CEO of Zappos.com argues for the importance of having company culture and values as top priorities
Tony Hsieh, CEO of
Zappos.com, just finished up his keynote presentation at
Vator Splash May in
San Francisco, CA right now with some invaluable advice for all kinds of
entrepreneurs. Zappos, an online shoe, clothing, and accessory
store that recently also started selling electronic devices, was
acquired by Amazon.com for $1.2 billion last year. The company is recently only showing signs of success. In the first quarter, Zappos saw 50%
year-over-year growth. Here are the key takeaways from his talk:
--Hsieh
began his hour with an anecdote. In college, he and his roommate
started a pizza business after purchasing ovens, hiring workers,
designing menus, contacting suppliers, etc. One guy they knew used to
buy pizzas regularly at night and, eventually, he started even buying
two. Hsieh eventually realized that the guy hadn't just been eating the
pizzas himself, but taking them upstairs to sell by the slice. An
inspiring story for any entrepreneur.
--In 1998, two years after
co-founding LinkExchange, an online advertising service, Hsieh sold the
100-employee company to Microsoft for $265 million because the company
culture had gone downhill. He began to dread going to the office of a
company he was responsible for creating, so culture became very
important to him and his future company, Zappos.com
--Amazon's
$1.2 billion acquisition of Zappos, which closed in November, was unique
in that Zappos remained independent. According to Hsieh, "We wanted to
continue growing the Zappos brand our way. We wanted to keep our
business going our way." Once again for the CEO of Zappos, it comes down
to culture and values.
--Zappos is similar to Virgin in that
neither has any problem entering niches that seem completely unrelated
to the company's original product. Virgin is in movies, music, and
airlines, while Zappos started with shoes and now sells whole varieties
of clothes as well as electronic devices. Whereas Virgin's vision is
about being cool, however, Hsieh says Zappos' vision is about providing
the best service.
--The philosophy of marketing at Zappos comes
down to word-of-mouth fueled by great customer experiences. Hsieh said,
"Let's take most of the money we would have spent on paid advertising
and put it in the customer experience." For Hsieh, the customer
experience begins with the actual look and feel of the Web site. Company
policy comes next, and Zappos' 365-day return policy is probably one of the
most amazing company policies around. Also, in direct opposition to most
sites on the Web, Zappos puts its 800-number for 24/7 customer service
at the top of every page of its site.
--Hsieh is all about the
phone centers. Tossing out the idea of giving customer service agents
scripts to read or demanding that they upsell, Zappos wants to "build
the company brand one phone call at a time. We're not trying to maximize
transactions, we're trying to build a lifetime relationship with our
customers." Hsieh says that some agents tell jokes to make customers
feel comfortable or another might bond over dogs after hearing a bark
come through the phone line. Though only 5% of sales come from telephone
calls, every customer will call on average at least once--that's a lot
of opportunity to bond with your customer base.
--So at Zappos,
culture is the number one priority, even during the hiring process. They have a whole second set of
interviews specifically to find out how a prospective employee would fit
into the culture of the company, regardless of qualifications or
skills. Everyone goes through a four-week training process, learning
about the company history, culture, philosophy, and even working at the
call center for two weeks talking to customers. Interestingly enough,
Zappos will offer trainees their training pay plus an additional $2000
if they quit the company right then and there; the idea is that only
people truly invested in the company and what they're doing will stick
around. In 2007, 3% of people took the offer. In, 2008, 1% did. And last
year, everyone turned it down.
--Two books from the Zappos
library specifically spoken highly of by Hsieh: "Good to Great" by Jim
Collins, co-author of "Built to Last" and "Tribal Leadership: Leveraging
Natural Groups to Build a Thriving Organization" by Dave Logan, John
King, and Halee Fischer-Wright.
--For a company to have a strong
culture, Hsieh said a company must have committable core values,
whatever those values might be. For Zappos, it is providing excellent
customer service. These are the traits they look for in prospective
hires:
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--The
most interesting was perhaps #6 above. "Companies are becoming more
transparent whether they like it or not," explained Hsieh. "We're all
connected." For this reason, the company has little qualms about
disclosing financial information to customers and vendors, even though
that introduces the risk of letting competitors see that data. For
Hsieh, openness should come first.
--Bottom line: "Figure out
what your company values are and commit to them, meaning that you are
willing to fire and hire people based on those values.
Stay tuned
to VatorNews for a write-up of the second keynote at Vator Splash, to
be delivered by
Gurbaksh Chahal, founder and CEO of
gWallet.
Steven Loeb
