees are not engaged, they prefer to let them go quickly. The cost of replacing a single employee once hired can be anywhere between one-half to twice that employee’s annual salary, so you can do the math and understand why Zappos does it this way.
4) Focus on Wowing the Customer:
This is their #1 value and helps them align the entire organization around one mission: to provide the best customer service possible. The company’s philosophy has long been, “Zappos.com is a service company that just happens to sell shoes.”
Zappos was one of the first call-centers to give employees free rein to do what it takes to satisfy customers. Creating a great impression over the phone, they increase word of mouth advertising and also increase the lifetime value of the customer. While they reduce the investment in marketing, they use that money to improve the customer experience instead, offering free shipping on every order and free returns. Yes, you can buy five pair of shoes and return four for free if they don’t fit
5) Look for New business ideas everywhere:
They believe employees are sensors of the changes in the environment and customer needs. They have taken many ideas of the employees to add new businesses to the portfolio.
They also develop strong relationships with vendors to help them come up with new ideas. Tony took this seriously. He put $350 million into the Downtown project, to make Las Vegas another Silicon Valley.
For organizations, culture is destiny
How can you measure the impact of cultural change? One of Tony’s famous quotes is, “Just because you can’t measure the ROI of something doesn’t mean you shouldn’t do it. What’s the ROI of hugging your mom? He affirms that “The reason most companies don’t focus as much as they should on customer service or company culture is that the ROI is usually 2-3 years down the line.” Thinking long term, companies can get the culture to drive customer service, engaged employees and a great brand.
Even retired, Tony will continue breathing and living Zappo’s values, especially value #3: Create fun and a little weirdness. Hsieh will spend more time in ‘Llamapolis,’ a mini-community in Las Vegas where he lives with his two alpacas.
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